Politicians want “loser pays” rule for patent trolls

"<i>The bill would allow patent defendants to file a motion seeking to have a judge rule that the patent owner is a certain type of 'non-practicing entity'—although the bill doesn't use that term. If the motion is successful, the lawsuit can still proceed, but if the patent-holding company loses, it will be on the hook for legal costs.</i>"<p>The bill is essentially a judicial shortcut to make patent litigation riskier for non-practicing entities, precisely, non subsection (d) entities. Unfortunately, there is little judicial consensus (to the best of my limited knowledge) on what this means. ARM produces nothing tangible - it licenses designs. That makes ARM look like a non-practicing entity. Yet few would brand it as a patent troll.<p>Having losing plaintiffs pay is good. But it still leaves the defendant bearing the risk of adverse judgment. Even the non-practicing entity shortcut means hiring a lawyer. Perhaps, for patent suits, the plaintiff should have to, as part of filing the suit, dislose whether they or their beneficial owners' related entities have a history of filing patent suits deemed frivolous.

Why should "loser pays" be limited to patent trolls?<p>I understand that they're the least sympathetic players is a patent system, but a bogus patent lawsuit is a bogus patent lawsuit. I would even argue that, in many cases, a company trying throw sand in the gears of their competitors by using patents that never should have been granted is <i>worse</i> than a patent troll. At the end of the day, a patent troll just wants to extract money (and typically is happy to extract it from all players equally). A company suing its competitors, by contrast, is trying to upset the competitive balance in some market which can easily have more far-reaching implications.<p>One counterargument I've heard is that we don't need "loser pays" for practicing entities because they can be countersued with your own portfolio, so you can eventually negotiate a truce based on MAD. To me, this misses the point. MAD is a workaround for some bugs in the patent system, not an end in itself. If there's a better way to discourage trumped-up patent lawsuits, we should use it too (or even instead, depending). And MAD has significant weaknesses (doesn't protect small players vs big players, favors incumbents, etc.) that a broad "loser pays" could help.

This is really easy for patent trolls to get around - patent trolls (NPEs) are typically shell companies that have no assets that can be seized (aside from the patent itself).

Very bizarre to focus on the symptom and not the cause. Legislators appear to acknowledge the USPTO gives out patents to patent trolls and yet wants to focus on curbing their enforcement not their registration. Perhaps this is a necessary step, because so many patent trolls currently exist, but why don't the legislators focus instead on cutting the head off the snake and prohibit patent trolls from successfully registering a patent in the first place.<p>For example, Trademark law requires that a application indicate the date of first use in commerce, and the one exception is filing under "intent to use". I know there are a lot of arguments against a similar provision for patents, but why not make this distinction in Patent applications, because if a patent is actually used in commerce, then you basically insure the holder is not just a troll.

This is called the English Rule (<a href="http://en.wikipedia.org/wiki/English_rule" rel="nofollow">http://en.wikipedia.org/wiki/English_rule</a>), and is adopted in nearly every Western democracy (besides, of course, the US).

One of the real problems in this whole situation has been defining NPE's. Law scholars seem to be unable to come to anything close to a consensus on how to define one (legally) without causing a lot of collateral damage. So now congress wants circuit court judges to be on the hook for labeling every plaintiff? Sounds like a good way to make sure a little venue shopping will solve all the plaintiff's problems. It's not like NPE's don't already have a history of that /s

The most important part of this bill isn't that it forces losing plaintiffs to pay legal costs, it's that it forces plaintiff's classified as an NPE by the judge to post a bond to cover the defendant's possible legal costs.<p>This will vastly increase the cost of operation for NPEs.

It should be for everyone asserting patent infringement allegations, not just "trolls". That way, they would at least think twice about using trivial patents against others, knowing that if they lose the trial, they have to pay the winner's expenses.<p>It would also encourage some companies to take companies who are asking them to pay "patent fees" to Court if they think the patents are not good enough, and they could win.

