Shift court fees away from innocent parties

Problem

Both the winner and loser in a patent suit almost always pay their owns fees and costs, which can total well into the millions of dollars if the case actually goes to trial. Because the potential costs are so high and there is no way to recover those costs, defendants will often settle to avoid hefty legal bills – even if they have a strong legal case that they never infringed on the patent or the patent was invalid to begin with.

Solution

Patent law should allow for the winning party, in cases where it was easy to see that the patent was invalid or there was no infringement, to obtain its fees and costs. If the trolls know they could be on the hook for that money, they will be less likely to file frivolous lawsuits.

John Paul Donoghue
Santa Fe
NM
United States
Posted Nov 4, 2012 3:25 pm
  • Internet user
I think those who do things like this and are found guilty of it should be shut down like those who commit accounting fraud, and the patents they owned being released to the public for anyone to use.
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462 thumbs up.
dark flux
United States
Posted Jan 9, 2013 12:49 pm
  • Internet user
how about we shift the cost of lawyers to the GOVERNMENT, so that all lawyers work for no cost to the public? this way, the QUALITY of the legal team will be equal on both sides of the legislation, instead of "The person who can afford the better leagl team wins"...
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458 thumbs up.
Anthony Little
Melbourne
Australia
Posted Feb 16, 2013 4:51 pm
  • Software developer / engineer
  • Internet user
I would go further than just the "loser pays" scenario (which already happens in Australia).
I also think the software code solution being submitted with the patent is the right approach.
It appears (from this side of the pacific) that the US patent office grants too many patents that aren't actually backed up by actual specific inventions. A 'method' is not an invention, it is effectively an idea, and should not be patentable.
That method for scanning documents and sending via email is the stupidest patent I've ever heard. It fails the obviousness test completely.

My next comments are a bit more extreme but want to know what people think.

How about changing patent law to follow a general principle so that if a company holds a valid software patent and are not 'active in the marketplace' with products that use that patent, then the patent expires. Give them a specific time period, say 90 days, 6 months, a year (or two, or three, timeframe can be altered to common sense). If they own a patent and don't actually try to produce or sell anything that uses the patent then their patent is invalidated.

This law would immediately wipe out the business model for all patent trolls. Overnight.
So if the scan-to-email trolls want to stay in business they actually have to start selling things that scan-to-email.


What do people think?
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440 thumbs up.
Cathal Mc Elhone
Ireland
Posted Jan 14, 2013 6:32 am
  • Software developer / engineer
  • Internet user
The Defendant should be able to choose the location of the court case because these trolls file the court cases in plaintiff friendly areas
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425 thumbs up.
Colleen Chien
Santa Clara University School of Law
PIEDMONT
CA
United States
Posted Sep 25, 2012 2:49 pm
I think the SHIELD Act is a step in the right direction, especially in limiting itself to tech patents. It could really change the economics for contingent-fee lawyers who bring troll suits, discouraging them from taking on weak cases, especially "one-shotters" looking for a quick settlement rather than repeat players. I don't think it will be abused in an unintended way or "change all cases," given that Judges can exercise their discretion in implementing it. At the same time, there are several realities to keep in mind as it the proposal is refined 1) few cases "go all the way" so accessing relief would take a lot of money/time, 2) most trolls are structured to be judgment proof, 3) patent litigation is unpredictable. Also 4) judges are often loathe to call the parties before them unreasonable or acting in bad-faith (and judges infrequently award fees using the authority they have under Rule 11 and Section 285 in patent cases, only about 50 times a year by my count). I review the theory and evidence in section D1 of my paper, Reforming Software Patents., available http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2125515
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414 thumbs up.
Jonathon Nooner
United States
Posted Jul 16, 2013 1:46 am
  • Internet user
This is a bad idea. Require the loser to pay all of the legal costs? Our legal system isn't perfect. If you get hit with a patent infringement lawsuit as a small company, you fight it in court, then you happen to lose; what are the chances that you can possible afford to pay back all of the fees for the whole case? Slim I presume. I would be opposed to this.
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390 thumbs up.
Jonathon Nooner
United States
Posted Jul 17, 2013 10:24 pm
  • Internet user
Wouldn't it be far better, if it were possible, to invalidate the patent before it even gets taken to court? What if there were a group of representatives from the software industry, who understand the field... to be able to decide whether or not a patent *should* be valid. I would imagine that this would be a far better solution. Cheaper and better for the system.

