Amended in Senate June 29, 2015

Amended in Senate June 3, 2015

Amended in Senate May 5, 2015

Senate Bill No. 681

Introduced by Senator Hill

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(Principal coauthor: Assembly Member Mullin)

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February 27, 2015

begin delete An act to add Title 19 (commencing with Section 3273.5) to Part 4 of Division 3 of the Civil Code, relating to civil law. end delete begin insert An act to add Section 24446 to the Revenue and Taxation Code, relating to income taxation, and declaring the urgency thereof, to take effect immediately. end insert

LEGISLATIVE COUNSEL’S DIGEST

SB 681, as amended, Hill. begin delete Civil law: patents. end delete begin insert Corporation taxes: deduction: public utilities. end insert

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Under existing law, the Public Utilities Commission has regulatory authority over public utilities, including gas corporations.

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The Corporation Tax Law allows various deductions in computing the income that is subject to the taxes imposed by those laws, and in modified conformity with federal law, allows a deduction for ordinary and necessary expenses carrying on a trade or business. Existing law provides that no deduction is allowed for any fine or similar penalty paid to a government for the violation of any law.

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This bill would not allow a deduction under the Corporation Tax Law for expenses or expenditures for plant and equipment by Pacific Gas and Electric Company that the Public Utilities Commission determined in a specific decision should be borne by the shareholders of the utility, and not the utility’s ratepayers, because of the utility’s numerous violations of law relating to the public safety. The bill would additionally not allow a deduction for amounts that the Public Utilities Commission ordered Pacific Gas and Electric Company to pay to reimburse the commission for its costs incurred in investigating and enforcing violations of law by the utility relating to public safety.

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This bill would declare that it is to take effect immediately as an urgency statute.

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Existing federal law provides for the issuance and enforcement of patents, makes a person who actively induces infringement of a patent liable as an infringer, and establishes rights and remedies for infringement of patents.

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This bill would make it unlawful to engage in a pattern or practice of sending written communications, stating that the recipient, as defined, is or may be infringing, or has or may have infringed, on a United States patent if the sender of the communication makes a specified false statement or representation in bad faith, fraudulently seeks compensation for specified conduct, or fraudulently conceals or omits specified information in the communication.

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The bill would provide that a person who sends a communication in violation of these provisions may be enjoined and is liable for a civil penalty of up to $2,500 for each violation. The bill would also specify that its provisions are only enforceable by the Attorney General, an attorney acting on behalf of the state, or a district attorney, county counsel, city attorney, or city prosecutor in this state. The bill would specify that its provisions do not impair or impede any other rights, causes of action, claims, or defenses available under other law and that the remedies provided for under its provisions are cumulative with any other remedies available under other law.

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Vote:  begin delete majority end delete begin insert ²⁄₃ end insert . Appropriation: no. Fiscal committee: yes. State-mandated local program: no.

The people of the State of California do enact as follows:

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begin insert SECTION 1. end insert   

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begin insert Section 24446 is added to the end insert begin insert Revenue and
Taxation Code end insert begin insert , to read: end insert

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begin insert 24446. end insert   

Section 162(a) of the Internal Revenue Code, relating
to trade or business expenses, in general, shall not apply to the
following:

(a) Expenses or expenditures for plant and equipment by Pacific
Gas and Electric Company that the Public Utilities Commission
determined in Decision 15-04-024 (April 9, 2015), “Decision on
Fines and Remedies to be Imposed on Pacific Gas and Electric
Company for Specific Violations in Connection with the Operation
and Practices of its Natural Gas Transmission System Pipelines,”
should be borne by the shareholders of the utility, and not the
utility’s ratepayers, because of the utility’s numerous violations
of law relating to public safety.

(b) Amounts that the Public Utilities Commission, in Decision
15-04-024, ordered Pacific Gas and Electric Company to pay to
reimburse the commission for its costs incurred in investigating
and enforcing a violation of law relating to public safety by the
utility.

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begin insert SEC. 2. end insert   

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This act is an urgency statute necessary for the
immediate preservation of the public peace, health, or safety within
the meaning of Article IV of the Constitution and shall go into
immediate effect. The facts constituting the necessity are:

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In order for the provisions of this act to be applicable to the
current tax year and to better ensure the effectiveness of decisions
of the Public Utilities Commission protecting the public safety, it
is necessary that this act take effect immediately.

