[House Report 114-877]
[From the U.S. Government Publishing Office]
114th Congress } { Report
HOUSE OF REPRESENTATIVES
2d Session } { 114-877
======================================================================
TARGETING ROGUE AND OPAQUE LETTERS ACT OF 2015
_______
December 16, 2016.--Committed to the Committee of the Whole House on
the State of the Union and ordered to be printed
_______
Mr. Upton, from the Committee on Energy and Commerce, submitted the
following
R E P O R T
together with
DISSENTING VIEWS
[To accompany H.R. 2045]
[Including cost estimate of the Congressional Budget Office]
The Committee on Energy and Commerce, to whom was referred
the bill (H.R. 2045) to provide that certain bad faith
communications in connection with the assertion of a United
States patent are unfair or deceptive acts or practices, and
for other purposes, having considered the same, report
favorably thereon without amendment and recommend that the bill
do pass.
CONTENTS
Page
Purpose and Summary.............................................. 2
Background and Need for Legislation.............................. 3
Hearings......................................................... 5
Committee Consideration.......................................... 6
Committee Votes.................................................. 6
Committee Oversight Findings..................................... 10
Statement of General Performance Goals and Objectives............ 10
New Budget Authority, Entitlement Authority, and Tax Expenditures 10
Earmark, Limited Tax Benefits, and Limited Tariff Benefits....... 10
Committee Cost Estimate.......................................... 10
Congressional Budget Office Estimate............................. 10
Federal Mandates Statement....................................... 11
Duplication of Federal Programs.................................. 11
Disclosure of Directed Rule Makings.............................. 12
Advisory Committee Statement..................................... 12
Applicability to Legislative Branch.............................. 12
Section-by-Section Analysis of the Legislation................... 12
Changes in Existing Law Made by the Bill, as Reported............ 13
Dissenting Views................................................. 14
PURPOSE AND SUMMARY
The purposes of H.R. 2045 are: (1) to prevent anyone from
coercing or deceiving victims into paying license fees or
settlements based on spurious claims or meritless suggestions
of patent infringement in written communications; and (2) to
ensure that recipients of such communications receive enough
information regarding the patent and corresponding allegations
such that a recipient can begin to determine whether the letter
identifies a legitimate patent claim. H.R. 2045 applies
specifically to a ``pattern or practice'' of sending written
communications in connection with the assertion of a United
States patent. Such written communications are commonly
referred to as patent demand letters.
H.R. 2045 authorizes the Federal Trade Commission (FTC) to
seek civil penalties for two types of deceptive behavior with
respect to a pattern or practice of sending patent demand
letters. First, H.R. 2045 prohibits a sender of a patent demand
letter from making any of a list of specific false statements
or representations. These prohibitions correspond to specific
misrepresentations observed in practice that may intimidate
unsophisticated patent demand letter recipients into entering
settlement agreements despite a lack of merit or the use of
deception in the underlying allegations in the patent demand
letters.\1\ Second, H.R. 2045 prohibits a sender of a patent
demand letter from omitting any of a series of required
disclosures. By requiring disclosures, H.R. 2045 seeks to
prevent a sender from withholding information that is essential
for a recipient to fairly make an independent determination of
the patent demand letter's merits. H.R. 2045 is not intended to
sweep in patent communications, including demand letters,
between sophisticated patent holders with large patent
portfolios.
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\1\See Trolling for a Solution: Ending Abusive Patent Demand
Letters: Hearing before the Subcomm. on Commerce, Manuf., and Trade,
113th Cong. 5 (statement of Rheo Brouillard on behalf of American
Bankers Association) (describing a patent demand letter received by
several banks claiming that their ATMs infringed a patent held by the
sender, and that the sender researched the alleged infringement, even
though at least one recipient bank did not operate any ATMs).
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Instances of abusive demand letter practices involving the
sending of only a few patent demand letters may occur, but are
not prevalent in the record. Those responsible for the abusive
patent demand letters covered by H.R. 2045 send large numbers
of such letters in hope of deceiving a portion of the
recipients of those letters.\2\ The scheme is dependent on
volume, so H.R. 2045 is limited to situations where repeated
behavior is demonstrated. Nonetheless, the term ``pattern or
practice'' is intentionally undefined to give the FTC leeway in
determining the threshold, which the Committee recognizes will
be a context-driven determination.\3\
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\2\See MPHJ Technology Investments, LLC, Fed. Trade Comm'n,
Proposed Consent Agreement (adopted Nov. 6, 2014), available at http://
www.ftc.gov/system/files/documents/cases/141106mphjagree.pdf.
