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New Bill Would Require Patent Trolls To Pay Defendants' Attorneys 196

Posted by Soulskill
from the system-and-method-for-being-a-leech dept.
Zordak writes "According to Law 360, H.R. 845, the 'Saving High-Tech Innovators from Egregious Legal Disputes' (SHIELD) Act of 2013 would require non-practicing entities that lose in patent litigation to pay the full legal costs of accused infringers. The new bill (PDF) would define a 'non-practicing entity' as a plaintiff that is neither the original inventor or assignee of a patent, and that has not made its own 'substantial investment in exploiting the patent.' The bill is designed to particularly have a chilling effect on 'shotgun' litigation tactics by NPEs, in which they sue numerous defendants on a patent with only a vague case for infringement. Notably, once a party is deemed to be an NPE early in the litigation, they will be required to post a bond to cover the defendants' litigation costs before going forward."
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New Bill Would Require Patent Trolls To Pay Defendants' Attorneys

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  • Hmm (Score:5, Insightful)

    by Anonymous Coward on Thursday February 28, 2013 @11:44AM (#43035767)

    Sudden outbreak of common sense?

    • Weird sensation... (Score:5, Insightful)

      by Joce640k (829181) on Thursday February 28, 2013 @12:04PM (#43036019) Homepage

      Why am I having a hard time believing this is real and has a hope of being passed into law?

      Am I really so cynical/jaded that a good-sounding idea from government and/or lawmakers just feels like some sort of a trap? It say something about how the world's been run lately.

      • by MickLinux (579158)

        Me being a pessimist, I figure it could be real, and could be quite likely to pass.

        It should put the nail it the coffin of those annoying inventors applying for patents, and keep the patents where they should be, in the hands of the overlords.

        If this law is tailored to the job, not only will you have to be able to afford to go round after round of appeal, but if you lose on any of them, you face instant financial ruin. So then if the ones you sue don't come to terms, then your goose is cooked before you be

        • by Anonymous Coward on Thursday February 28, 2013 @12:37PM (#43036489)

          If this law is tailored to the job, not only will you have to be able to afford to go round after round of appeal, but if you lose on any of them, you face instant financial ruin.

          If it's actually *your* patent, or if you're actively using the patent to do something other than suing people, then the requirements to post bond and pay the defense costs don't apply.

      • Why am I having a hard time believing this is real and has a hope of being passed into law?

        And even if it does become law, the wording is ambiguous:

        ...and that has not made its own 'substantial investment in exploiting the patent.'

        What *exactly* does this mean? I'm sure that Patent Trolls can work the language to their advantage, especially in
        South Texas, or where ever the local Media are cleaning up on Patent Troll cases...

        • by AlphaWolf_HK (692722) on Thursday February 28, 2013 @12:28PM (#43036329)

          The preamble to the bill isn't the bill itself. My guess is that there is or will be wording within the fine print that will spell out exactly what that is.

          • You're wasting your breath. It's just like patents. The title and tiny summary at the beginning isn't the patent... the claims are the patent. But guess what, a large percent of the people I hear complaining about patents didn't bother reading what is actually claimed. Why would those same people who were complaining about patents read the contents of a law to see what it actually says when they can just stick with being lazy and bitching about the summary of the law instead?
      • by Sqr(twg) (2126054)

        Really, all that's needed for this to pass is that the patent trolls decide it would be cheaper to pay the defendants' legal fees than to buy a few senators to oppose the bill...

      • My question is what prevents this:

        Company X is our patent troll, decides to sue someone.
        Company X's owners establish Company Y with just enough money to litigate their side of the case
        Company X sells the rights to a patent to Company Y for a pittance
        Company Y Sues and loses
        Compnay Y Has no holdings beyond the now largely useless bogus patent so it dissolves
        Company X loses nothing except the patent, which again, is now largely useless

        If Company Y wins, they sell the patent back to Company X and the owners ca

        • by lpp (115405)

          IANAL but I suspect that in a case like this the judge would pierce the corporate veil since Company Y is clearly just an attempt to circumvent the intent of the law with a legal fiction. Specifically that Company Y is truly acting independently when in fact it is acting purely within the parameters dictated by Company X and purely within the interests of Company X.

