Guest Editorial: Throwing Trolls Off The Bridge

Guest Editorial by Peter Schechter (Edwards Wildman Palmer LLP)

CCF03082013_00000Some years ago, a few patent lawyers realized that the cost of U.S. patent litigation had become so expensive that most companies sued for infringement would probably pay something just to make it go away, regardless of the merits. This realization forms the fundamental underpinning of most U.S. patent litigation today. If most of the plaintiffs were shining examples of Horatio Alger stories, no one would be too upset about this state of affairs. But they are not – far from it. Most patent infringement plaintiffs today are Non-Practicing Entities (NPEs), or "patent trolls." Rates of success on the merits for NPEs, in those few cases that actually get determined on the merits, are very low, ranging from less than 10% to about 25%, according to different studies. Many people view NPE cases as being generally meritless, generally speaking, regardless of the accuracy of that view in any specific case. On February 14, 2013, even President Obama voiced his displeasure with patent trolls, saying they "are essentially trying to leverage and hijack somebody else's idea and see if they can extort some money out of them."

Recently, Congress has at least been trying to fix what many feel is this most broken aspect of the U.S. patent system. Last year, Rep. Peter DeFazio (D-Ore.) and Rep. Jason Chaffetz (R-Utah) introduced the bipartisan H.R. 6245 –"Saving High-tech Innovators from Egregious Legal Disputes (SHIELD) Act" — a bill intended to curb the flourishing patent troll business model by shifting the patent litigation system away from the "American model" (everyone pays their way, win or lose) to a "loser pays" system, at least in some types of infringement cases. H.R. 6245 was applauded by some and decried by others; among its faults were the limitations on the types of cases to which it applied, and its lack of "teeth" for implementing the "loser pays" fee-shifting provision. The bill died with the end of the 112th Congress.

Reps. DeFazio and Chaffetz last week reintroduced a "new and improved" version (H.R. 845) of the SHIELD Act (now "of 2013"). Now the bill bites – hard — on NPEs. Gone are the industry-specific limitations. New for 2013 is the most significant provision of the bill: the requirement that the NPE (as defined in the bill) must post a bond early in the case to cover the recovery of the "full costs to any prevailing party asserting invalidity or noninfringement, including reasonable attorney's fees …." This provision does more than implement fee-shifting in NPE patent litigation; it strikes at the heart of the patent troll's business model, and may cut out that heart completely.

To understand the importance and effect of the bond provision, one must first understand the NPE business model. Many, and probably most, NPEs today are "special purpose vehicles" created for the sole and exclusive purpose of owning and suing on patents. In many instances, these limited liability companies are owned by the patent litigators doing the suing. These plaintiffs have few or no assets other than the patents themselves, the out-of-pocket expenses of litigation being fronted by the lawyers, and the lawyer's fees being entirely contingent upon settlement payments. In other words, NPEs are designed to be, and typically are, judgment-proof. For this crucial reason, the traditional fee-shifting mechanism in the Patent Act, 35 U.S.C. Sec. 285, is not an effective deterrent to truly unwarranted patent infringement allegations. Only in rare situations are the litigation attorneys held jointly and severally liable for Sec. 285 attorney's fees awards. While Rule 11, Fed. R. Civ. P., always exists to deter the very worst offenses, Rule 11 awards against signing attorneys are even rarer in patent infringement cases than Sec. 285 awards.

As a result, NPEs are often analogized to gamblers playing with house money – they can win, but cannot lose. The bond requirement of the SHIELD Act of 2013 recognizes and addresses this economic reality, because virtually every type of judicial bond available from a surety, bank, insurance company, or other bond provider is fully 100% collateralized. In practical terms, this fact may well throw the trolls off the bridge.

Bail bonds and appeal (supersedeas) bonds are two examples of judicial bonds. Both the party seeking the bond and the company giving the bond know the exact amount of the potential liability that the bond must cover. In some cases, the amount of a supersedeas bond is set by statute, and may include a required amount to cover interest.

