Colorado recently passed a law aimed at reducing the amount of so-called “patent trolling.” Generally, “patent troll” is used as a derogatory term to describe non-practicing entities, which are entities that own a patent on something but do not use it themselves (they may license it to others or do nothing at all with it other than enforce their patent rights against others). Such entities may “troll” other companies that are allegedly using that patent without permission by sending them threatening letters that if they do not pay up a licensing fee for the patent, that they will take them to court over it.

There have been various cases where businesses have shut down or struggled after receiving these letters or paying the licensing fees. This has become an issue of particular concern in the tech industry where very broad patents have been issued, that arguably never should have been or at least been more narrow. You can check out these two This American Life podcasts on the subject if you want to learn more: When Patents Attack! Part 1; Part 2. However, more specifically, this law was motivated by cases where businesses have received threatening letters without much information as to who they were coming from or what the basis was for the alleged infringement.

HB-1063 aims to combat this by allowing Colorado’s Attorney General to go after people who send threatening letters in bad faith to companies asking for money over alleged uses of their patents by the company. The act would apply to instances such as where the sender of the letter falsely claims that litigation has been filed against the recipient or related persons, where there is no reasonable basis in fact or law for the allegations (such as if the sender does not own the patent in question or have any authority to license or sell it). The act can also come into play when the sender does not provide enough information to the recipient. Required information would generally include:

• Identity of the person sending the letter
• The number issued by the USPTO of the patent in question
• Factual allegations regarding the specific areas that the recipient’s activities (products/services/technology) infringed the patent in question

Note that this law should not prevent anyone who legitimately has the rights to the patent and/or its licensing, unless you fail to send adequate information to alleged violators or send such letters without a reasonable basis. This means that so-called patent trolling will not cease to exist, but it should make allegations of patent infringement more substantive, clear, and transparent. This should also reduce abusive and more questionable instances of patent trolling.

It will be interesting to see if this law has the desired effect of both reducing the instances of “patent trolling” in Colorado and encouraging technology and knowledge-based companies to begin and grow in Colorado. From a legal perspective, it will also be interesting to see if this law will have any problems with preemption by federal law, basically meaning that this state law could be held invalid by the federal courts because it is incongruent with federal law (this legal concept is based on the Constitution’s Supremacy Clause).

If you have questions about intellectual property issues, please contact the Law Office of E.C. Lewis, P.C., home of your Denver Business Attorney, Elizabeth Lewis, at 720-258-6647 or email her at elizabeth.lewis@eclewis.com.