        • by viperidaenz (2515578) on Thursday February 28, 2013 @02:27PM (#43037929)

          Company Y doesn't have the money to post bond, so can't continue.

        • by nedlohs (1335013)

          Do you know what a bond is (in this context)?

        • My question is what prevents this:

          Company X is our patent troll, decides to sue someone.
          Company X's owners establish Company Y with just enough money to litigate their side of the case
          Company X sells the rights to a patent to Company Y for a pittance
          Company Y Sues and

          wins... Company Z, the infringer, points to the pittance as being Company Y's valuation of the patent, and offers to pay a reasonable royalty of 5% of said pittance. The judge, finding this unbelievably clever, agrees. Company X's owners sob in the corner. :)

      • by erroneus (253617)

        These NPEs are a serious threat to large patent holders. Normally, patent holders come to some sort of agreement. In the case of NPEs, there is almost no negotiating. These large patent holders invariably have a lobby or two which they contribute to. NPEs? Not so much.

      • by kryliss (72493)

        Because when you are hit with a hammer a thousand times why would you honestly believe that hit #1001 will be with a balloon?

    • Re:Hmm (Score:4, Insightful)

      by butalearner (1235200) on Thursday February 28, 2013 @12:12PM (#43036111)

      Almost. Of course, this bill is full of weasel words so it'll never pass, and we're still dancing around the two things we need:

      1) Software patent reform.
      2) Loser pays for every kind of lawsuit, not just patent troll suits. You know, like every other sane country on the planet.

      • Re:Hmm (Score:5, Insightful)

        by dc29A (636871) * on Thursday February 28, 2013 @12:34PM (#43036439)

        Even if this law passes, it won't work because the patent office keeps granting vague patent after vague patent.

      • by Stiletto (12066)

        Loser pays is a terrible idea, unless you can guarantee that the legal system 100% of the time accurately determines who is wrong (as opposed to who has the best/most lawyers). As a person with limited resources, I would never be able to risk suing a corporation over something, because, even if I had a 1% chance of losing, that chance would mean instant bankruptcy for me. Similarly, corporations would have even more incentive to use bogus lawsuits to extract settlement money from individuals who would never

        • Re:Hmm (Score:5, Insightful)

          by AK Marc (707885) on Thursday February 28, 2013 @01:36PM (#43037281)

          Loser pays is a terrible idea, unless you can guarantee that the legal system 100% of the time accurately determines who is wrong (as opposed to who has the best/most lawyers).

          Without loser pays, anyone who gets sued already lost. You get to pay millions to prove your innocence. So there's a loss for being innocent. Loser pays fixes that. What would you propose to protect the innocent from frivolous lawsuits?

          • Re:Hmm (Score:5, Interesting)

            by Anne Thwacks (531696) on Thursday February 28, 2013 @02:08PM (#43037657)
            Loser Pays applies to virtually the entire rest of the galaxy, and, while not perfect, it is way better than the Loonie Tunes US approach. Here in the UK, it applies to both criminal and civil law in 100% of cases, unless the judge decides the loser was partly to blame - eg deliberately made himself look guilty to attract a law suit.
            • by s.petry (762400)

              I call bullshit!

              In almost every civil action there is something called a counter suit. What is my option when you shut down my business because of an alleged patent infringement? What do I counter sue for? Nothing, because there is no protection from arbitrary and ambiguous patents or lawsuits using such patents. Even in cases where a patent has been invalidated during the trial process, the defendant has tremendous losses. Those losses can not be recouped. If I pay a troll and the patent gets invalid

            • by Maow (620678)

              Loser Pays applies to virtually the entire rest of the galaxy, and, while not perfect, it is way better than the Loonie Tunes US approach. Here in the UK, it applies to both criminal and civil law in 100% of cases, unless the judge decides the loser was partly to blame - eg deliberately made himself look guilty to attract a law suit.

              Wait, if I'm charged with a criminal offence in the UK, and found not guilty, I get my lawyers fees reimbursed by Her Majesty?