The bond required by the SHIELD Act is different – no one knows, at the beginning of a patent case, what the "full costs to any prevailing party asserting invalidity or noninfringement, including reasonable attorney's fees," might ultimately be. Qualcomm, the prevailing defendant in a patent case, was recently awarded more than $12.4 million in attorney's fees alone; "full costs" would presumably be substantially more. Prevailing defendant Takeda Chemical was awarded $16.8 million in attorney's fees in 2008. Dozens of attorney's fees awards have exceeding $1 million, and in almost all of those cases, the prevailing defendants had to establish that the cases were "exceptional" under Sec. 285.

"Losing NPE pays full costs including reasonable attorney's fees" would become the default standard for NPEs under the SHIELD Act; no "exceptionality" is required. Given the NPEs' current strategy of filing numerous substantially simultaneous separate suits (as a result of the anti-joinder provisions of the America Invents Act), critical questions arise. Would an NPE be required to post a "full costs" bond in each, separate suit? If not, the law would be pointless. How would the "full costs" amount of the required bonds be determined at the beginning of each, separate suit, when different defendants will employ different defense strategies, and incur different "full costs"? Will the bond amount be the subject of legal opinions of counsel, or of expert opinions? What banks, sureties, or insurance companies would offer to provide SHIELD Act bonds to NPEs? Assuming that some financial institutions would, in fact, offer to provide SHIELD Act bonds, what amount and type of collateral would be required and, more importantly, how would typically asset-free, judgment-proof NPEs provide that collateral?

Given the historical reluctance of insurers to offer patent infringement insurance of any kind at all, the 100% collateral requirement is virtually a sure thing. It also seems reasonable to assume that only a very tiny fraction of currently operating NPEs will be able to raise sufficient capital to provide 100% collateral for more than a very small number of SHIELD Act bonds at any given time – should they even decide to take that risk, knowing full well their low probabilities of success on the merits. If the SHIELD Act of 2013 becomes law as written in H.R. 845, the business model of patent infringement litigation as currently practiced by most NPEs would likely become economically unfeasible, and the era of NPE patent litigation as it currently exists would likely come to an end.

= = = = =

The views expressed in this article are the author's alone, and do not necessarily reflect those of Edwards Wildman Palmer LLP or anyone else.

DC Note: Artwork is by my daughter Robin. 

84 thoughts on “Guest Editorial: Throwing Trolls Off The Bridge

  1. 84

    I’m afraid the article, the illustration, and many of the comments are based on a fundamental misconception.

    Trolls are found under bridges, not on them.

  2. 83

    Now if they were looking for progress instead of regression and denying citizens jobs revenues and exports the federal government would be guaranteeing the inventors determined marketable application a bond to insure parent concievers funds to build and market there products without infringement they was there suposed to be doing it is conception to the point of those skilled in the art can construct the invention with or without undue experimentation this protects the societys intrests in having all that can be created by ensuring the incentive to create, and not have to have 200 years of technical schooling to invent in all catigories

  3. 82

    Meritious or meritless cases should be decided by the judge before trial and provisions are already in place for dismissial,saving companies court costs arguing merits to the judge shouldent cost a bond because it grossley unlevels the legal playing field in favor of deep pocketed firms to require bonds of the indegent inventor and there patrollers

  4. 81

    anon: “Maybe you had a different question in mind”

    Yes, IBP’s question was, how do I get the heck out of this discussion on “Integration” before I am totally humiliated?

    Same question LB asked.

    Same question and issue ( humiliation) that haunts MM, every time the link to the USPTO Official Guidance is posted.

    It’s just something about this topic ( Integration) that makes the extreme anti patent peeps fall apart every time they are confronted with the facts and this particular area of patent law.

  5. 80

    insult anyone who dares to question your imaginary authoriteh

    Telling Simon his view was too simple was no insult.

    You are doing that balloon noise thing you do again.

  6. 79

    1) The actuality of a patent is a negative right – a right to exclude. It is not a right to make anything.

