84R8773 DDT-D

By: Smithee H.B. No. 3176

A BILL TO BE ENTITLED

AN ACT

relating to claims of patent infringement; providing civil penalties; imposing fees.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. The heading to Title 99, Business & Commerce Code, is amended to read as follows:

TITLE 99. MISCELLANEOUS [COMMERCIAL] PROVISIONS

SECTION 2. Title 99, Business & Commerce Code, is amended by adding Chapter 2005 to read as follows:

CHAPTER 2005. CLAIMS OF PATENT INFRINGEMENT

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 2005.001. DEFINITIONS. In this chapter:

(1) "Affiliate" means an entity that, directly or indirectly, owns or controls, is owned or controlled by, or is under common ownership or control with a registrant under Section 2005.101.

(2) "Control" means to exercise substantial influence over the policies and actions of another.

(3) "Demand letter" means a letter, e-mail, or other written communication, including a series of written communications, that is sent to a target, a target's attorney or other representative, or a target's customers and that claims that the target has engaged in patent infringement.

(4) "Target" means a Texas resident:

(A) who has received a demand letter or against whom an allegation of patent infringement has been made;

(B) who has been threatened with litigation or against whom a lawsuit has been filed alleging patent infringement;

(C) whose attorney or other representative has received a demand letter claiming that the person's product, service, or technology has infringed a patent; or

(D) whose customers have received a demand letter claiming that the person's product, service, or technology has infringed a patent.

(5) "Texas resident" means a person who resides in this state or is doing business in this state.

SUBCHAPTER B. BAD FAITH CLAIMS OF PATENT INFRINGEMENT

Sec. 2005.051. BAD FAITH CLAIMS OF PATENT INFRINGEMENT PROHIBITED. (a) A person may not send a demand letter making, in bad faith, a claim of patent infringement against a Texas resident, and in connection with the claim:

(1) file a lawsuit alleging patent infringement;

(2) threaten to file a lawsuit if the alleged patent infringement is not resolved; or

(3) make a demand for compensation or damages or payment of a license fee based on the alleged patent infringement.

(b) For purposes of Subsection (a), a person makes a claim of patent infringement in bad faith if:

(1) the claim is objectively baseless, meaning that no reasonable litigant could reasonably expect success on the merits; and

(2) the person making the claim knows or should have known that the claim is objectively baseless.

(c) A claim of patent infringement is presumed to have been made in good faith if the claim:

(1) is made by a person who holds a certificate of authority issued under Section 2005.151; or

(2) is a claim for relief arising under 35 U.S.C. Section 271(e)(2) or 42 U.S.C. Section 262.

(d) This section does not apply to a communication between parties to the same federal lawsuit.

Sec. 2005.052. ENFORCEMENT BY ATTORNEY GENERAL; INJUNCTION AND CIVIL PENALTY. (a) If the attorney general believes that a person has violated Section 2005.051, the attorney general may bring an action on behalf of the state to enjoin the person from any conduct constituting a continuing violation of that section with respect to a demand letter already sent or future conduct that would violate that section.

(b) In addition to seeking an injunction under Subsection (a), the attorney general may request and the court may order any other relief that may be in the public interest, including:

(1) the imposition of a civil penalty in an amount not to exceed $50,000 for each violation of Section 2005.051, except as provided by Subsection (c);

(2) an order requiring reimbursement to this state for the reasonable value of investigating and prosecuting a violation of Section 2005.051; and

(3) an order requiring reimbursement of a target for legal, professional, and technical expenses related to evaluating or preparing to defend against the claim.

(c) If the trier of fact finds that the person described by Subsection (a) falsely claimed to a target or a target's attorney or other representative that the person received a certificate of authority under Section 2005.151, the court may increase the amount of the civil penalty to an amount not to exceed $150,000 for each violation of Section 2005.051.

(d) If the amount of money recovered after final judgment is insufficient to satisfy the civil penalty, the state's investigation and prosecution costs, and the target's or targets' evaluation and preparation costs, the money must be paid toward each on a pro rata basis.