\3\For an example of how a court has treated the concept of
``pattern or practice'' in the FTC Act, see Tennessee v. Lexington Law
Firms, 1997-1 Trade Cas. (CCH) P71,820, 9-10 (M.D. Tenn. 1997) (``Here,
the complaint indicates that the Tennessee attorney general's alleged
discovery that one or two violations have already been committed gave
it reason to believe that Defendant was or is engaged in a pattern or
practice of committing such violations. As such, Defendant's argument
[that, as a matter of law, the Tennessee attorney general had no reason
to believe a pattern or practice existed] cannot prevail.''). Although
the statute at issue in Tennessee is further tempered by requiring only
that a State attorney general have a ``reason to believe'' that a
defendant is engaging in a pattern or practice--which is not present in
H.R. 2045--H.R. 2045 is nonetheless intended to grant similar
discretion to the FTC on pattern or practice determinations.
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BACKGROUND AND NEED FOR LEGISLATION
Businesses and consumers across the nation have been
victimized on a large scale by patent holders who misled them
with vague and deceptive demand letters into paying undue
license or settlement fees.\4\ These types of scams typically,
but not always, target end users of patented technology with
little patent expertise or for whom the cost of defending
against the letter exceeds the business' resources, forcing it
to pay the sender, regardless of whether the underlying claim
is meritorious.
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\4\See Trolling for a Solution: Ending Abusive Patent Demand
Letters: Hearing Before the Subcomm. on Commerce, Manuf., and Trade,
113th Cong. (2014), H.R. __, a bill to enhance federal and state
enforcement of fraudulent patent demand letters: Legislative Hearing
before the Subcomm. on Commerce, Manuf., and Trade, 114th Cong. (2014),
Update: Patent Demand Letter Practices and Solutions: Hearing Before
the Subcomm. on Commerce, Manuf., and Trade, 114th Cong. (2015), H.R.
__, Targeting Rogue and Opaque Letters (TROL) Act: Legislative Hearing
Before the Subcomm. on Commerce, Manuf., and Trade, 114th Cong. (2015).
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A violation of H.R. 2045 is treated as a violation of a
Federal Trade Commission rule defining an unfair or deceptive
act or practice prescribed under 15 U.S.C. Sec. 57a(a)(1)(B).
As a result, a violation of H.R. 2045 is punishable by civil
penalties as provided at 15 U.S.C. Sec. 45(m).
H.R. 2045 provides an affirmative defense for defendants to
show that alleged violations of the Act were actually mistakes
made in good faith. The affirmative defense allows defendants
to show that its allegedly unlawful statements,
representations, or omissions were mistakes made in good faith,
which may be demonstrated by a preponderance of evidence that
the violation was not intentional and resulted from a bona fide
error notwithstanding the maintenance of procedures reasonably
adapted to avoid any such error. The affirmative defense in
H.R. 2045 mirrors the operative language of the affirmative
defense in the Fair Credit Reporting Act.\5\ The burden of
production and persuasion with respect to the affirmative
defense is on the accused sender of the patent demand letter,
and in order to meet that burden, the sender must show that a
procedure reasonably adapted to avoid the error was in place
when the error was made.
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\5\H.R. __, the Targeting Rogue and Opaque Letters (TROL) Act:
Legislative Hearing Before the Subcomm. on Commerce, Manuf., and Trade,
114th Cong. 13 (2015) (statement of Charles Duan, Director, Patent
Reform Project, Public Knowledge).
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H.R. 2045 preempts any law, rule, regulation, requirement,
standard, or other provision having the force and effect of law
of any State, or political subdivision of a State, expressly
relating to the transmission or contents of communications
relating to the assertion of patent rights. When the Committee
reported H.R. 2045, over twenty State statutes expressly
relating to patent demand letters had been enacted\6\ and
several States were considering similar bills. Importantly,
however, H.R. 2045 bars a court from construing the preemption
provision to preempt any State consumer protection law, any
State law relating to acts of fraud or deception, and any State
trespass, contract, or tort law. As a result, H.R. 2045 has no
effect on State consumer protection statutes--often referred to
as ``mini-FTC Acts'' for their resemblance to the FTC's organic
statute--nor does it touch other State and local provisions of
general applicability.