    2) the proposed SHIELD act does not redefine the essence of what a patent is. Its clumsy attempt at introducing a “use” requirement is just that: clumsy. It is written as if the patent right alreadyincludes a right to make. US patent law simply does not.

    These are indeed obvious points to anyone with any basic understanding of US patent law.

    If you think I am in error – it is now up to you to explain why.

    I await your abundant wisdom and your supplying of actual answers (as opposed to mere questions) – knowing well what I will actually get.

  7. 77

    LOL – rubbish and noise, yet silent as the likes of Malcolm runs amuck…

    Really IBP?

    No wonder 101 IE casts you into the same circle.

    As to defining “abstract,” shouldn’t the finger be actually pointed at the Supreme Court for their clarity with that term?

  8. 76

    “That doesn’t change the truth about what Simon said’

    Actually, yes, it does.

    Explain how.

    Real understanding

    Show us that you have “real understanding”, anon. I don’t believe you have a “real understanding.” Try explaining to everyone (1) what “the actuality” of a patent is and (2) how that “actuality” is not changed when Congress passes legislation that requires use of the patent for enforcement of the patent.

    Or maybe you can just pretend that you know the “obvious answers” to those questions and use that as an excuse to insult anyone who dares to question your imaginary authoriteh on the subject.

  9. 75

    We’re supposed to be closer to a libertarian d-ps–t fantasy land than a democracy, but you guys have made very good headway in ruining it.

    Hush now. You’ll make Glenn Beck cry.

  10. 74

    If I recall correctly, the courts have defined an abstract idea as “an original cause, a motive, a fundamental truth”. And, ” a process that can be performed entirely within the mind”. So we know by legal definition software is NOT an abstract idea.

    And as I previously stated Software is an “integrated” technological process. And as the Court has made clear, a new and useful “Integrated” process is statutory subject matter. That’s an argument no one can even rebut, let alone defeat.

    In fact all the anti patent crowd can do when faced with “Integration” is run away, make excuses, and then perhaps call you names.

    MM, LB, IBP, are all cut from that same cloth.

  11. 73

    Personal question, Malcolm:

    What are you smoking?

    None of your business. Suffice it to say there isn’t enough of it on earth to make your comments funny.

  12. 72

    Constitutional republic. We’re supposed to be closer to a libertarian d-ps–t fantasy land than a democracy, but you guys have made very good headway in ruining it.

  13. 71

    IBP: “Ask them a reasonable question, like I just did of 101, and you get rubbish in response.”

    101 Integration Expert: And why exactly is my answer that “software is an “integrated” technological process. ” rubbish?

  14. 70

    IBP: Just one: why did I even bother?

    101 Integration Expert: Because you wanted to know my opinion, obviously. Equally obvious, you do not have the subject matter expertise on “Integration” or the in depth analytical skill to ask a follow up question that would advance the discussion.

  15. 69

    Sorry, “101 Integration Expert”, NOT Night Wiper.

    It’s easy to confuse the posters responsible for the noise on this board. Ask them a reasonable question, like I just did of 101, and you get rubbish in response. What a waste of time.

  16. 68

    Fish scales–

    In response to this question, it is up to Night Wiper to define what it means by “abstract”, since it was Night Wiper who made the initial assertion that “Software is not abstract.”

  17. 66

    That doesn’t change the truth about what Simon said

    Actually, yes, it does. Real understanding does that.