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SECTION 1.  

Title 19 (commencing with Section 3273.5) is
added to Part 4 of Division 3 of the Civil Code, to read:

 

Title 19.  Patent Demands

 

3273.5.  

For the purposes of this title, the following definitions
shall apply:

(a) “Final determination” means, with respect to the invalidity
or unenforceability of a patent, that the invalidity or
unenforceability has been determined by a court of the United
States or the United States Patent and Trademark Office in a final
decision that is unappealable or for which any opportunity for
appeal is no longer available.

(b) “Recipient” means a person who purchases, rents, leases,
or otherwise obtains a product or service in the commercial market
that is not for resale in the commercial market and that is, or later
becomes, the subject of a patent infringement allegation.

3273.6.  

It is unlawful for a person, in connection with the
assertion of a United States patent, to engage in a pattern or practice
of sending written communications that state or represent that the
recipient is or may be infringing, or has or may have infringed,
the patent and is liable or owes compensation to another, if any of
the following conditions are met:

(a) The sender of the communication makes, in bad faith, any
of the following statements or representations, knowing those
statements or representations are false:

(1) That the sender has the right to license or enforce the patent
at the time the communications are sent, if the sender is not a
person with that right.

(2) That a civil action asserting a claim of infringement of the
patent has been filed against either the recipient or against other
persons.

(3) That legal action for infringement of the patent will be taken
against the recipient.

(4) That the sender is the exclusive licensee of the patent
asserted in the communications.

(5) That persons other than the recipient purchased a license for
the patent asserted in the communications.

(6) That persons other than the recipient purchased a license,
and the sender does not disclose that the license is unrelated to the
alleged infringement or the patent asserted in the communications.

(7) That an investigation of the recipient’s alleged infringement
has occurred.

(8) That the sender, or an affiliate of the sender, previously filed
a civil action asserting a claim of infringement of the patent based
on the activity that is the subject of the written communication
when the sender knew that the activity was held, in a final
determination, not to infringe the patent.

(b) The sender of the communication fraudulently seeks
compensation for any of the following:

(1) A patent claim that has been determined to be unenforceable
or invalid against the recipient in a final determination.

(2) Activity undertaken by the recipient after expiration of the
patent asserted in the communication.

(3) Activity of the recipient that the sender knew was authorized,
with respect to the patent claim that is the subject of the
communication, by a person with the right to license the patent.

(c) The sender of the communication fraudulently conceals or
omits any of the following information from the communication,
when that information is readily available to the sender at the time
the communication is sent:

(1) The identity of the person asserting a right to license the
patent to, or enforce the patent against, the recipient, including the
identity of any parent entity and the ultimate parent entity of the
person, unless that person is a public company and the name of
the public company is identified.

(2) Identification of at least one patent issued by the United
States Patent and Trademark Office alleged to have been infringed.

(3) Identification, to the extent reasonable under the
circumstances, of at least one product, service, or other activity of
the recipient that is alleged to infringe the identified patent.

(4) A description, to the extent reasonable under the
circumstances, of how the product, service, or other activity of the
recipient infringes an identified patent and patent claim.

(5) A name and contact information for a person the recipient
may contact about the assertions or claims relating to the patent
contained in the communications.

3273.7.  

(a) A person who sends a communication in violation
of Section 3273.6 may be enjoined in a court of competent
jurisdiction and is liable for a civil penalty not to exceed two
thousand five hundred dollars ($2,500) for each violation. The
penalty collected in an action by the Attorney General or an
attorney acting on behalf of the state shall be paid to the General
Fund.

(b) Subject to subdivision (c), the Attorney General, an attorney
acting on behalf of the state, or a district attorney, county counsel,
city attorney, or city prosecutor in this state shall have the sole
authority to enforce this title with respect to the unlawful acts
expressly enumerated in Section 3273.6. Nothing in this title shall
be construed to create a private right of action with respect to the
unlawful acts expressly enumerated in Section 3273.6.

(c) Except as provided in subdivision (b) with respect to the
unlawful acts expressly enumerated in Section 3273.6, nothing in
this title shall be construed to impair or impede any other rights,
causes of action, claims, or defenses available under other law.
The remedies provided in this title are cumulative with any other
remedies available under other law.

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