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\6\Alabama, Georgia, Idaho, Illinois, Louisiana, Maine, Maryland,
Mississippi, Missouri, New Hampshire, North Carolina, North Dakota,
Oklahoma, Oregon, South Dakota, Tennessee, Utah, Vermont, Virginia,
Washington, and Wisconsin.
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The State laws expressly related to patent demand letters
generally list a series of prohibited bad acts with respect to
patent demand letters. Four States include an exhaustive list
of bad acts defining whether a demand letter is unlawful,\7\
and the other States allow a court to draw upon any other
factor the court finds relevant in determining whether a demand
letter is unlawful.\8\ To date, no State attorney general has
brought a case under a State law that specifically addresses
demand letters. As witnesses before the Subcommittee have
testified, cases brought under State patent demand letter laws
may be precluded under the Federal Circuit's Noerr-Pennington
doctrine, unless they also allege bad faith on the part of the
defendant.\9\ Moreover, because Noerr-Pennington is rooted in
the First Amendment, it may preclude certain Federal
enforcement as well, unless it only addresses bad faith
conduct.\10\ Four State attorneys general have taken action
against a single patent assertion entity, but those
investigations were conducted under State consumer protection
laws of general applicability.
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\7\Illinois, Oklahoma, Tennessee, and Wisconsin.
\8\See, e.g., H.B. 1163, 64th Leg. (ND 2015).
\9\Update: Patent Demand Letter Practices and Solutions: Hearing
Before the Subcomm. on Commerce, Manuf., and Trade, 114th Cong. 12
(2015) (statement of Paul R. Gugliuzza, Associate Professor of Law,
Boston University School of Law) (``Although no court has yet applied
this standard to the new state statutes, it seems to ensure that most
tactics employed by bottom-feeder trolls will remain legal.'').
\10\Globetrotter Software, Inc. v. Elan Computer Grp., Inc., 362
F.3d 1367 (Fed. Cir. 2004) (holding that Noerr-Pennington shields
communications such as demand letters from both state and federal laws,
unless they are narrowed to bad faith conduct).
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State attorneys general may enforce the provisions of H.R.
2045. In any case in which the attorney general of a State has
reason to believe that an interest of the residents of that
State has been adversely affected by any person who violates
section 2, the attorney general of the State may bring a civil
action on behalf of such residents of the State in a district
court of the United States of appropriate jurisdiction to
enjoin further such violation by the defendant or to obtain
civil penalties. Civil penalties for State attorneys general
are limited to $5,000,000 for a series of related violations. A
State attorney general shall provide prior written notice of
any enforcement action authorized under Section 4 to the FTC
and provide the FTC with a copy of the complaint in the action,
except in any case in which such prior notice is not feasible,
in which case the attorney general shall serve such notice
immediately upon instituting such action. The FTC shall have
the right to intervene in the action, and upon so intervening,
to be heard on all matters arising therein. The FTC shall also
have the right to petition for appeal. If the FTC has
instituted a civil action for violation of Section 2, no State
attorney general may bring an action under H.R. 2045 during the
pendency of that action against any defendant named in the FTC
complaint for any violation of such section alleged in the
complaint. H.R. 2045 preserves the State attorney general's
ability to exercise the powers conferred on the attorney
general by the laws of that State to conduct investigations,
administer oaths or affirmations, or compel the attendance of
witnesses or the production of documentary and other evidence.
Under H.R. 2045, bad faith means that the sender made
knowingly false or knowingly misleading statements,
representations, or omissions; made statements,
representations, or omissions with reckless indifference as to
the false or misleading nature of such statements,
representations, or omissions; or made statements,
representations, or omissions with awareness of the high
probability of the statements, representations, or omissions to
deceive and the sender intentionally avoided the truth. This
construct seeks to preserve the First Amendment rights of
patent holders to assert their patents, inoculate H.R. 2045
from First Amendment challenges under Noerr-Pennington,\11\
avoid enforcement actions in cases of good faith mistakes, and
narrow the legislation to actual harmful activity observed in
the marketplace. The bad faith definition largely mirrors the
legal standard developed under the FTC Act provision
authorizing the FTC to obtain restitution from individual
corporate officers involved in fraud schemes. Specifically,
Federal courts have determined that in order to obtain
restitution from an individual defendant, the FTC must show
that he or she ``had knowledge of material misrepresentations,
[was] recklessly indifferent to the truth or falsity of a
misrepresentation, or had an awareness of a high probability of
fraud along with an intentional avoidance of the truth.''\12\
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\11\Eastern Railroad Presidents Conf. v. Noerr Motor Freight, Inc.,
365 U.S. 127 (1961); United Mine Workers v. Pennington, 381 U.S. 657
(1965). The Federal Circuit has held that Noerr-Pennington immunity
applies to patent demand letters, immunizing patent assertion activity
unless it is both ``objectively baseless'' and done in subjective bad
faith. Globetrotter Software, Inc. v. Elan Computer Grp., Inc., 362
F.3d 1367, 1377 (Fed. Cir. 2004).