Sec. 2005.053. COMPLAINTS. (a) A target or a target's attorney or other representative who receives a demand letter from a person located anywhere in the United States and who believes that the person violated Section 2005.051 in connection with the letter may file a written complaint with the attorney general.

(b) A target whose customers receive a demand letter from a person located anywhere in the United States may also file a complaint with the attorney general if the target believes that the sender of the demand letter violated Section 2005.051 in connection with the letter.

(c) A complaint filed with the attorney general under this section must include a copy of the demand letter.

Sec. 2005.054. NO PRIVATE CAUSE OF ACTION. This subchapter does not create a private cause of action for a violation of Section 2005.051.

Sec. 2005.055. CONSTRUCTION OF SUBCHAPTER; EFFECT ON ATTORNEY GENERAL AUTHORITY. This subchapter may not be construed to limit rights and remedies available to the state or to any person under any other law and may not alter or restrict the attorney general's authority under law with regard to conduct involving assertions of patent infringement.

SUBCHAPTER C. REGISTRATION AND DISCLOSURE REQUIREMENTS; DATABASES

Sec. 2005.101. REGISTRATION AND DISCLOSURE REQUIREMENT FOR CERTAIN PATENT INFRINGEMENT CLAIMS; DATABASE. (a) A person who sends 10 or more demand letters per calendar year from anywhere in the United States and who has an ownership interest in a patent associated with the demand letters or a person on whose behalf the letters are sent from anywhere in the United States and who has an ownership interest in a patent associated with the demand letters shall, not later than the 30th day after the date the 10th demand letter is sent:

(1) register with the secretary of state;

(2) provide the information required under Subsection (b); and

(3) pay a registration fee in the amount established under Section 2005.104.

(b) The secretary of state shall establish and maintain a database of persons required to register under Subsection (a). The database must include:

(1) a summary of information from each demand letter sent to a Texas resident by or on behalf of the registrant during the two-year period preceding the date the 10th demand letter was sent, including the name of the sender, the date of the letter, the person to whom the letter was sent, the patent number associated with the letter, and any other information the secretary of state considers relevant;

(2) in the case of a registrant who is a business entity:

(A) the names and addresses of the registrant's top five executive officers, if applicable;

(B) the name and address of each individual who has an ownership interest in the registrant of more than five percent; and

(C) the name and address of each affiliate of the registrant; and

(3) the name and address of each person who has made an investment in or a loan to the registrant in an amount of $1 million or more during the 12-month period preceding the date the 10th demand letter was sent by or on behalf of the registrant.

(c) This section does not apply to:

(1) a demand letter sent by or on behalf of a person who holds a certificate of authority issued under Section 2005.151; or

(2) a demand letter that includes a claim for relief arising under 35 U.S.C. Section 271(e)(2) or 42 U.S.C. Section 262.

Sec. 2005.102. DEMAND LETTER DATABASE; NOTIFICATION. (a) A target or a target's attorney or other representative who receives a demand letter sent from anywhere in the United States may notify the secretary of state of the person's receipt of the demand letter and provide the secretary of state with a copy of the letter and, if not contained in the letter:

(1) the target's name and address;

(2) the name and address of the person who claims to own or claims to have a right to license the patent that the letter claims the target has infringed; and

(3) the patent number of each patent that the person sending the demand letter claims the target has infringed.

(b) The secretary of state shall establish and maintain a database of demand letters and other information about which the secretary of state has received notification under Subsection (a). The database must include:

(1) the names and addresses of the persons described by Subsection (a)(2) and targets against whom an allegation of patent infringement has been made; and

(2) the patent number of each patent that the targets have allegedly infringed.

(c) The secretary of state shall notify the sender of a demand letter of the registration requirements of Section 2005.101 if the secretary of state has reason to believe the sender or other person on whose behalf the letter was sent is required to but has failed to register under that section. The secretary of state must send the notification at least 30 days before the date the attorney general brings an action under Section 2005.105.