  18. 64

    Peter, you suggest that “NPE’s […] can win, but cannot lose.” Are you kidding me? Are you suggesting that NPE’s want to incur the expense and incur the risk of litigation, instead of merely collecting royalties and damages for patent infringement that are owed to the owners of each issued U.S patent? Every time a corporation refuses to voluntarily take a license, the NPE loses because it incurs the expense and risk of litigation. In litigation, the NPE can lose its’ investment to acquire patents, if the patents are held not infringed, invalid, or unenforceable by a federal court. In litigation, the NPE incurs “litigation risk” that is not based on the merits, but rather is inherent in litigation before flesh and blood judges. Admit it, judges make errors and most are not technically oriented. And, some judges are severely uninformed (I decline to use the adjective “biased”) – they read articles like yours, listen to the defense bar, and internalize the lobbying campaigns that continue to push the meritless proposition that NPE’s are not merely secondary market investors who acquire undervalued patent assets and thus create liquidity for failed inventors and tech companies, but instead are “opportunists” or “trolls” who have “bad intentions” and by implication, low ethical standards in their willingness and means to engage in litigation against recalcitrant patent infringers – who are the true “bad guys” engaged in “unlawful conduct”. You also ignore the risk of an NPE simply being outspent by opponents who are not individuals with limited resources like all individual inventors, but deep-pocketed legal entities like Google, Cisco and Intel – collectively big IT? Where is the real risk to the patent infringers – if they lose they pay a reasonable royalty and their own expenses, and they settle for far less, right? Go ahead and admit it Peter, the truth will set you free. No need to wink, I know you are kidding me.

  19. 62

    I mean, startups and individuals should not just perform the valuable functions of creating innovations in important areas of technologies, right?

    What’s the important innovation you have in mind, Jeff? New methods of swiping a touch-screen? Accessing a database with new content and displaying the results in a different order than the prior art? A method of sending a text from a phone while sitting in a robot car on the way to an airport, wherein the airport is [insert city previously not named in a patent application]?

    Or do you have less “high tech” “innovations” in mind?

  20. 61

    Maybe someone who owns some commercial property or farm land isn’t doing anything with it should be forced to sell it to whoever agrees to put it to use and pay roughly market value, or maybe something less than market. After all, people who don’t do anything with real property aren’t adding to the economy. Arguably, that non-use scenario is neutral or negative for the economy as a whole.

    That’s a great idea and I’m sure it has been proposed and implemented in certain contexts. Your focus on the “economy as a whole” is a bit misplaced. In fact, one need only identify harm to the community affected by the neglected property in question. Consider, e.g., an otherwise walkable block in a vibrant community turned into a dangerous wasteland by a commercial property owner who refuses to sell at reasonable terms.

    Communities can and do exercise control over such property owners. At the very least, they can (and should0 make life difficult for such property owners.

    Occasionally you should take a breath and remind yourseld that we live in a democracy, not some libertarian d–ps–t fantasy land.

  21. 60

    Except for the fact that the actuality of what a patent is is not changed in the rest of the law. A patent still is a negative right, and a patent right does not confer a right to actually make anything

    That doesn’t change the truth about what Simon said. If legislation is passed by Congress to make some “use” a requirement for enforcing a patent, then the legislation does change “what a patent is”. Oh but wait: Humpty Dumpty surely has a special definition of “is” handy. I cant wait to hear it.

  22. 59

    This article reduces to an argument to make life easier for those who would like to conduct their business without ever fearing having trespassed onto someone’s else’s property.

    Conducting business without fear of trespass? That sounds like communism!!!!

  23. 58

    LB

    what makes you think the quantity of patent litigation is going to go DOWN?

    first, it does not prevent use of this tool by infringers who file DJ actions, which under the Medimmune manifesto is available at the drop of a hat

    now coupled with the fact that the offending lawyers can ask for attorneys fees upfront as part of the case, you think this is going to result in FEWER cases? This is a defense attorney’s perpetual employment act because now they can convince reluctant clients to pursue a lot more cases they would have otherwise ignored.

  24. 57

    Yeah, maybe they should try to attract capital to make a foolish run against entrenched competitors with commanding market share and other competitive advantages. I mean, startups and individuals should not just perform the valuable functions of creating innovations in important areas of technologies, right? Everyone needs a factory … needs to push out boxes, is that how you see it (6)? Inventors should “know their place” in your scheme of things, be grateful they even have a well-paying job, huh?

  25. 54

    The inventor inevitably is flat broke after having been trampled by corporations who are infringing his patents. So, does the Shield Act apply to a plaintiff who finances the massive cost of the inventor’s infringement lawsuit and joins with him as a co-plaintiff? What about the plaintiff who finances the cost of litigation on behalf of the inventor’s estate, where the frustrated inventor has gone insane from pulling his hair out and resides in a psychiatric institution? What about the plaintiff who forms a partnership or LLC with the inventor’s estate?