If "patent trolls" are formed as shell companies (located in the eastern district of texas) that have no assets other than the patent and enough to sue (i.e. corporation whose shareholders form it by merely contributing the patent and a nominal amount of funds), then this bill is useless unless it also permits piercing of the corporate veil (or equivalent for other limited liability entities such as LLC) such that the shareholders or directors are also liable for the attorney's fees of the defendant. Otherwise, why would a patent troll place assets other than enough to litigate in their shell companies?

What struck me from the article:<p>&#62;For example, successful copyright plaintiffs usually win attorneys' fees if they have a registered copyright.<p>That means that the MAFIAA gets their legal fees back if they sue the 9-yr old down the street and win?<p>IMO that's pretty messed up.

<p><pre><code> The plaintiff is an inventor or original assignee. The plaintiff is actually using the patent. The plaintiff is a university or "technology transfer organization" </code></pre> Last one shouldn't be there. It's redundant with the first in 99% of the cases that matter and sets up an obvious method for the trolls to rebrand themselves as universities or "technology transfer organizations" for the sole purpose of evading the law.<p>Also, forget the "loser pays" system. Just make establishing one of the first two a prerequisite for having standing to sue for patent infringement.

It's great that the trolls would have to pay for losing the lawsuit, but the basic problem remains - the company being sued can't afford to be the losing party, leading it to pony up outrageous settlement/royalty fees.<p>Even for junk patents, certain well known jurisdictions (read: Marshall, TX) award the trolls in these cases 80%+ success rates at trial. The trolls would only be on the hook for the remaining 20%, in addition to having collected all the settlements and royalties for cases which never made it to trial.<p>In view of the above I don't see this changing much of anything.

I would go a step further and ask the plaintiff to subsidies the defense and only get reimbursed if they win. In many cases (including one I was involved in) the defendant doesn't have enough cash to hire a proper defense and is forced into settling. This will put all the burden/risk on the plaintiff and therefore limit the abuse against small start-ups that typically don't have access to a lot of cash.

Maybe I am naive, but can't we do even more to make patent trolling impossible?<p>Like forbidding their transfer to such non-practicing (or any) entities to begin with? Or maybe not having patents and finding a new way to encourage development in medicine - which afaik is the only area where patents have a measurable benefit.<p>(to make clear i mean /benefit to society/ not money)

I really hope this works like they intend. For some reason I see patent trolls figuring a way around it though.

Almost there. All we need now is a personal penalty for the <i>lawyer</i> who knowingly brings the frivolous case and I'd bet that it would tip the balance just enough so that trolling mostly disappears.

Don't patent trolls already create LLCs or other corporate firewalls so that if they are countersued, they don't have assets?

Reading about this patent trolling just makes me angry :(

Pays what? They will create a few LLCs for each case with next to zero assets. If they lose the case the patents are almost by definition worthless, so they get nothing.<p>However, think of trying to legitimately sue Microsoft, or Apple or Google for using your patent. You have their bills to worry about too and they can out-lawyer almost everyone. This is no doubt loved by the largest corps, it does nothing to stop trolls but makes it much harder for a real person /entity to sue them (with tens of billions in the bank)<p>Edit: Imagine the first day in court, months after the other side's billing has started: you see 16 lawyers on the [Google's, MS, Apple's] side and have a heart attack! 16X$400 an hour (on the low side) X 5 hours = $32,000 for half a day, just to show up in court.

Unfortunately, this is doing to stack up the deck against individual small inventors.<p>This guy would've had to start a car company in order not to be liable for millions in legal fees if he lost?<p><a href="http://en.wikipedia.org/wiki/Robert_Kearns" rel="nofollow">http://en.wikipedia.org/wiki/Robert_Kearns</a><p>Somehow I think the big companies will exploit this, and start violating NDAs and real patents willy nilly, since the bar has been raised for them.<p>But the patent trolls are doing enough damage too, I am not sure if it's worth hurting a few real deserving inventors.