Sec. 2005.103. LIMITED ACCESS TO DATABASES; CONFIDENTIALITY. (a) Except as provided by Subsection (b) or (c), information contained in the databases established under Sections 2005.101 and 2005.102 is confidential and not subject to disclosure under Chapter 552, Government Code.

(b) The secretary of state shall establish a procedure to allow only the following persons to have online access to information contained in the databases established under Sections 2005.101 and 2005.102:

(1) a target or a target's attorney or other representative who provides a demand letter under Section 2005.102 that includes a patent number and evidence of a demand for compensation or damages or payment of a license fee based on the alleged patent infringement; and

(2) a person who holds a certificate of authority under Section 2005.151.

(c) Information in the databases may be disclosed to a court or to the attorney general to take enforcement action with respect to a violation of Section 2005.051 or 2005.101.

Sec. 2005.104. FEES. To cover the costs of administering this subchapter, the secretary of state by rule shall establish:

(1) a registration fee to be paid by persons required to register under Section 2005.101; and

(2) a database access fee to be charged to a person permitted by Section 2005.103(b) to access the databases established under Sections 2005.101 and 2005.102.

Sec. 2005.105. CIVIL PENALTY. (a) Except as provided by Subsection (b), a person who violates Section 2005.101(a) and does not come into compliance with that section on or before the 30th day after the date the secretary of state sends notice of the registration requirements of that section as required by Section 2005.102(c) is liable to the state for a civil penalty in an amount not to exceed $10,000 for each day the violation continues.

(b) If the trier of fact finds that the person described by Subsection (a) falsely claimed to a target or a target's attorney or other representative that the person received a certificate of authority under Section 2005.151, the court may increase the amount of the civil penalty to an amount not to exceed $30,000 for each day the violation of Section 2005.101(a) continues.

(c) The attorney general may bring suit to recover the civil penalty imposed under this section. For purposes of the notice requirement under Section 2005.102(c), the attorney general shall notify the secretary of state before bringing a suit under this section and allow time for that notice to be timely made.

(d) The attorney general may recover reasonable expenses incurred in recovering the civil penalty, including court costs and reasonable attorney's fees.

Sec. 2005.106. RULES. The secretary of state may establish procedures and shall adopt rules to implement this subchapter.

SUBCHAPTER D. CERTIFICATE OF AUTHORITY

Sec. 2005.151. CERTIFICATE OF AUTHORITY FOR CERTAIN BUSINESSES. (a) A person may apply to the attorney general for a certificate of authority for purposes of establishing a presumption under Section 2005.051(c)(1) or asserting an exemption under Section 2005.101(c)(1).

(b) Subject to Subsection (c), the attorney general by rule shall adopt eligibility criteria for the issuance by the attorney general of a certificate of authority under this section.

(c) The attorney general shall issue a certificate of authority to an applicant who:

(1) owns at least 1,000 patents;

(2) generates $5 billion or more in annual sales; and

(3) employs at least 5,000 persons.

(d) The attorney general by rule shall establish a procedure by which a person may apply for and receive a certificate of authority under this section.

(e) The attorney general may charge an application fee to recover the costs of administering this section.

(f) A person denied a certificate of authority under this section may appeal that determination to a district court.

SECTION 3. (a) Not later than January 1, 2016, the secretary of state shall establish the databases required by Sections 2005.101 and 2005.102, Business & Commerce Code, as added by this Act.

(b) Not later than January 1, 2016, the secretary of state shall adopt the rules necessary to implement Subchapter C, Chapter 2005, Business & Commerce Code, as added by this Act.

(c) Notwithstanding Section 2005.101, Business & Commerce Code, as added by this Act, a person is not required to register under that section before January 1, 2016.

SECTION 4. Not later than October 1, 2015, the attorney general shall adopt the rules necessary to implement Section 2005.151, Business & Commerce Code, as added by this Act.

SECTION 5. This Act takes effect September 1, 2015.