The PTO has proven that it either lacks the technical competence or the time or the incentive to properly investigate the history of a technology. Let a group of experts handle it! They would have the incentive, and the competence to take the time that these patents need.

Loser pays all just seems like it would raise the stakes of the case.
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386 thumbs up.
Jonathon Nooner
United States
Posted Jul 18, 2013 12:51 pm
  • Internet user
I retract my statement from July 16. I didn't think about it this piece of the issue hard enough. Both sides paying the court fee would hurt the small tech company more than the larger patent assertion entities. And so I have reversed my position on this issue. If the loser pays, then the small company could gain some recompense for the difficulties imposed by the frivolous lawsuit. I fully support this concept now.

The average patent lawsuit costs roughly $5 million. It would be better if a party gets hit with a patent infringement case that a small panel of software experts (regarding software patents) could investigate the validity of a patent. The idea being, if the patent is found not to be unique, then it can be invalidated before an expensive and resource heavy trial ever takes place. This would make patent trolling unmarketable because a panel of experts will be more likely to take the bad patents and toss them in the trash.

I would much rather have software engineers investigating the validity of a patent than some court in Eastern Texas who may be biased or may not have any solid understanding about the technology or ideas being discussed.

It would be nice if it were possible to edit the old posts instead of just making new ones.
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376 thumbs up.
Jonathan Klar
Software Company
Pacific Palisades
CA
United States
Posted Oct 12, 2012 7:56 pm
  • Lawyer
Before you support the "loser-pays-attorneys' fees" bill, you should consider the risk.

First, if a software company is sued by a patent troll in East Texas (or anywhere else for that matter), the juries rule in favor of the trolls much of the time, regardless of how frivolous the claims may appear to the software companies. If a confused jury awards the troll $50,000, for example, the software company defendant could still be on the hook for an additional $1,000,000+ in attorney's fees payable to the patent troll, which most larger, successful software companies can pay.

Second, if you assume that the software company wins, it will then be legally entitled to recover its $1,000,000+ in attorney's fees from the patent troll. However, most of these trolls are undercapitalized "shell" corporations, which are formed just before the suit is filed. The patent is also assigned to the shell corporate plaintiff just before the case is filed.

If the patent troll corporation loses - which it should in most cases - there's often no money or hard assets in the name of the patent troll for the winner to seize. Thus, the winning software campany cannot collect the fees which would be awarded to it by the court.

In effect, the loser-pays-fees rule adds to the profits of the patent trolls when they win; and they are often unable to pay the defendant's fees when they lose. Insurance companies concluded many years ago, for the same reason, to oppose laws which automatically award attorneys' fees in favor of the winning party. The insurance companies realized that they would always be good for the fees when they lose, but that their opponents would usually lack funds to pay the fees of the insurance companies' attorneys when the insurers are on the winning side.

The general rule is that, if you are a "deep pocket" likely to be sued by opponents who are not well capitalized, in the long run the loser-pays-fees fees rule will cost you money.

THE OPINIONS EXPRESSED ABOVE ARE STRICTLY MY PERSONAL OPINIONS AND DO NOT NECESSARILY REFLECT THE OPINIONS OF ANY CLIENT OR PARTICULAR SOFTWARE COMPANY.
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367 thumbs up.
Mike Boucher
Dakota Legal Software, Inc.
Lafayette
CO
United States
Posted Sep 5, 2012 11:39 am
  • Patent owner
  • Software developer / engineer
  • Internet user
  • Victim of patent troll
The proposal says:

"Patent law should allow for the winning party, in cases where it was easy to see that the patent was invalid or there was no infringement, to obtain its fees and costs."

