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Tuesday, October 21st, 2014
Virginia’s new anti-patent troll law got the shad treatment on its way to enactment.
When I was in law school in the 80’s, I took a class on legislative drafting taught by a Virginia state senator and a politically connected law professor. That’s where I learned about the “shad treatment.”
My teachers explained that the “shad treatment” is the legislative art of ripping the spine out of a bill while leaving the contours of the bill intact. You undermine its effectiveness while still giving the appearance of doing something.
The name derives from Virginia’s famous shad planking, a political gathering of mostly good ol’ boys. The featured menu item is shad with its spine removed by a filet process.
Virginia recently joined a parade of states enacting statutes attacking bad-faith behavior by patent trolls. Sixteen other states have enacted such a statute. At least 11 more are considering such legislation.
“Patent troll” is a pejorative term. It refers to a company formed to extract license fees from purported patent infringers while not utilizing the patented technology to make a product or perform a service. The hallmark of being a patent troll is going after potential licensees using a grab bag of bad-faith practices.
There is nothing inherently wrong with owning and enforcing a patent without making a product or service utilizing the patented technology. Indeed, our patent laws derive from our Constitution, which speaks of securing the rights of inventors to their inventions, to spur innovation. There is no requirement that the inventor commercialize his invention himself to have patent rights.
Regarding trolls, there is an economic opportunity to earn money by shaking down businesses for patent-license fees, because patent litigation is perhaps the most expensive kind of litigation.
Patent trolls exploit the threat of expensive litigation to extract license fees from companies that find it cheaper just to pay the troll than to risk litigation and to invest in having patent counsel investigate the strength of the claims with which they are faced.
Patent trolls have earned their bad name because of nefarious tactics.
While I won’t catalog their entire bag of tricks here, they include hiding their real identity behind a maze of holding companies, asserting patents of questionable strength if not patents that have been previously weakened judicially, and making deceptive or vague allegations regarding the purportedly infringing activity of the target.
Every state law that addresses patent trolls does so by outlawing “bad faith” practices by the patent troll. Each state’s statute identifies particular activities as indicia of bad-faith. The list of bad activities varies somewhat from state to state.
Virginia stands out, however, as the only state among those that have passed or are considering anti-patent troll legislation to not allow the recipient of a bad-faith letter from a patent troll to sue that troll under the anti-troll statute. In Virginia, only the Virginia Attorney General’s Office may assert a claim.
That’s the shad treatment.
First, the threat of a strong counter-suit is a good weapon to have when threatened with a lawsuit. The Virginia statute denied that weapon to victims of patent trolls.
Second, any money recovered by the Attorney General’s Office is kept by the state government. Nothing funnels that money to the businesses preyed upon by patent trolls.
Third, the Virginia Attorney General’s Office has limited resources and, consequently, has to pick its battles. It will not have the resources and time to attack every instance of trolling.
Finally, the “golden crescent” of Virginia – Northern Virginia, Metropolitan Richmond and Tidewater – are all within one of the fastest federal court districts in the country. This area – the Eastern District of Virginia – is known as the “Rocket Docket.”
Yet, under the statute, when the Virginia Attorney General’s Office wants to take action against a patent troll, the statute requires the office to file an action in a Virginia circuit court, seeking certain remedies against the troll. Virginia’s circuit courts proceed at a much slower pace than the Rocket Docket.
By the time the Virginia Attorney General can get relief in a Virginia Circuit Court, you may have had to capitulate and pay off the troll to stave off speedy and expensive federal court litigation.
The new law might help somewhat. Some trolls may back off just because the Attorney General’s Office shows interest in the situation. Yet, I predict hardcore trolls won’t be easily pushed. They have thick skin.
That just leaves me with one question. Who removed the spine from the anti-troll shad, and at whose bidding?
Written on October 21, 2014
by John B. Farmer
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