\12\Fed. Trade Comm'n v. Publ'g Clearing House, Inc., 104 F.3d
1168, 1171 (9th Cir. 1997) (quoting American Standard Credit Systems,
874 F.Supp. 1080, 1089 (C.D. Cal. 1994) and Fed. Trade Comm'n v. Army
Travel Svc., Inc., 875 F.2d 564, 573-74 (N.D. Ill. 1988)).
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Under its current Section 5 authority, the FTC cannot
obtain civil penalties unless a defendant has violated an FTC
rule or a consent order. In a recent investigation under
Section 5 against MPHJ--an entity that directed over 31,000
letters through 31 subsidiaries--the FTC obtained a consent
decree barring MPHJ from making deceptive representations when
asserting patent rights. To allow the FTC to bring cases
involving misstatements or omissions not enumerated in H.R.
2045, the draft legislation would specifically preserve the
FTC's Section 5 authority to enjoin unfair or deceptive acts or
practices. Although the TROL Act preempts State laws
specifically addressing patent demand letters, it also
preserves the authority of State attorneys general to enforce
their own mini-FTC Acts and authorizes State attorneys general
to enforce the provisions of the TROL Act.
HEARINGS
The Subcommittee on Commerce, Manufacturing, and Trade held
a hearing on H.R. 2045 on February 26, 2015. The Subcommittee
received testimony from:
Paul Gugliuzza, Associate Professor, Boston
University School of Law;
Vince Malta, Liaison for Law and Policy,
National Association of Realtors;
Vera Ranieri, Staff Attorney, Electronic
Frontier Foundation; and
Laurie Self, Vice President and Counsel,
Government Affairs, Qualcomm.
COMMITTEE CONSIDERATION
On April 22, 2015, the Subcommittee on Commerce,
Manufacturing, and Trade met in open markup session and
forwarded a discussion draft entitled ``Targeting Rogue and
Opaque Letters Act'' to the full Committee, as amended, by a
record vote of 10 yeas and 7 nays. On April 29, 2015, the full
Committee on Energy and Commerce met in open markup session and
ordered H.R. 2045 reported to the House, without amendment, by
a record vote of 30 yeas and 22 nays.
COMMITTEE VOTES
Clause 3(b) of rule XIII of the Rules of the House of
Representatives requires the Committee to list the record votes
on the motion to report legislation and amendments thereto.
COMMITTEE OVERSIGHT FINDINGS
Pursuant to clause 3(c)(1) of rule XIII of the Rules of the
House of Representatives, the Committee held hearings and made
findings that are reflected in this report.
STATEMENT OF GENERAL PERFORMANCE GOALS AND OBJECTIVES
The purposes of H.R. 2045 are (1) to prevent patent owners
or those holding themselves out to be patent owners from
coercing or deceiving victims into paying license fees or
settlements based on spurious claims or meritless suggestions
of infringement; and (2) to ensure that recipients of such
communications receive enough information regarding the patent
and corresponding allegations such that a demand letter
recipient with little or no expertise in patent law can
understand the letter's claims and how to respond. H.R. 2045
applies specifically to a ``pattern or practice'' of sending
written communications in connection with the assertion of a
United States patent. These communications are commonly
referred to as patent demand letters.
NEW BUDGET AUTHORITY, ENTITLEMENT AUTHORITY, AND TAX EXPENDITURES
In compliance with clause 3(c)(2) of rule XIII of the Rules
of the House of Representatives, the Committee finds that H.R.
2045 would result in no new or increased budget authority,
entitlement authority, or tax expenditures or revenues.
EARMARK, LIMITED TAX BENEFITS, AND LIMITED TARIFF BENEFITS
In compliance with clause 9(e), 9(f), and 9(g) of rule XXI
of the Rules of the House of Representatives, the Committee
finds that H.R. 2045 contains no earmarks, limited tax
benefits, or limited tariff benefits.
COMMITTEE COST ESTIMATE
The Committee adopts as its own the cost estimate prepared
by the Director of the Congressional Budget Office pursuant to
section 402 of the Congressional Budget Act of 1974.
