Make Patent Trolls Pay in Court
O.O.P.S.
By RANDALL R. RADER, COLLEEN V. CHIEN and DAVID HRICIK
Published: June 4, 2013
FROM an early age we are taught the importance of fighting fairly. But
as the vast number of frivolous patent lawsuits have shown, too many
people are rewarded for doing just the opposite.
For Op-Ed, follow @nytopinion and to hear from the editorial page
editor, Andrew Rosenthal, follow @andyrNYT.
The onslaught of litigation brought by “patent trolls” — who typically
buy up a slew of patents, then sue anyone and everyone who might be
using or selling the claimed inventions — has slowed the development of
new products, increased costs for businesses and consumers, and clogged
our judicial system.
Their business plan is simple: trolls (intellectual-property lawyers use
less evocative terms like “non-practicing entities” and
“patent-assertion entities”) make money by threatening companies with
expensive lawsuits and then using that cudgel, rather than the merits of
a case, to extract a financial settlement. In the apt summary of
President Obama, who on Tuesday announced a plan to stave off frivolous
patent litigation, trolls just want to “hijack somebody else’s idea and see if they can extort some money.”
So far, legislative action against the practice has been meager. In May, Gov. Peter Shumlin, Democrat of Vermont, signed legislation
— the first of its kind — that amends the state’s consumer protection
laws to empower its attorney general and others to sue patent holders
who assert infringement claims against a Vermont business or resident in
bad faith. But lawmakers in the remaining 49 states and in Congress,
where no less than four bills now sit in various committees, have yet to
legislate specifically against patent trolling.
Mr. Obama’s latest proposals echo those in several bills, including
making it harder for patent litigants to set up shell companies to hide
their activities.
In the meantime, vexatious patent litigation continues to grind through
our already crowded courts, costing defendants and taxpayers tens of billions of dollars
each year and delaying justice for those who legitimately need a fair
hearing of their claims. Trolls, in fact, filed the majority of the roughly 4,700 patent suits in 2012 — and many of those were against small companies and start-ups that often can’t afford to fight back.
The problem stems largely from the fact that, in our judicial system,
trolls have an important strategic advantage over their adversaries:
they don’t make anything. So in a patent lawsuit, they have far fewer
documents to produce, fewer witnesses and a much smaller legal bill than
a company that does make and sell something.
Because they don’t manufacture products, they need not fear a
counterclaim for infringing some other patent. They need not be
concerned with reputation in the marketplace or with their employees
being distracted from business, since litigation is their business.
Trolls, moreover, often use lawyers to represent them on a
contingent-fee basis (lawyers get paid only when they win), allowing
trolls to defer significant legal costs that manufacturers, who
generally must pay high hourly fees, cannot.
With huge advantages in cost and risk, trolls can afford to file
patent-infringement lawsuits that have just a slim chance of success.
When they lose a case, after all, they are typically out little more
than their own court-filing fees. Defendants, on the other hand, have
much more to lose from a protracted legal fight and so they often end up
settling.
Lost in the debate, however, is that judges already have the authority
to curtail these practices: they can make trolls pay for abusive
litigation.
Section 285 of the Patent Act, as well as Rule 11
of the Federal Rules of Civil Procedure, give judges the authority they
need to shift the cost burden of litigation abuse from the defendant to
the troll. But remarkably, judges don’t do so very often: by our count, fees were shifted under Section 285 in only 20 out of nearly 3,000 patent cases filed in 2011.
Our judicial system’s bias against shifting fees partly explains that
reluctance, but Section 285 is flexible enough to help defend against
trolls. And even though many cases settle, the prospect of paying fees
will discourage aggressive suits and frivolous demands.
To make sure Section 285 is implemented with appropriate vigor, judges
must look more closely for signs that a patent lawsuit was pursued
primarily to take improper advantage of a defendant — that is, using the
threat of litigation cost, rather than the merits of a claim, to bully a
defendant into settling.
One sign of potential abuse is when a single patent holder sues hundreds
or thousands of users of a technology (who know little about the
patent) rather than those who make it — or when a patent holder sues a
slew of companies with a demand for a quick settlement at a fraction of
the cost of defense, or refuses to stop pursuing settlements from
product users even after a court has ruled against the patentee.
Other indications of potential bullying include litigants who assert a
patent claim when the rights to it have already been granted through
license, or distort a patent claim far beyond its plain meaning and
precedent for the apparent purpose of raising the legal costs of the
defense.
Judges know the routine all too well, and the law gives them the authority to stop it. We urge them to do so.
No comments:
Post a Comment