Intellectual Property Attorney

Congress Set To Take On “Patent Trolls”

U.S. Representatives Peter DeFazio (D-OR) and Jason Chaffetz (R-UT) have introduced a bill aimed at curbing costly lawsuits by so-called “patent trolls” (sometimes more politely called “non-practicing entities”), i.e., individuals or entities that acquire patents with the intent to seek monetary damages from infringers and not to use or develop the technology or product covered by the patent. The problem has received widespread attention in recent years as a result of a documented increase in lawsuits filed by patent trolls. A Boston University study concluded that patent trolls cost the United States $29 billion in direct costs (e.g., legal fees and license fees) in 2011 — a $22 billion increase from 2005. (A copy of the study is available
here.) Google’s Senior Patent Counsel, Suzanne Michel,
wrote in a blog post that the $29 billion spent on patent trolls was wasted money that “should have gone towards building great products, or creating hundreds of thousands of jobs.” Michel also estimated that 85% of those lawsuits involve “software patents, many of which are vague, overbroad and invalid.”

Congressmen DeFazio and Chaffetz tout that their proposed bill, dubbed the Saving High-tech Innovators from Egregious Legal Disputes (“SHIELD”) Act, would shift the financial burden of the lawsuits to the patent trolls. If the patent troll loses, the Act would require the patent troll to pay all costs and attorneys’ fees to the prevailing party. A previous version of the SHIELD Act failed last year. However, the previous version was limited only to patents related to software or computer hardware. The new proposed SHIELD Act features no limitations and would encompass all patents.

According to reports from Congressman DeFazio’s office, another notable component of the proposed SHIELD Act is that it contains safeguards to ensure that: “independent inventors, businesses that produce patented items, and universities are not accidentally lumped in with trolls.” These safeguards are reportedly designed so that “[o]nly patent trolls that buy patents on the open market, for the sole purpose of using them for predatory litigation, will be subject to fee shifting under the SHIELD Act.”

A number of organizations and entities reportedly support the SHIELD Act including the Electronic Frontier Foundation, National Retail Federation, Expedia and Kayak. President Obama also appears to support curbs on patent troll litigation. The President recently
commented that patent trolls “don’t actually produce anything themselves. They’re trying to essentially leverage and hijack someone else’s idea and see if they can extort some money out of them.”

The SHIELD Act, H.R. 845, was introduced on February 27, 2013 and was referred to the House Committee on the Judiciary. We will monitor the progress of the SHIELD Act and update the Grimes Blog with new developments.

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