Meaningful patent troll reform may finally be on the horizon.  Last year retailers across the country had high hopes for patent reform.  Unfortunately, the version of the America Invents Act that was signed into law by President Obama in September 2011 offered little or no help in stopping or even significantly slowing patent trolls.  But over the last week Congressman DeFazio (D-Oregon) has injected hope for effective patent troll litigation reform in the form of the SHIELD Act.  

Currently, a prevailing party in a patent litigation can recover attorney’s fees when a case is deemed exceptional, often based upon a finding of willfulness, a lack of colorable defenses or litigation misconduct.  35 U.S.C. § 285.  The SHIELD Act would amend § 285 to provide for a prevailing defendant in computer hardware or software cases, including internet-based cases, to recover their attorney’s fees and costs where a court finds that the patentholder, often a troll, lacked a “reasonable likelihood of succeeding”:

Notwithstanding section 285, in an action disputing the validity or alleging the infringement of a computer hardware or software patent, upon making a determination that the party alleging the infringement of the patent did not have a reasonable likelihood of succeeding, the court may award the recovery of full costs to the prevailing party, including reasonable attorney’s fees, other than the United States.

SHIELD Act at § (a).   

The SHIELD Act defines “software patent” broadly, covering any software, computer or internet-based patents:

SOFTWARE PATENT.—The term ‘software patent’ means a patent that covers—

  1. any process that could be implemented in a computer regardless of whether a computer is specifically mentioned in the patent; or
  2. any computer system that is programmed to perform a process described in sub paragraph (A).

Id. at § 3.  “Computer hardware patent” is given a similarly broad definition:

COMPUTER HARDWARE PATENT.—The term ‘computer hardware patent’ means a patent that covers computer hardware, including a device or component of such device.

The devil will be in the details of how courts construe a “reasonable likelihood of succeeding.”  And there are other downsides to the SHIELD ACT.  The most significant downsides include that:

  1. A defendant can only seek its fees after defending the case to a substantive resolution requiring a significant up-front investment in both fees and corporate attention; and
  2. The SHIELD Act only applies to complaints filed on or after the eventual enactment of the law. 

While the SHIELD Act does not solve all of the problems with troll litigation or even streamline cases, it is a valuable next step towards effective patent litigation reform.  And it may give trolls a reason to think twice before brining questionable claims.