The phrase "easy to see" invokes the legal principle of a frivolous action. Simply losing a case is not enough. To invoke the alleged protection of this proposal, the plaintiff has to lose because the filing was frivolous.

As a patent holder, how do I sue someone without running the risk of a frivolous filing? Well, clearly if I have filed a suit in the past and won then my assertion that my patent is valid and my attempts to enforce it are non-frivolous. So far, so good. Enter the trolls...

As a troll, how can I sue someone with deep pockets without running the risk of a frivolous filing charge? The foregoing paragraph gives the recipe. First, sue a small business that cannot afford a strong defense and use superior firepower to win the case. Note that the important thing is to get a win, so do not allow a settlement that would allow the small business to survive the attack. Armed with a judicial determination that the claim is non-frivolous, sue the deep pocket target that was the actual target of the action all along.

So this basically amounts to a proposal to force trolls to wound or kill me to get a res judicata shield against frivolity before they attack a deep pocket target. Count me opposed. Strongly opposed.
up
344 thumbs up.

Pages

Jonathan Klar
Software Company
Pacific Palisades
CA
United States
Posted Oct 12, 2012 7:56 pm
  • Lawyer
Before you support the "loser-pays-attorneys' fees" bill, you should consider the risk.

First, if a software company is sued by a patent troll in East Texas (or anywhere else for that matter), the juries rule in favor of the trolls much of the time, regardless of how frivolous the claims may appear to the software companies. If a confused jury awards the troll $50,000, for example, the software company defendant could still be on the hook for an additional $1,000,000+ in attorney's fees payable to the patent troll, which most larger, successful software companies can pay.

Second, if you assume that the software company wins, it will then be legally entitled to recover its $1,000,000+ in attorney's fees from the patent troll. However, most of these trolls are undercapitalized "shell" corporations, which are formed just before the suit is filed. The patent is also assigned to the shell corporate plaintiff just before the case is filed.

If the patent troll corporation loses - which it should in most cases - there's often no money or hard assets in the name of the patent troll for the winner to seize. Thus, the winning software campany cannot collect the fees which would be awarded to it by the court.

In effect, the loser-pays-fees rule adds to the profits of the patent trolls when they win; and they are often unable to pay the defendant's fees when they lose. Insurance companies concluded many years ago, for the same reason, to oppose laws which automatically award attorneys' fees in favor of the winning party. The insurance companies realized that they would always be good for the fees when they lose, but that their opponents would usually lack funds to pay the fees of the insurance companies' attorneys when the insurers are on the winning side.

The general rule is that, if you are a "deep pocket" likely to be sued by opponents who are not well capitalized, in the long run the loser-pays-fees fees rule will cost you money.

THE OPINIONS EXPRESSED ABOVE ARE STRICTLY MY PERSONAL OPINIONS AND DO NOT NECESSARILY REFLECT THE OPINIONS OF ANY CLIENT OR PARTICULAR SOFTWARE COMPANY.
up
367 thumbs up.
Colleen Chien
Santa Clara University School of Law
PIEDMONT
CA
United States
Posted Sep 25, 2012 2:49 pm
I think the SHIELD Act is a step in the right direction, especially in limiting itself to tech patents. It could really change the economics for contingent-fee lawyers who bring troll suits, discouraging them from taking on weak cases, especially "one-shotters" looking for a quick settlement rather than repeat players. I don't think it will be abused in an unintended way or "change all cases," given that Judges can exercise their discretion in implementing it. At the same time, there are several realities to keep in mind as it the proposal is refined 1) few cases "go all the way" so accessing relief would take a lot of money/time, 2) most trolls are structured to be judgment proof, 3) patent litigation is unpredictable. Also 4) judges are often loathe to call the parties before them unreasonable or acting in bad-faith (and judges infrequently award fees using the authority they have under Rule 11 and Section 285 in patent cases, only about 50 times a year by my count). I review the theory and evidence in section D1 of my paper, Reforming Software Patents., available http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2125515
up
414 thumbs up.
Alex Burr
Individual
Cambridge
United Kingdom
Posted Sep 22, 2012 1:05 pm
  • Software developer / engineer
  • Internet user
This is a good idea. There is also another thing which filers of invalid patents should pay for, which would remove the invalid patents much faster. As you probably know, stackexchange has just introduced 'askpatents.com', a mechanism which takes advantage of the new legal provision that anyone can submit prior art to the USPTO. While a good thing, this demonstrates a negative externality: victims of dubious patents are having to take the cost of searching for prior art.