CONGRESSIONAL BUDGET OFFICE ESTIMATE
Pursuant to clause 3(c)(3) of rule XIII of the Rules of the
House of Representatives, the following is the cost estimate
provided by the Congressional Budget Office pursuant to section
402 of the Congressional Budget Act of 1974:
U.S. Congress,
Congressional Budget Office,
Washington, DC, May 28, 2015.
Hon. Fred Upton,
Chairman, Committee on Energy and Commerce,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 2045, the
Targeting Rogue and Opaque Letters Act of 2015.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Susan Willie.
Sincerely,
Keith Hall.
Enclosure.
H.R. 2045--Targeting Rogue and Opaque Letters Act of 2015
H.R. 2045 would establish as an unfair or deceptive act
sending letters to companies and individuals claiming
infringement of a patent when those letters include certain
statements, as outlined in the bill, that are known by the
sender to be false or misleading. Similarly, the bill would
establish as an unfair or deceptive act sending such letters
if, in bad faith, the sender fails to include certain other
information also outlined in the bill. H.R. 2045 would
authorize the Federal Trade Commission (FTC) to seek civil
penalties for violations of the new prohibitions.
Based on information from the FTC, CBO estimates that the
cost of implementing H.R. 2045 would not be significant because
the agency is able to enforce similar prohibitions under its
existing general authorities. CBO estimates that enacting H.R.
2045 would increase federal revenues from the added authority
to collect civil penalties; therefore, pay-as-you-go procedures
apply. However, we expect those collections would be
insignificant because of the small number of cases that the
agency would probably pursue. Enacting the bill would not
affect direct spending.
H.R. 2045 contains intergovernmental mandates as defined in
the Unfunded Mandates Reform Act (UMRA). The bill would preempt
some state and local laws related to patent rights. The bill
also would impose notification requirements and limitations on
state attorneys general. Because the limits on state and local
authority would impose no duties with costs and because the
notification requirements would result in minimal additional
spending, CBO estimates the costs of the mandates would be
small and would not exceed the threshold established in UMRA
for intergovernmental mandates ($77 million in 2015, adjusted
annually for inflation). H.R. 2045 contains no private-sector
mandates as defined in UMRA.
The CBO staff contact for this estimate is Susan Willie.
The estimate was approved by H. Samuel Papenfuss, Deputy
Assistant Director for Budget Analysis.
FEDERAL MANDATES STATEMENT
The Committee adopts as its own the estimate of Federal
mandates prepared by the Director of the Congressional Budget
Office pursuant to section 423 of the Unfunded Mandates Reform
Act.
DUPLICATION OF FEDERAL PROGRAMS
No provision of H.R. 2045 establishes or reauthorizes a
program of the Federal Government known to be duplicative of
another Federal program, a program that was included in any
report from the Government Accountability Office to Congress
pursuant to section 21 of Public Law 111-139, or a program
related to a program identified in the most recent Catalog of
Federal Domestic Assistance.
DISCLOSURE OF DIRECTED RULE MAKINGS
The Committee estimates that enacting H.R. 2045
specifically directs to be completed 0 rule makings within the
meaning of 5 U.S.C. 551.
ADVISORY COMMITTEE STATEMENT
No advisory committees within the meaning of section 5(b)
of the Federal Advisory Committee Act were created by this
legislation.
APPLICABILITY TO LEGISLATIVE BRANCH
The Committee finds that the legislation does not relate to
the terms and conditions of employment or access to public
services or accommodations within the meaning of section
102(b)(3) of the Congressional Accountability Act.
SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION
Section 1. Short title
This Act may be cited as the ``Targeting Rogue and Opaque
Letters (TROL) Act.''
Section 2. Unfair or deceptive acts or practices in connection with the
assertion of a United States patent
This section establishes that it is an unfair or deceptive
act or practice under the FTC Act to engage in a pattern or
practice of sending patent demand letters if the
communications, in bad faith, include any of the twelve
prohibited elements enumerated in paragraphs (1) or (2), or
fail to include any of the five elements enumerated in
paragraph (3). Section 2 also sets forth an affirmative defense
that was altered at Subcommittee markup. The new affirmative
defense provides that statements, representations, or omissions
were not made in bad faith if the sender can demonstrate that
such statements, representations, or omissions were mistakes,
which may be demonstrated by a preponderance of evidence that
the violation was not intentional and resulted from a bona fide
error notwithstanding the maintenance of procedures reasonably
adapted to avoid any such error.