  26. 53

    IBP: “why, so-called “software” is not abstract.”

    Software is not abstract because it is an “integrated” technological process.

    Any questions?

  27. 52

    “If so, this seems like a hit to the value of many startups.”

    Maybe they should try making something other than pieces of paper.

  28. 51

    “Has anyone tried to estimate the cost-benefit of NPE litigation activity on our economy or society in general?”

    I would guesstimate -100%.

  29. 49

    If a small startup A is the “original assignee” of a collection of disparate patents and is bought be a slightly larger, but not huge, company B, and B will be “exploiting” only a fraction of the patents filed by A, must it post bond to assert those it’s not “exploiting” since it’s not the original assignee?

    If so, this seems like a hit to the value of many startups.

  30. 48

    Robin –
    Very nice illustration. I like the color choice for the bridge (cyan is it?) and the use of negative space.

  31. 47

    I don’t think the “defense litigation bar” is the culprit behind this, if there is such a thing. The attorneys who defend NPE cases do quite well under the status quo – it is definitely not in their personal interests to reduce the quantity of patent litigation, egregious or otherwise.

  32. 46

    101–

    Either articulate your argument why, or point to a link where you argued why, so-called “software” is not abstract.

  33. 45

    Gotta love the defense litigation bar’s sleight of hand on this one, and how it illustrates a marvelous example of how expensive lobbying can pay off for large legal/corporate interests.

    Given the twin premises that: 1) patent litigation is “outrageously expensive”and 2) patent owners seek an objectively fair return for use of their innovations

    their proffered thesis is somehow NOT that litigation lawyers are unreasonably expensive, but, rather, patent owners are “litigation abusers” for asking for something less than some artificial numbers set by a self-interested class of corporate protectionists in an unrelated field

    This bill is basically a transparent fee generating vehicle that puts the legal foxes in control of new DJ actions that will further line their pockets – its a defense litigator’s dream. I submit that the main “litigation abuse” in this area is (and will continue to be) heaped by high priced legal talent and shill paid purported “academics” on all too willing clients.

  34. 44

    “it strikes at the heart of the patent troll’s business model, and may cut out that heart completely. ”

    Huzzah!

  35. 42

    Except for the fact that the actuality of what a patent is is not changed in the rest of the law. A patent still is a negative right, and a patent right does not confer a right to actually make anything (think improvement patent on top of someone else’s still in force patent).

    Further, what the Court has said is simply not touched by this legislation.

    Sorry Simon, your view is too simple.

  36. 41

    The problem with your last paragraph is that the proposed legislation would (and evidently is intended to) change the US into a jurisdiction with a(n at least partial) use requirement. What the courts have said about that in the past would therefore be irrelevant.

  37. 39

    In contrast, the inventor would play by existing rules

    If someone isn’t playing by “existing rules,” the answer is NOT make up additional rules (that are problematic in and of themselves).

    Everything else you say is spot on.

  38. 38

    “While Rule 11, Fed. R. Civ. P., always exists to deter the very worst offenses, Rule 11 awards against signing attorneys are even rarer in patent infringement cases than Sec. 285 awards.”

    Why is Rule 11 so rarely used? How can courts be encouraged to use it to help deter trolling behavior?

    Strengthening existing mechanisms should be considered in parallel to the slow legislative process.

  39. 37

    And, why not extend the “troll” logic elsewhere, e.g., real property?

    Indeed. Why stop here? Why not make every person who wishes to use the courts post a bond as such. If this “frivolous” thing is so bad, then more medicine must be good.

    The problem with your last paragraph is that the courts have already adjudicated that there is no “use” requirement in US patent law (and for very good reasons, starting with the nature itself of what a patent actually is).