Imagine if when someone submitted prior art which invalidated a patent, the filer had to pay them a fee. If the fee was sufficient, a cottage industry of prior-art searchers would spring up. We would then get rid of many of the dubious patents even before any lawsuit.

I doubt if it could be applied to existing patents - they would almost certainly have to be grandfathered. But it would have a very useful effect going forward.
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310 thumbs up.
Mike Boucher
Dakota Legal Software, Inc.
Lafayette
CO
United States
Posted Sep 5, 2012 11:39 am
  • Patent owner
  • Software developer / engineer
  • Internet user
  • Victim of patent troll
The proposal says:

"Patent law should allow for the winning party, in cases where it was easy to see that the patent was invalid or there was no infringement, to obtain its fees and costs."

The phrase "easy to see" invokes the legal principle of a frivolous action. Simply losing a case is not enough. To invoke the alleged protection of this proposal, the plaintiff has to lose because the filing was frivolous.

As a patent holder, how do I sue someone without running the risk of a frivolous filing? Well, clearly if I have filed a suit in the past and won then my assertion that my patent is valid and my attempts to enforce it are non-frivolous. So far, so good. Enter the trolls...

As a troll, how can I sue someone with deep pockets without running the risk of a frivolous filing charge? The foregoing paragraph gives the recipe. First, sue a small business that cannot afford a strong defense and use superior firepower to win the case. Note that the important thing is to get a win, so do not allow a settlement that would allow the small business to survive the attack. Armed with a judicial determination that the claim is non-frivolous, sue the deep pocket target that was the actual target of the action all along.

So this basically amounts to a proposal to force trolls to wound or kill me to get a res judicata shield against frivolity before they attack a deep pocket target. Count me opposed. Strongly opposed.
up
344 thumbs up.
Eric T
United States
Posted Sep 4, 2012 10:21 pm
  • Software developer / engineer
  • Internet user
The counter here is that small businesses and individuals with minimal or no resources take on what they believe to be a valid infringement of their intellectual property (through perhaps a lack of proper expertise due to a lack of monetary or intellectual resources) and lose, that they will be punished for trying.

What is the true definition of a troll, and more importantly here, how do we assure that they will be properly identified as such in every court room across the nation?

I foresee this backfiring on ma&pa the way it is written, while the true trolls find a way to 'validate' their claims as a proper patent holder by producing some cheap product that may or may not sell. Or by even selling it to a company they also own, creating a false image of .. legitimacy?

Also, this check box that says "check all that apply:".. The one that says "Victim of patent troll".. well I'm checking it because while I may not be a direct victim, I have been affected, and am in an 'interpret how I want' mood.
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308 thumbs up.
Luke Selman
Colour Entertainment
Bristol
United Kingdom
Posted Sep 4, 2012 7:51 pm
  • Academic
  • Software developer / engineer
  • Internet user
The whole notion of the patent system before it became this was to ensure that inventions or physical objects could be protected while it is being demonstrated to an audience that may otherwise steal the idea and create a duplicate or otherwise similar technological innovation. Now that the USPTO allows abstract ideas to be patented from the year 1987, it has ever since been a daunting and 20 year run of economic disaster, leading from all sorts of directions, including copyright wars, which I might add contributes to between 40-60% of economic loss yearly WORLDWIDE.

The amount of damage that these stupid legislative bills are doing is ridiculous, and copyright laws are just as bad as the British government promising the Jews of Germany after World War 2 Israel (which is another possible mistake causing our economic loss). However, without going too off-topic, the copyright laws not only disrupts innovation in the IT industry, but slows down the growth of the worldwide economy.