Section 3. Enforcement by Federal Trade Commission
Section 3 establishes that a violation of Section 2 shall
be treated as a violation of a rule defining an unfair or
deceptive act or practice prescribed under the FTC Act. This
enables the FTC to seek civil penalties for violations;
whereas, under its current authority, it could only seek an
injunction against a sender of an unfair or deceptive demand
letter. Section 3 also clarifies that the FTC's existing powers
and enforcement authority are preserved.
Section 4. Preemption of State laws on patent demand letters and
enforcement by State attorneys general
Section 4 preempts State laws, rules, regulations,
standards, and other provisions having the effect of law
expressly relating to the transmission or contents of patent
demand letters, while preserving other State laws of general
applicability, such as the State consumer protection laws of
general applicability. Section 4 also permits State attorneys
general to enforce the Act and to seek civil penalties for
violations. Section 4 requires the attorney general of a State
to provide the FTC with prior written notice of any action
taken to enforce the law and also provides the FTC authority to
intervene in the action. It further provides that no State
action may be brought if the FTC has a civil action pending
against any named defendant.
Section 5. Definitions
Section 5 defines certain terms used throughout the draft
legislation, including ``bad faith'' as it pertains to the
representations or omissions enumerated in Section 2.
CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED
This legislation does not amend any existing Federal
statute.
DISSENTING VIEWS
We cannot support H.R. 2045, the Targeting Rogue and Opaque
Letters Act of 2015. Although we could support efforts to curb
deceptive patent demand letters, this bill does not accomplish
that goal. Instead, this bill creates a disincentive to
enforcement by tying the hands of state attorneys general and
by creating barriers to Federal Trade Commission (FTC)
enforcement that are simply too high.
This bill requires the FTC and state attorneys general to
prove ``bad faith'' of the sender in order for patent demand
letters to be considered an unfair or deceptive act or
practice. In short, this means that the FTC has to be able to
prove that the sender of a patent demand letter knowingly made
false statements or was aware that the recipient would be
deceived. This knowledge requirement is an unusual element that
would make investigations and enforcement far more difficult.
Consumers can be harmed by misrepresentations regardless of
whether the party making the representations knows them to be
false. The knowledge requirements would be a significant and
counterproductive departure from existing law.
The majority asserts that the knowledge requirement is
necessary to protect First Amendment rights under the Noerr-
Pennington doctrine. However, whether Noerr-Pennington applies
outside of the antitrust context, i.e., whether it immunizes
entities from anything other than antitrust liability, is at
best a matter of debate.\1\ Some courts have found that it is a
general rule of construction that applies expansively.\2\ Other
courts, however, have concluded that the Noerr-Pennington
doctrine does not apply outside the antitrust context, and
further, that threats made before litigation commences and
communicated solely between private parties are not afforded
broad immunity under the First amendment.\3\ Because this
remains an open question of law, establishing a knowledge
requirement for FTC actions is unnecessary and potentially
damaging.
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\1\Shirokov, 2012 U.S. Dist. LEXIS 42787 at *52-53.
\2\See e.g., Sosa v. DIRECTV, Inc., 437 F.3d 923, 937 (9th Cir.
2006).
\3\Cardtoons, L.C. v. Major League Baseball Players Ass'n, 208 F.3d
885, 891 (10th Cir. 2000).
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In addition to concerns regarding the knowledge
requirement, we have serious concerns about this bill's
preemption of state laws. Twenty states, at the time of
Committee consideration of H.R. 2045, had already enacted
specific policies to curb trolling. In many ways, these state
protections exceed those that would be guaranteed under the
TROL Act. This bill would completely preempt the 20 laws that
expressly address abusive patent assertion communications. It
would also severely constrain the ability of states to take an
active role in guarding against unfair and deceptive patent
demand letters by limiting available remedies and placing an
arbitrary cap on civil penalties. The cap on civil penalties
creates a loophole whereby patent trolls may be willing to
accept the maximum civil penalty because they can collect much
more through deceptive demand letters. If Congress seeks to
preempt specific state laws--especially on issues on which the
states have been leaders fighting unfair and deceptive acts,
such as false and misleading demand letters--the federal effort
should be at least as strong as those state laws.
For the reasons stated above, we dissent from the views
contained in the Committee's report.
Frank Pallone, Jr.,
Ranking Member.
Jan Schakowsky,
Ranking Member, Subcommittee
on Commerce,
Manufacturing, and
Trade.
[all]