Targeting Rogue and Opaque Letters Act of 2018

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. 1. Short title This Act may be cited as the Targeting Rogue and Opaque Letters Act of 2018 2. Unfair or deceptive acts or practices in connection with the assertion of a United States patent (a) In general It shall be an unfair or deceptive act or practice within the meaning of section 5(a)(1) of the Federal Trade Commission Act ( 15 U.S.C. 45(a)(1) (1) the sender of the communications, in bad faith, states or represents in the communications that— (A) the sender is a person with the right to license or enforce the patent at the time the communications are sent, and the sender is not a person with such a right; (B) a civil action asserting a claim of infringement of the patent has been filed against the recipient; (C) a civil action asserting a claim of infringement of the patent has been filed against other persons; (D) legal action for infringement of the patent will be taken against the recipient; (E) the sender is the exclusive licensee of the patent asserted in the communications; (F) persons other than the recipient purchased a license for the patent asserted in the communications; (G) persons other than the recipient purchased a license, and the sender does not disclose that such license is unrelated to the alleged infringement or the patent asserted in the communications; (H) an investigation of the recipient’s alleged infringement occurred; or (I) 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 such activity was held, in a final determination, not to infringe the patent; (2) the sender of the communications, in bad faith, seeks compensation for— (A) a patent claim that has been held to be unenforceable due to inequitable conduct, invalid, or otherwise unenforceable against the recipient, in a final determination; (B) activities undertaken by the recipient after expiration of the patent asserted in the communications; or (C) activity of the recipient that the sender knew was authorized, with respect to the patent claim or claims that are the subject of the communications, by a person with the right to license the patent; or (3) the sender of the communications, in bad faith, fails to include— (A) 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 such person, unless such person is a public company and the name of the public company is identified; (B) an identification of at least one patent issued by the United States Patent and Trademark Office alleged to have been infringed; (C) an 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; (D) 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; or (E) 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. (b) Affirmative defense With respect to subsection (a), there shall be an affirmative defense that statements, representations, or omissions were not made in bad faith (as defined in subparagraphs (B) and (C) of section 5(1)) if the sender can demonstrate that such 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. (c) Rule of construction For purposes of sections 3 and 4, the commission of an act or practice that is declared under this section to be an unfair or deceptive act or practice within the meaning of section 5(a)(1) of the Federal Trade Commission Act ( 15 U.S.C. 45(a)(1) 3. Enforcement by Federal Trade Commission (a) Violation of rule A violation of section 2 shall be treated as a violation of a rule defining an unfair or deceptive act or practice prescribed under section 18(a)(1)(B) of the Federal Trade Commission Act ( 15 U.S.C. 57a(a)(1)(B) (b) Powers of Commission The Commission shall enforce this Act in the same manner, by the same means, and with the same jurisdiction, powers, and duties as though all applicable terms and provisions of the Federal Trade Commission Act ( 15 U.S.C. 41 (c) Effect on other laws Nothing in this Act shall be construed in any way to limit or affect the authority of the Commission under any other provision of law. 4. Preemption of State laws on patent demand letters and enforcement by State attorneys general (a) Preemption (1) In general This Act 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. (2) Effect on other State laws Except as provided in paragraph (1), this Act shall not be construed to preempt or limit any provision of any State law, including any State consumer protection law, any State law relating to acts of fraud or deception, and any State trespass, contract, or tort law. (b) Enforcement by State attorneys general (1) In general 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— (A) to enjoin further such violation by the defendant; or (B) to obtain civil penalties. (2) Maximum civil penalty Notwithstanding the number of actions which may be brought against a person under this subsection, a person may not be liable for a total of more than $5,000,000 for a series of related violations of section 2. (3) Intervention by the FTC (A) Notice and intervention The attorney general of a State shall provide prior written notice of any action under paragraph (1) to the Commission and provide the Commission 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 Commission shall have the right— (i) to intervene in the action; (ii) upon so intervening, to be heard on all matters arising therein; and (iii) to file petitions for appeal. (B) Limitation on State action while Federal action is pending If the Commission has instituted a civil action for violation of section 2, no State attorney general may bring an action under this subsection during the pendency of that action against any defendant named in the complaint of the Commission for any violation of such section alleged in the complaint. (4) Construction For purposes of bringing any civil action under paragraph (1), nothing in this Act shall be construed to prevent the attorney general of a State from exercising the powers conferred on the attorney general by the laws of that State to— (A) conduct investigations; (B) administer oaths or affirmations; or (C) compel the attendance of witnesses or the production of documentary and other evidence. 5. Definitions In this Act: (1) Bad faith The term bad faith (A) made knowingly false or knowingly misleading statements, representations, or omissions; (B) made statements, representations, or omissions with reckless indifference as to the false or misleading nature of such statements, representations, or omissions; or (C) 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. (2) Commission The term Commission (3) Final determination The term final determination

Summary: Targeting Rogue and Opaque Letters Act of 2018 This bill makes sending bad faith patent demand letters an unfair or deceptive act in violation of the Federal Trade Commission Act. A patent demand letter is a written communication claiming that the recipient may be liable for patent infringement. "Bad faith" means making knowingly false or misleading statements, making claims with reckless disregard for the truth, or omitting information with the intent to deceive. Bad faith representations under the bill include false or misleading claims about the sender's right to assert the patent, whether lawsuits have been filed against the recipient or others, and whether others have purchased a license to exercise the patent. It is also bad faith to make written demands for compensation for invalid patents, or to demand compensation without identifying the ultimate parent entity of the letter sender. The sender has an affirmative defense that it acted in good faith, by proving its misstatements or omissions were unintentional and it made an error in spite of procedures to avoid such errors. The bill preempts state laws relating to patent assertion communications. The Federal Trade Commission and state attorneys general can bring actions to enforce these provisions.