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Vermont’s legislature recently amended its consumer fraud statute with a new law aiming to prevent bad faith assertions of patent infringement against individuals or entities based in Vermont. The new law is awaiting the governor’s signature. Vermont’s law is the first of its kind, though there have been federal efforts to curb patent trolling as well, albiet with mixed results. The law provides a basis for lawsuits and enforcement by the Vermont Attorney General where bad faith patent infringement assertions are made, with provisions for compensatory and exemplary damages.
Vermont’s new law provides a list of factors that suggest bad faith, such as a failure to identify the patent or the owner of the patent, a lack of specificity as to how the patent is violated, and unreasonable demands. By contrast, a good faith assertion is marked by such factors as commercialization of the patented item and successful enforcement of the patent in court.
Commentators have discussed whether Vermont’s new law would be preempted by federal law and whether state regulation of patents is a valid option. One has argued that the law may be preempted by federal law, as federal courts have jurisdiction over several of the issues that may commonly be raised by suits under the new law, such as the validity of the patent at issue and whether the patent was infringed. Further, as the argument goes, even if not preempted by federal law, state regulation of patent law is problematic because of the various costs that result from inconsistent state laws. It has been argued in response that Vermont’s law should not be considered preempted by federal law because it will not interfere with the goals and objectives of federal law as long as it is applied in a way that fits within federal standards, and that state involvement in patent law has its benefits. These putative benefits include a race to the top, with states competing and experimenting to produce the best regime, local involvement in policy development, and the avoidance of an overly concentrated source of patent law.
Does federal law preempt Vermont’s new law? Are the arguments for or against state involvement in this area of law convincing? Can we expect other states to follow suit, and if so, will we see efforts that have strong similarities to Vermont’s new law?
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