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Trolls & The Preemption Dilemma

Patent trolls account for most patent assertions and are often blamed for the increased costs of patent litigation. Congress and the courts have tried to wrangle the abusive practices of trolls. Through a post‐grant review system, Congress tried to combat the growing litigation costs by streamlining invalidity challenges. The Supreme Court has also tackled the patent‐troll problem in seminal remedy and venue cases, hampering trolls’ ability to get injunctions and use certain venues. Yet the problem persists. Although Congress and federal courts recognize and sometimes try to alleviate the patent‐troll problem, what can states do to protect small‐ and medium‐sized businesses from these pesky trolls? For now, probably nothing. The Federal Circuit, through a preemption analysis influenced by the First Amendment’s Petition Clause, often invalidates state laws that could regulate the problem. Still, states continue to try: most states have passed statutes regulating demand letters asserting patent infringement. These state anti‐patent laws’ goal is to protect companies and consumers from patent trolls. Regardless of whether the current state anti‐patent laws will effectively deter egregious patent‐troll behavior, the Federal Circuit’s current preemption doctrine doesn’t seem to let states promote a legitimate state interest— protecting businesses from bad‐faith behavior so that the businesses can innovate.

But is the Federal Circuit properly reading Supreme Court precedent on preemption and the Petition Clause? Or are they unnecessarily developing a rigid rule to help ex ante patentholder decisionmaking? As this Comment argues, even though the Federal Circuit has improperly morphed the Noerr test into conflict preemption and doesn’t effectively analyze whether Noerr applies to prelitigation communication and non‐antitrust claims, the Federal Circuit’s results aren’t far off. There’s good reason for petition immunity to apply to prelitigation activity, like demand letters, but the analysis should be separate from conflict preemption. It turns out that the Supreme Court’s rigid approach to the sham exception is partly to blame.

This Comment makes three contributions. The first contribution is putting a state anti‐patent law through a full implied‐preemption analysis in accordance with Supreme Court precedent. The second contribution is giving and applying a proper framework to determine whether the Petition Clause applies to prelitigation communication and non‐antitrust claims. The third contribution is suggesting a flexible petitioning‐immunity framework that will leave states room to regulate patent‐troll demand letters.