BILL ANALYSIS Ó
SENATE COMMITTEE ON APPROPRIATIONS
Senator Ricardo Lara, Chair
2015 - 2016 Regular Session
SB 681 (Hill) - Civil law: patents
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|Version: May 5, 2015 |Policy Vote: JUD. 5 - 1 |
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|Urgency: No |Mandate: No |
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|Hearing Date: May 18, 2015 |Consultant: Jolie Onodera |
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This bill meets the criteria for referral to the Suspense File.
Bill
Summary: SB 681 would make it unlawful to send a written
communication that states or represents that the recipient may
have infringed on a United States patent if the sender, in bad
faith, makes specified statements, seeks compensation for
specified conduct, or fails to include specified information in
the communication. This bill would specify that its provisions
are only enforceable by the Attorney General, but does not
impair or impede any other claims or defenses available under
other law.
Fiscal
Impact:
Potential increase in workload resulting in costs potentially
in excess of $150,000 (Special Fund*) to the Attorney
General's office to the extent new cases arise that cannot
viably be litigated under the provisions of the Unfair
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Competition Law.
Potential increase in General Fund revenues to the extent
civil penalties of up to $2,500 per violation are imposed and
collected.
*Unfair Competition Law Fund
Background: Existing federal law, the Patent Act, provides for the
issuance of patents to any person who invents or discovers any
new and useful process, machine, manufacture, or composition of
matter, or any new and useful improvement thereof. (35 U.S.C. §
101.)
Existing state law pursuant to the Unfair Competition Law,
renders an individual liable for any unlawful, unfair, or
fraudulent business act or practice and any unfair, deceptive,
untrue or misleading advertising. (Business and Professions Code
§ 17200.)
According to the Senate Judiciary Committee analysis of this
bill:
"In recent years, much attention has been focused on the
business model practiced by certain firms that make money not by
producing goods, but by licensing patent use or asserting patent
claims against other companies that produce goods using patented
technologies and methods. The activities of these so-called
"patent trolls," "non-practicing entities," or "patent
monetization entities" are thought by some to be harming
innovation and causing the market as a whole to reduce venture
investing and research and development spending. Whether or not
these entities actually harm the market is a hotly debated
topic, as is the nature of what - if anything - should be done
about it. Indeed, even the definition of who constitutes a
non-practicing entity is contentious, with some commentators
pointing out that the concept may include universities that
license use of their patents. This bill would create a new civil
infraction designed to address the problems caused by
non-practicing entities that allege patent infringement claims
in bad faith."
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Proposed Law:
This bill would render it 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 are
sent in bad faith 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 specified
conditions are met. This bill:
Provides that a person who sends a communication in
violation of its provisions may be enjoined in a court of
competent jurisdiction and is liable for a civil penalty
not to exceed $2,500 for each violation, as specified.
Provides that 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.
Provides that the Attorney General or an attorney acting
on behalf of the state shall have the sole authority to
enforce its provisions, and that it shall not be construed
to create a private right of action.
Provides that the bill's provisions shall not be
construed to impair or impede any other rights, causes of
action, claims, or defenses available under other law.
Provides that the remedies provided in this bill are
cumulative with any other remedies available under other
law.
Related
Legislation: AJR 9 (Chang) 2015 would make specified findings
regarding patents and patent litigation, and would urge the
President and the Congress of the United States to craft a
balanced and workable approach to reduce incentives for an
minimize abusive and frivolous patent litigation while ensuring
that legitimate patent enforcement rights are protected and
maintained. This bill is pending in the Assembly Judiciary
Committee.
Staff
Comments: The Department of Justice has reported that the
provisions of this measure would result in an unquantifiable but
potentially significant fiscal impact to the extent additional
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claims are brought to or initiated by the Attorney General under
the specified provisions of this bill. While the bill clarifies
that its provisions do not bar claims under California's Unfair
Competition Law (UCL), due to the complex legal framework and
available legal defenses, to the extent claims are not viable
under the UCL, additional claims under the provisions of this
bill could result.
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