              I don't think it works that way in Canada; I'd be quite interested if you could clarify that.

              We do of course have loser pays in civil proceedings, unless judge decides otherwise, and on a fee schedule applied by the judge.

        • by andydread (758754)
          if you look at the bill it seems this is not loser pays for everybody. Its if you purchase patents from corporations, produce nothing, then sue people you have to first put up a bond. How many entities do you know of that 1) Purchases patents from corporations, and 2) Produce nothing, and 3) Sue people over said purchased patents? These people are trolls. think about it. If you are a small guy and you came up with some new invention and patent it then you would be the original inventor on that patent
        • Loser pays as a statutory requirement is a bad idea. However, loser pays should be an allowed option in every civil case, something that the judge/jury can impose when the circumstances warrant it. When the plaintiff has presented a good case, but still loses, loser pays could be unnecessarily punitive.

    • This could never pass as it is way too logical. I believe this rule should apply to all litigation, civil and criminal. Why should the government be allowed to bankrupt an individual by accusing him (or her) of a crime that they did not commit? If the government loses it should pay the defendant's legal expenses and vice versa. It would add further punishment to those convicted of crimes.

  • Seems to me that this will just encourage greater extortion of small shops - those that can't afford to even consider taking a case to court.

    • by alen (225700)

      they can't afford court right now either

      • Correct. But this makes it worse for them inthat they will be increasingly targeted by NPEs who don't want to take the risk of going to court with one of the big players.

        • Correct. But this makes it worse for them inthat they will be increasingly targeted by NPEs who don't want to take the risk of going to court with one of the big players.

          Unlikely. The reason they don't usually go after the small companies is because they are small, i.e. they have no money. There is little point in spending much money trying to extort a tiny settlement out of a company that the NPE may very well bankrupt in the process. If I'm a small company I would basically say "bring it on". They'll spend more money on lawyers than they would win in a settlement and even if they did win they probably would get nothing because the company would declare bankruptcy.

    • They only have to pay if it's deemed that they haven't done anything to use the patent and aren't the original owners of the patent. How many legitimate (aren't patent trolls) small shops are buying up patents and sitting on them?
    • by Chemisor (97276) on Thursday February 28, 2013 @12:00PM (#43035967)

      A small shop can not afford to take a case to court even without paying the defendant's lawyers. An IP lawsuit costs millions of dollars to pursue; more money than any normal person will make in his entire working lifetime. The courts are for the big fish. For the rest of us, any involvement with them leads to bankrupcy.

      • by Psyborgue (699890) on Thursday February 28, 2013 @12:56PM (#43036743) Homepage Journal
        That depends. Some lawyers are willing to take defense cases on a contingent fee basis. I was sued once for defamation. Because the case was filed in a state where there were strong anti-SLAPP laws, my, normally 500/hr lawyers took the case for (mostly) free with a relatively small retainer. They were so confident the case was bs, had no chance of winning, and that they could get paid through the anti-SLAPP statute, they were willing to take the small risk of losing. The case ended up costing the plaintiff probably close to half a million by the time the dust settled (the judge even granted them a 1.5x multiplier for their risk). The point is there are lawyers out there who are willing to take these sorts of cases if there are statutes out there that will allow them to get paid. I think this sounds like a good law, even for the small guys.
        • And there you have the REAL reason why this law is being proposed and why it will pass. It's for the benefit of lawyers. This law ensures that more lawyers will get paid, essentially extending the anti-SLAPP environment to patents, and for the same reasons. If there are any benefits to inventors or the real economy, it's purely coincidental.

      • by andydread (758754)
        A small shop is not a NPE. A small shop is not suing people with patents purchased from corporations without having any products or plans for products what-so-ever. A small shop doesn't procure unmanned offices in the Eastern District of Texas. A small shop can sue for infringments on their own patents without putting up the bond. What the law says is you just cant purchase patents, have no intent to produce anything, and sue world+dog without putting up a bond first. Nothing is stopping you from inve
    • by ceoyoyo (59147)

      Small patent trolls won't be able to go to court? My heart weeps.

