A hot topic in the patent world is “patent trolling”. Patent trolling loosely refers to the practice of acquiring or applying for multiple patents, especially broad ones, not to exploit the inventions they describe but to pursue others who use the technology. Patent trolls usually employ litigation as a tool to try and profit from the patents. The practice is criticised by some commentators for undermining the goals of the patent system – to incentivise and reward innovation and invention – and now legislation has been tabled in the US to try and cut down on it.
Patent trolls (or, more formally, non-practising entities) often target small start-up IT companies for several reasons. First, unlike the larger players, they are unlikely to have their own broad patent portfolios to counterattack with, making a lawsuit to enforce the patent relatively low risk for the patent troll. Second, (perhaps more importantly) such defendants don’t have the money, the time, or the experience to defend themselves if the matter goes to trial. Instead, these companies may find settlement is the best option to get out of trouble. One reason for this in the US is that even if a small company were to fight a case and win, under US law they are unlikely to be able to recoup a substantial portion (if any) of the costs spent on the case.
In the US, it has been estimated that a single patent litigation will cost more than $US1 million, and that the lawsuits cost American technology companies (not to mention the public in court costs) over $US29 billion a year.
But no longer, say US Congressmen Peter DeFazio and Jason Chaffetz. In August this year, they introduced the “Saving High-Tech Innovators from Egregious Legal Disputes (SHIELD)” legislation to the US House of Representatives. The Act proposes to amend US Patent law to allow the courts, upon finding that a patent-holder did not have a reasonable prospect of success when it brought the case, to award full costs (including reasonable lawyer’s fees) to the party alleged to be infringing. It’s anticipated that, if passed, this law will greatly increase the risk attaching to lawsuits for the party alleging infringement, and will deter patent trolls from filing frivolous suits. The Act specifically targets the IT industry, including patents related to both computer hardware and software, where patent trolling is apparently more common than in other industries.
It’s not immediately obvious how successful the law would be, given many patent trolls are also small parties who may not have the funds to fully compensate their targets if ordered to do so, but it’s already got some backing. Twitter’s legal counsel Ben Lee came out in support of the legislation this month, citing the many baseless patent lawsuits the social media website is served with as a reason to enact SHIELD. In particular, Mr Lee points to the problem with the grant of patents that had near-zero cost of invention (something previously discussed by the eminent Justice Richard Posner) and very little in the way of inventiveness.
We will continue to monitor the progress of the draft legislation.