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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.
---------------------------------------------------------------------------
    \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).
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------

                  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.
---------------------------------------------------------------------------
    \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).
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \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).
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \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).
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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)).
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \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).
---------------------------------------------------------------------------
    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]