Attorney General Madigan: Bill Protecting Businesses from Patent Trolls Passes Senate

Attorney General Lisa Madigan today applauded Senate lawmakers for passing legislation to protect Illinois small businesses from “patent trolls” that acquire patents to profit from frivolous patent infringement claims.

Senate members voted 48-0 today to send Senate Bill 3405 to the House. The bill, crafted by Attorney General Madigan’s office and sponsored by Sen. Daniel Biss, will crack down on the growing problem of misleading demand letters that patent trolls have sent to thousands of small businesses, retailers and manufacturers. In the letters, patent trolls frequently fail to disclose basic information, including the actual owner of the alleged patent and the circumstances surrounding any alleged infringement. Identical letters have been sent to thousands of businesses and often falsely threaten litigation even though the patent trolls have no intention of filing lawsuits. In some cases, patent trolls have targeted businesses for simply purchasing products in the commercial market. The letters patent trolls send are designed to take advantage of businesses with no expertise in patent disputes.

“We need better protections for small businesses facing deceptive and costly demands from patent trolls,” Madigan said. “This legislation will ensure the rights of legitimate patent holders while cracking down on this fraudulent practice.”

Patent trolls have become an expensive and escalating problem for businesses across the country. A Boston University survey found that costs due to patent trolls have risen dramatically – from $7 billion in 2005 to $29 billion in 2011. The study found that in 2011 alone, 2,150 companies were forced to mount 5,842 defenses in lawsuits initiated by the actions of patent trolls. In 2005, the number of defenses was 1,401.

“As we consider ways to make it easier for businesses to operate in Illinois, it makes sense to ensure that our laws prohibit scams that cost them money and valuable time,” Biss said.

The legislation would ban patent demand letters that:

Contain false or deceptive information;

Are sent by individuals who do not have the right to license or enforce a patent;

Falsely threaten litigation if a fee is not paid; and

Fail to identity the individual asserting the patent and explain the alleged infringement.

In conjunction with her work on the state level to protect small business owners, Madigan joined 41 other state attorneys general earlier this year in sending a letter to the U.S. Senate Judiciary Committee and the Committee on Commerce, Science and Transportation, urging support for federal patent reform legislation.

Rep. Ann Williams will sponsor the bill in the House chamber.