State lawmakers are still considering a few proposals impacting corporations and business entities.

Patent Trolling

SB 258 gives the state’s attorney general certain powers to fight bad-faith patent infringement claims. The proposal is designed to stop patent trolling—individuals or groups trying to extort settlement payments from businesses by making false claims of patent ownership related to various business tools and practices.  

CBIA and a coalition of businesses and organizations have worked to improve and strengthen the bill while ensuring that valid patent claims remain enforceable. Recommended changes include:

  • Allowing patent trolling victims to prove either deception or vagueness in the claims. Proving deception is a much higher standard than vagueness, and victims of patent trolls often face claims that are vague. Allowing trolling victims to prove vagueness or deception will protect them better.
  • Clarifying that court-ordered damages are only available to victims of patent trolls and not to patent trolls themselves.
  • Ensuring that valid patent holders will not be accidentally harmed as a result of the legislation and that valid patents will be protected, not compromised, as a result of the bill.

These would go a long way to discourage patent trolling and protect valid patent claims.

The Senate agreed this week by incorporating these changes into the language of SB 258 and approving the bill this week. SB 258 now awaits action in the House.  

Business Registry Clean-Up

Anyone who has formed a company in Connecticut knows that the state's business registry contains both active companies and inactive or defunct ones as well. When trying to determine the availability of potential business names for a new enterprise, those ersatz entries make determining a company name very problematic.

HB 5489 will help begin the process of cleaning up and updating the state’s business registry by giving the secretary of the state certain powers.

Under HB 5489, if a company fails to file its annual report with the secretary of the state for two consecutive years, the company will be notified that the state will begin the process of administratively dissolving the company if it doesn’t remedy the situation within three months.   

The bill’s purpose to remove inactive and defunct companies from the registry and make it as accurate and up-to-date as possible.

Benefit Corporations

SB 23 will allow businesses to be incorporated in Connecticut as benefit corporations. These entities receive no advantage not otherwise afforded other for-profit business entities (tax, legal or otherwise), but must identify, and fulfill, a social benefit meeting the standards outlined in the bill. If a benefit corporation fails to fulfill its social mission, its shareholders can go to court to force compliance.

Benefit corporations have become very popular nationwide. Twenty states have adopted them and nearly 600 such companies have been organized across the country. Young investors with financial resources are seeking states that allow for the creation of benefit corporations that they can invest in.

Proponents of SB 23 say it would spur small business growth and bring new jobs to Connecticut. While time will tell, there doesn't appear to be any disadvantage to the creation of benefit corporations. In fact, with socially-minded investors actively seeking states where benefit corporations are allowed, passage of SB 23 could make Connecticut more attractive.

SB 23 also contains an optional "legacy preservation" provision allowing benefit corporations to preserve their social missions into perpetuity by stating that they may not be changed. However, the legacy preservation provision can only be adopted by a company after it has given its shareholders two years’ notice and then it is approved unanimously by shareholders.

For more information, email Eric George.