Saturday, May 25, 2013

Vermont Enacts a New Law to Reduce Frivolous Patent Suits

Saturday, May 25, 2013
In a move that legal observers agree is a first, Vermont Governor Peter Shumlin has enacted a law requiring potential patent litigants to clearly identify the nature of their claim when alleging patent infringement against another party. Under this new state law, potential litigants can be accused of bad faith if they do not clearly identify the patent in question, the patent owner and an explanation of the manner by which the patent is allegedly being infringed when initially notifying a potential infringer of the disputed actions (typically by way of as a cease-and-desist letter).

Will the law be effective in reducing frivolous and vexatious lawsuits? That remains unclear. In the US and Canada, patent law is regulated on a federal level and as such, it is difficult to predict the exact effect of a state or provincial law attempting to govern patent litigation.

From a practitioner’s perspective, one observation that I can make is that cease and desist letters in Vermont will certainly become more expensive as a result of this law. Patent infringement analysis is typically very complex and painstakingly considered, and the costs of conducting such analysis reflect this reality. As such, potential litigants will have to make immediate and substantial economic decisions when considering whether to enforce their rights. This will result in both beneficial effects (by curbing extortionary lawsuits) and deleterious effects (by increasing costs to rights holders).

Will the benefits outweigh the drawbacks on the scales of justice? Other jurisdictions will certainly be watching this Vermont test case closely to see.

By Adam Tracey