    • Small shops are not out there filing lawsuits against numerous alleged patent infringing companies. Generally they are the targets of that approach. The bill would allow the targets of patent trolls the ability to recoup losses that they currently have no ability to recoup. Currently the defendants either pay the troll, or pay for lawyers to fight. There is no recovery currently for any part of the trial. The current methods of patent trolls are extortionist.

      You phrase the problem like the patent troll

  • by Anonymous Coward on Thursday February 28, 2013 @11:57AM (#43035919)

    S.H.I.E.L.D.
    "Strategic Hazard Intervention Espionage Logistics Directorate"
    "Saving High-Tech Innovators from Egregious Legal Disputes"

    I think congress pulled a fast one on Marvel and beat them hands down!

    AC experimenter and I give a rats ass to anyone who cares!

    • by nametaken (610866)

      Oh damn, now we need a legislative working group for a bill to shield people from copyright suits.

      Maybe call 'em... the Justice League?

    • BULLET. Titanium nitride tipped to penetrate your SHIELD.
  • by arcctgx (607542) on Thursday February 28, 2013 @12:05PM (#43036033)

    Does filing a lawsuit count as a "substantial investment in exploiting the patent"?

  • by Bob9113 (14996) on Thursday February 28, 2013 @12:06PM (#43036041) Homepage

    The bill is designed to particularly have a chilling effect on 'shotgun' litigation tactics by NPEs, in which they sue numerous defendants on a patent with only a vague case for infringement.

    So to achieve that, instead of addressing shotgun litigation by any litigant, they create an inhibition to all NPEs. That would include things like the The Open Invention Network [wikipedia.org], and would exempt practicing entities like SCO. Does that sound right?

    This legislation would create unequal patent protection for big corps versus independent inventors. Once a patent is sold by its original inventor, it can only subsequently be sold to big corps or it loses some of its power. This means big corps will have an advantage compared to independent inventors, who will have less ability to market their inventions.

    If the problem is shotgun patent enforcement, regulate shotgun patent enforcement. If the problem is overbroad patents, narrow the allowed scope of patents. Address the real problem with equal treatment for all litigants under the law. Don't create a preferred class for big incumbent corps and inhibit independent competition.

    This is nothing more than another land grab by big incumbents who use our government to inhibit free market competition.

    • by ceoyoyo (59147) on Thursday February 28, 2013 @12:35PM (#43036451)

      Yes. The Open Invention Network shouldn't be suing people on flimsy grounds either.

      Not to mention that the OIN has members like Google. If one of their members is a practicing entity, the OIN can likely make a good argument that they are as well.

      • by Java Pimp (98454)

        But then a NPE could enlist a more shady company as a "member" (think SCO) and make the same argument.

      • by jedidiah (1196)

        A loss at trial does not imply "flimsy grounds".

        That is the basic problem with any sort of "loser pays" approach. It primarily just increases the cost of litigation. It will probably not just be restricted to "evil people".

        Measures intended to "punish evil people" don't really address the root of the issue. They just sound good to the masses. It's the perfect sort of "feel good and do nothing" measure.

        Ultimately, they just open the door for bad ideas that end up victimizing "nice people" sooner or later.

    • by IP_Troll (1097511) on Thursday February 28, 2013 @12:39PM (#43036535)
      No that sounds completely wrong.

      1. The Open Invention Network actively licenses the patents it holds, so it would not be considered an NPE.
      2. The SCO litigation was about copyright, not patent.
      3. Your statement about unequal protection is false, a non sequitur, and illogical. Big corporations do not "own" the patents it. A shell company in a tax haven like Ireland owns the patents and license them back to the parent, and other licensees. If the Open Invention Network is considered an NPE then so are these shell companies.
      4. Attorneys fees to a defendant are already allowed in many types of cases when it is determined that the plaintiff had no business filing suit, including patent litigation. Revising the patent law so that a bond has to be placed before the suit can go forward ensures the wrongfully accused defendant will actually get paid and the plaintiff can't just vanish after they lose, thus leaving the defendant with the attorneys fees.