Ever since computers were ever invented, regardless of how it was supposed to aid in delivering information, has only caused millions of jobs to be lost, hundreds of thousands of businesses put at risk due to the immediate change in technology, and the only good thing that it has changed is that it opens one gate: innovating laser technology. Apart from that, computers was the technology that led us to our bad attitude in the copyright industry today.
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310 thumbs up.
David Lee
United States
Posted Jul 14, 2012 9:18 am
  • Internet user
People have said that a rectangle with rounded corners with a screen in the middle cannot be patented because it's the only practical and ergonomic way to make a phone or a tablet. What other shapes besides a rectangle can a phone be made in? A triangle? Pyramid? Hexagon? Octagon? Dodecagon?

If a company is forced to work around a patented idea to avoid infringement, it defeats the purpose of innovation, especially if the patented idea is the bleeding obvious. As an example of this, smartphones these days are equipped with NFC chips and water-damage sensors. It's a trend that's growing among smartphone manufacturers. Apple got patents for both of these. If they decide to sue other companies which have already supplied NFC and water-damage sensor chips, wouldn't the sued companies either counter-sue or stop including these chips altogether?

This wouldn't be much of a problem if the patent owner licenses the patent at a reasonable price. Samsung was forced to remove universal search from the Galaxy S3 to avoid litigation by Apple. I am disappointed that Samsung had to downgrade a perfectly innovative phone.

I could go on and on about Apple's litigation and my opinions against it, but I'll stop with one final note: if competition is abolished via litigation, consumers will have limited choices on what to buy as their next smartphone or tablet. And that cannot happen. The patents that Apple has filed and used against other companies should be invalidated, and Apple should pay for all legal fees if it continues to use obvious patents against others.
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295 thumbs up.
Aaron Morris
Pittsburgh
PA
United States
Posted Jul 10, 2012 6:23 am
  • Software developer / engineer
  • Internet user
I understand the intent of this proposal, and it certainly seems well-intentioned. However, I wonder if this wouldn't do more harm than good by making an extremely one-sided patent system (as if isn't too one-sided already).

The reason? As long as software patents exist (which I am personally not in favor of), then they should probably be capable of protecting the "small guy" type of individual patent holder. And this proposal seems like it would make it very challenging for someone with limited financial resources to pursue a patent claim against a large infringer.

For example, suppose a private developer observes a large corporation infringing on his/her patent. That developer already knows that challenging the corporation in court, with its army of lawyers, will be extremely challenging. Now imagine that the developer will AUTOMATICALLY be held liable for paying the corporation's legal fees. Will he/she pursue the patent claim? Probably not.

Now imagine a different situation in which the same private developer is being sued by the same corporation (validly or invalidly) for patent infringement. Is there any realistic deterrent to cause the corporation to refrain from suing the developer? Not really. The developer's legal expenses will be a small fine to the corporation.

That would seem like a worse patent system than what we already have: one in which legitimate inventors are deterred from protecting their patents while the large corporations really have nothing to lose. (Though I can see situations in which a large corporation suing another large corporation--think Oracle vs. Google--might be deterred by this proposal.)

Furthermore, what new value does this really provide? We already have a system that supports counter-suing. So it is possible to recoup your legal fees resulting from a frivolous lawsuit. So the only real change is the concept of AUTOMATIC liability.

However, I am an engineer, not a lawyer. So maybe someone with greater legal knowledge can weigh-in.
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298 thumbs up.
Guest Acccount
United States
Posted Jul 4, 2012 6:50 pm
The winner in a law suit doesn't have to pay 1 penny in the counter suit.

Where did you study law?

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322 thumbs up.
G Patent
General Patent Corp.
United States
Posted Jun 26, 2012 10:13 am
This is another interesting idea. Reducing the scourge of patent trolls will require eliminating some of the trolls' (currently substantial) economic incentives. Forcing them to pay in the event of loss would quite likely go a long way toward achieving this goal.
http://www.youtube.com/watch?v=LkQELhZeDYQ
up
293 thumbs up.

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