≡ Menu

Proposed bill to make losing patent trolls to pay legal fees of victims does not go far enough

As noted in Patent trolls may have to pay legal costs, a proposed federal law—called the Saving High-tech Innovators from Egregious Legal Disputes Act (the SHIELD Act)—would make patent trolls pay (“non-practicing entities”, i.e. a company that does not actually produce and sell a product covered by the patent it is asserting against the defendant), pay “the legal fees of defendants if a court decides the case doesn’t have a reasonable likelihood of success.”

Yes, this would be a slight improvement in the current law. Yes, patent trolls are a problem1 —though the primary problem with the patent system is not “junk” patents, it is not software patents, it is not gene patents, it is not patent office incompetence, it is not vague standards for non-obviousness, and it is not patent trolls. The real problem is “high-quality” patents owned by practicing entities who use patents aggressively, against competitors, by companies like Apple.2 Patent trolls just want a fee; so they are like a tax. Apple wants to get an injunction, if possible, to stop Samsung from selling competing products. And patent battles between competitors give rise to oligopolized industries that raise prices and reduce innovation.3

I suggest some meaningful, significant reforms in How to Improve Patent, Copyright, and Trademark Law and Reducing the Cost of IP Law, including the rule that the losing patent plaintiff pays the legal fees of the defendant. Any patent plaintiff, whether a troll or not; and whether or not the patentee did or did not have a reasonable chance of success: if you lose, you pay the victim’s fees. As I wrote in “This is Why I Pirate”: How A Groundless Copyright Threat Destroyed A Young Film Student’s Dreams and Career:

From a post at reddit, a heartbreaking story of a grad student’s career destroyed by the mere threat of a copyright lawsuit from Fox even though he had a license from Isaac Asimov’s wife. This is one reason that, although I oppose a “loser pays” rule (see Is “Loser Pays” Libertarian? and Gizmodo: The US Patent System Is Killing Innovation), I would favor a “losing patent/copyright plaintiff pays” rule. As I proposed in Reducing the Cost of IP Law: “In the US system, a victorious defendant in a patent-infringement lawsuit usually still pays for his legal defense, which may run in the millions of dollars. The system should be changed so that a patentee who loses an infringement suit must pay the defendant’s legal and other costs. The IPO recently proposed a loser-pays approach, but in my view, the defendant should never have to pay the fees of the patentee, since the defendant did not instigate the suit.” The same goes for copyright defendants. I argue that the losing copyright-plaintiff should pay the victim’s fees.

In fact, I would favor such a rule for all lawsuits in state or federal courts: any losing plaintiff at all should always have to pay the fees of the defendant. A losing defendant, however, should never have to pay the plaintiff’s legal fees.

  1. “Patent Trolls” Cost Productive Companies $29 Billion in 2011, Stall Innovation, and Hurt Small BusinessesHuffPo: Patent Trolls Are Killing People — LiterallyPatent Trolls Cost The Economy Half A Trillion Dollars since 1990. []
  2. Patent Trolls Are Preferable to “Practicing Entities”. []
  3. The Microsoft-Apple Gesture OligopolyControls breed controls, Monopolies breed monopoliesNortel Patents Sold for $4.5 Billion to Consortium Which Includes AppleApple vs. Microsoft: Which Benefits more from Intellectual Property?Patent Cross-Licensing Creates Barriers to Entry. []
{ 2 comments… add one }

To the extent possible under law, Stephan Kinsella has waived all copyright and related or neighboring rights to C4SIF. This work is published from: United States. In the event the CC0 license is unenforceable a  Creative Commons License Creative Commons Attribution 3.0 License is hereby granted.