Leveling The Playing Field: Texas Calls Foul On Abusive Patent Demands

The Highlights

1. Empowering End Users to Respond: Texas House Bill 5543 proposes giving end users the ability to take legal action in state court when they receive patent demand letters that lack clarity or substantiation.
2. Increasing Accountability for NPEs: The bill allows courts to require non-practicing entities to post a bond of up to $500,000 when infringement claims lack sufficient clarity, while also offering remedies such as damages and attorney's fees.
3. Texas Builds on National Reform Momentum: HB 5543 reflects a growing trend among states to equip businesses and consumers with tools to address patent enforcement practices that may rely more on pressure than merit.

In competitive sports, a fair game requires more than talent—it requires rules that prevent one side from bending the system. When players fake a foul or lean on gamesmanship, referees intervene to restore fairness and integrity. Patent enforcement has its own version of this problem: some businesses and policy makers have raised concerns about non-practicing entities (NPEs) sending vague or aggressive patent demand letters to businesses and their customers. Critics argue that these letters can rely less on the strength of the underlying patent and more on the imbalance of resources—pushing recipients and their upstream suppliers toward quick settlements rather than costly litigation. In Texas, lawmakers are stepping into the role of referee. With House Bill 5543 (HB 5543), the legislature is considering new tools to curb what are seen as abusive demand letters and give end users a fair chance to contest questionable claims.

House Bill 5543

On May 12, 2025, the Texas House Judiciary and Civil Jurisprudence Committee advanced HB 5543, sponsored by state Rep. Morgan Meyer (R-Dallas). The proposed language of the bill includes an express reversal on the previously prohibited private cause of action, a relaxed definition of "consumer," and an authorization to the court to post a bond not exceeding $500,000 upon the finding of a "reasonable likelihood" of bad faith patent assertion. While there is no projected timeline for the full House to act, if enacted, the bill would give end users a private cause of action against "bad faith claims of patent infringement" under the state's Deceptive Trade Practices-Consumer Protection Act (DTPA). Much like a new rulebook, HB 5543 seeks to ensure that patent rights—vital tools for protecting innovation—are not undermined by tactics that critics describe as misuse of the threat of enforcement.

At its core, HB 5543 takes aim at what it defines as bad faith patent demand letters—communications accusing end users of infringement without legitimate basis or sufficient clarity. In this context, an "end user" refers to the individual or entity that uses the product, service, or technology, excluding the manufacturer or service provider. Observers note that these end users are frequently identified by NPEs as pressure points, with letters alleging infringement that can intimidate them and, in turn, push upstream providers into costly settlements.

While current Texas law already prohibits certain deceptive tactics, enforcement authority rests solely with the Texas attorney general, leaving the letter recipients with limited options. HB 5543 seeks to change that by empowering end users to bring legal action directly in state court.

Under the bill, if a court finds a "reasonable likelihood" that a bad-faith assertion had occurred, it could require the asserting party to post a bond of up to $500,000 to cover the end user's fees and costs. The legislation also introduces a suite of remedies including damages, injunctive relief, and attorney's fees—giving end users the tools to fight back. In doing so, HB 5543 transforms end users from passive recipients of legal threats into active participants capable of challenging what critics characterize as abusive patent practices and raising the stakes for NPEs.

National Momentum and Texas' Bold Move

Texas' proposal builds momentum across the country. Since Vermont's pioneering 2013 law, more than half of the U.S. states have adopted statutes targeting so-called bad-faith patent assertions. The momentum was especially strong in 2014 and 2015, as states across the country sought to protect local businesses from what they considered abusive tactics. The states adopted different approaches: some states treat bad-faith assertions as a form of unfair or deceptive trade practice, often incorporating remedies like treble damage, attorney fees, and a private cause of action treat (e.g., 9 VT Stats. Sections 4195 et seq., Ala. Code Sections 8-12A-1 et seq.); some states limit enforcement to the state attorney general only (e.g., Minn. Stat. Section 325D.72, Va. Code Section 59.1-215.1 et seq.). Some states expressly authorize courts to require bonds from patent demand letter senders, shifting financial risk back to NPEs (e.g., 9 V.S.A. Section 4198, RI Gen L Section 6-41.1-5). Against this backdrop, Texas HB 5543 pairs the private cause of action model with a bond requirement of up to $500,000, and folds these remedies into the state's powerful DTPA. While not the first to authorize such tools, it represents one of the most aggressive syntheses to date, raising the stakes higher for NPEs.

The potential impact of HB 5543 is heightened by Texas' prominent role in patent litigation. For years, the Eastern District of Texas has been a focal point for cases brought by NPEs, and in 2024 alone, over 500 NPE cases were filed there. While patent law is federal, HB 5543 regulates conduct—specifically, the way demand letters are used—not patent validity. That creates dual course of protection: defendants can still challenge infringement in federal court, while still pursuing relief under state law if a demand letter is misleading or perceived as abusive.

Importantly, HB 5543 is not an attack on patent rights themselves. Patents remain essential tools to protect innovation and encourage investment. The bill instead seeks to differentiate between good-faith enforcement and tactics that critics describe as bad-faith. By doing so, Texas signals its commitment to balancing the interests of innovators, businesses, and consumers.

A New Rulebook for Fair Play in Texas

Originally published by Texas Lawyer

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