  40. 36

    Has anyone tried to estimate the cost-benefit of NPE litigation activity on our economy or society in general? Maybe it represents a net benefit. Maybe not. The data ought to speak for itself, assuming there is any unbiased, on-point data.

    Has anyone tried to figure a way to reduce the cost of litigation? Maybe that’s where part of the “problem” resides, assuming there is any problem at all.

    Is there another way to address the “problem”? Could NPEs be forced into negotiations/arbitration to simply take a reasonable royalty if a practicing entity determines that it needs the IP? That might be more economically efficient than stomping around the courts for a few years and spending millions of dollars in the process.

    And, why not extend the “troll” logic elsewhere, e.g., real property? Maybe someone who owns some commercial property or farm land isn’t doing anything with it should be forced to sell it to whoever agrees to put it to use and pay roughly market value, or maybe something less than market. After all, people who don’t do anything with real property aren’t adding to the economy. Arguably, that non-use scenario is neutral or negative for the economy as a whole.

    None of this is meant to accept or reject the author’s hypothesis. The question should focus on cost-benefit. Simply labeling someone a “troll” doesn’t shed light – its just pejorative and unhelpful. The main point of the patent system is economic benefit to the economy/society. Why not focus on how to maximize the benefits from innovation? Does the proposed legislation do that?

  41. 35

    Of course it impacts alienability as it impacts value. The ability of inventors to monetize their legally obtained and presumed valid patents is lessened as prospective buyers of those rights now have to factor in the extra costs of asserting the rights. In contrast, the inventor would play by existing rules which makes it easier, though far from costless, to assert the patent against a suspected infringer.

    I don’t know what all the fuss is about NPE ior so called trolls. They liquify the market and enable inventors to more readily and easily profit from their inventions. Once granted, these patents exist, are presumed valid and can be asserted at any time by any owner against suspected infringers. This article reduces to an argument to make life easier for those who would like to conduct their business without ever fearing having trespassed onto someone’s else’s property.

  42. 33

    I agree. They see it as a way to avoid having to learn patent law and the technology at issue.

  43. 32

    I agree with anon about point 4 being problematic.

    1-3 and 5 go right to the heart of the matter and fix most issues.

  44. 30

    And I LOVE the Nick Fury, SHIELD references.

    And, as the recent Carnegie Mellon case proves, Universities troll too. They are just perceived as more honorable and righteously indignant.

  45. 29

    Technically, it’s not the “original assignee” in the sense of the first assignee. Rather it’s an assignee who filed and was awarded to the patent (“or in the case of a patent filed by and awarded to an assignee of the original inventor or joint inventor, the original assignee of the patent”). The bill is written so broadly that it would apply to A LOT more entities than the typical definition of an NPE/”patent troll.” Also, the way the bill is worded could a patent filed pre-AIA fit the definition of “original assignee” since the assignee could not have been the original “applicant”?

  46. 28

    From another Wild blog post:

    You cannot blame academics for publishing papers on what they consider to be interesting and important subjects; but you can look very closely at the agendas of entities whose interests might be served by limiting or abolishing software patent rights, as well as restricting the ability of others to sue them for patent infringement. And what is good for these entities (which by and large can quite easily live with things as they are) may well not be good for many other patent owners in the US, present and future. The fact is that before legislators start making decisions, they absolutely have to make sure that they have all the information they need to make effective ones. Right now, I would suggest, they are not even close to that point.

    See link to iam-magazine.com

  47. 27

    From Schechter: “The SHIELD Act would not apply to a plaintiff who is: the inventor; a joint inventor; the original assignee; someone who has made substantial investment in exploitation of the patent through production or sale of a patented item; a university; or a university technology transfer organization.”

    Next, a striking comment from Wild at 6pm last night, that SHIELD does not even touch 75% of present NPE activity. And in his position, with his experience, he should know.

    I gather that SHIELD is just empty posturing that would only make things worse.

    I’m left thinking, do these legislators have any integrity at all?

  48. 24

    without getting into…

    Why not get into it?

    How do you figure that you have not abrogated alienability when the “who” of ownership dictates the “what” of due process?