      Your visceral knee jerk reaction to a concept that you do not understand is absurd.
      • by erice (13380)

        No that sounds completely wrong.
        1. The Open Invention Network actively licenses the patents it holds, so it would not be considered an NPE.

        Licensing patents to others is what patent trolls do. It would not meet the criteria of "substantial investment in exploiting the patent".

        I think the original inventor would need to be part of the network in order to avoid the NPE classification.

        • by IP_Troll (1097511)
          That is completely wrong and the word inventor doesn't mean what you think it means.

          Assuming you are right, if the inventor "needs to be part of the network" then 99% of patent holding companies would be NPEs, because as I said before - Big corporations do not "own" the patents. A shell company in a tax haven like Ireland owns the patents and license them back to the parent, and other licensees. If the Open Invention Network is considered an NPE then so are these shell companies.
  • by alittle158 (695561) on Thursday February 28, 2013 @12:07PM (#43036061)
    How about just barring the eastern district of Texas from hearing any cases on patents?...
  • While patent lawsuits are particularly important, why is it that we have to make a new law for this at all? Shouldn't we have this for all lawsuits across the board? It can still be allowed for judges to decide in specific cases if the situation does not warrant this requirement. But overall it should normally be the way it is done.

    • by wvmarle (1070040)

      Is it in all civil cases so that loser pays winner's cost, and court cost?

      In that case it would indeed be quite reasonable that when initiating a law suit, the plaintiff should post some kind of guarantee that they will pay loser's cost (preferably a fixed amount based on type of lawsuit etc, so that this is known before the suit is initiated and not dependent on the mood of the judge). That might make actually getting the money afterwards a little less impossible.

      OTOH this can not reasonably be asked from

    • What you propose would make it nearly impossible for a private citizen to ever, ever again sue a corporate citizen. Big corporations have dozens of lawyers on staff, so they can easily rack up "millions" of dollars of work on a lawsuit. (Of course, if the suit were never filed, those lawyers would have instead racked up millions of dollars of work doing something else as they are salaried employees.) With the chilling effect of you having to pay those fines if you lose the lawsuit, why would you, a mere

      • by GodInHell (258915)
        What he proposes is what the law is throughout most of the globe. The exceptional state (the U.S.) has what is called "the American Rule" that each side bears their own Court costs and Attorneys' fees unless there is an agreement to the contrary. -Adam
  • So, why doesn't this apply to all civil lawsuits? This is how it works in many countries thus their courts aren't tied up as bad as ours (i.e. American).
    http://en.wikipedia.org/wiki/Loser_pays [wikipedia.org]

    • by erice (13380)

      So, why doesn't this apply to all civil lawsuits? This is how it works in many countries thus their courts aren't tied up as bad as ours (i.e. American).
      http://en.wikipedia.org/wiki/Loser_pays [wikipedia.org]

      Justice is imperfect. If the little guy who is in the right sues a big corporation and loses, he could be bankrupted by the big corporation's legal fees.

  • If this allows reimbursement of attorney's fees for patent troll attacks, will it induce charities like the EFF to bankroll a defense attorney if it can recover its legal fees from the plaintiff?

  • by EmperorOfCanada (1332175) on Thursday February 28, 2013 @12:47PM (#43036635)
    I love that they have singled out patent trolls as opposed to making it hard for some basement inventor to defend himself. Bravo!
  • Granted, I was talking about DMCA takedown notices, but it is the same concept: relevant blog post [blogspot.com]
  • Having the plaintiffs in a false claim pay 1.5x to 2x the defendants costs would be better. Perhaps the assessing of higher costs could be left up to the court, if the lawsuit was determined to be egregious.

  • Unfortunately I make it the Saving HIgh-Tech INnovators From EgregIous Legal Disputes, or SHIT IN FEILD Bill. Spelling error apart, this is indeed likely to be as successful as trying to persuade bears not to poo in the woods.
  • So what if this gets challenged by the trolls under the grounds that it may be unconstitutional. They may argue that if a patent is a property right like a house then as the new owner they should be able to enjoy the same priveleges as the previous owner. Or the may argue that the law discriminates against them as the new owners of the said property. Not sure how those arguments would hold up though.

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