    They just might need a large pile of cash before they can do so

    LOL – and you complain about “legalized form of extortion”?

    Really? What a hypocrite.

    Frivolous suits need to be solved across the board and not just concerning patents. If a suit is truly frivolous, then Rule 11 should come into play.

    Do you know what Rule 11 is?

    While you are it looking it up, kindly join your “friends” and find me that short list (very short list) of one single modern advanced country that has seen the light and forsaken all IP.

    Thanks.

  49. 23

    What’s the connection with 101?

    Sure, the PTO issues lots of cr-uddy patents, and that problem to needs to be addressed prospectively too, but the fact is there are now a lot of cr-uddy patents out there that get asserted against parties that actually do something for the economy, like provide real goods, services and jobs. It’s a legalized form of extortion. Requiring a bond of certain plaintiffs ensures they have skin the in game; it doesn’t preclude improving the PTO so that it issues worthy patents but not unworthy ones.

    And to the guy above who complained about alienability: without getting into what kind of aspects of property the legislatively-created bundle of rights called patents should have, nothing in the proposed law would abrogate alienability. Nor would it constitute a taking, since parties would be free to enforce those patents. They just might need a large pile of cash before they can do so. Just like those legitimate business who are getting sued for frivolous stuff need in order to defend those spurious infringement suits. Kind of hurts when the shoe is on the other foot, doesn’t it?

    Nice explanation, Paul, and thank you Dennis for posting this.

  50. 22

    Congressman Nick Fury introduced an amendment to the SHIELD Act to allow the creation of an interagency force, under Fury’s jurisdiction, to combat NPE’s and keep the courts free of unwarranted intrusions.

  51. 20

    Given that according to PatentFreedom up to 75% of all known NPEs enforce patents covered by exemption 1 of the SHIELD Act, the likelihood is that it will have little effect on their activities. However, it will give deep pocket defendants more scope to attack less well resourced plaintiffs of all kinds, as accusing them of being trolls – and forcing them to spend extra time and money to show they are not – will inevitably become a standard defence play.

  52. 19

    Tighten 102, 103, and 112 to fix the problems–not 101.

    I agree NWPA, that 101 needs to be left alone. The conflation of the other categories with 101 has gotten out of control!

    I do not think 102, 103, and 112 need to be tightened so much as applied strictly and rigorously.

    If you have invented something that has never been invented before (102), and it’s non obvious ( 103) and fully described and enabled ( 112), then you should be able to fight the battles at 102, 103, and 112 and win!

    But to kneecap certain invention at 101 does the patent system a real disservice. Not to mention the Actual Inventor!

    Software is not abstract.

    Software is not a Law of Nature, or natural phenomenon.

    Software is NOT a judicial exception and does not need to become one.

    The same can be said of all business methods.

    Software itself is an inherently “integrated” process.

    If the software is new in combination, or use, and at least one person finds it “useful”, then it passes 101.

    It really is that simple.

  53. 18

    To be clear, I don’t claim to know either way. I’m guessing that the success rate for patentees in adjudicated patent cases is generally low. If a case is strong, the defendant has a very powerful incentive to settle early rather than get hit with large lawyer bills in addition to a judgment and possibly a permanent injunction.

  54. 17

    Even PEs are NPEs in many regards (particularly for the patents being sought to be enforced)- I think this is a possible point that NWPA is making.

  55. 15

    “Rates of success on the merits for NPEs, in those few cases that actually get determined on the merits, are very low, ranging from less than 10% to about 25%, according to different studies.”

    I haven’t seen these studies, but I would be curious to know the difference between the adjudicated-case success rates of NPEs vs. PEs (or however we define non-non-practicing entities), when the same metric is applied to the case data.

  56. 14

    I understand the legal aspects of it anon.

    My comment wasn’t meant as a solution not necessary a legal one. More of a topic for conversation. More of a way to say: let’s look at how the NPE’s actually work and what is going on rather than this brutal legislation that would have lots of collateral damage.

  57. 12

    And, another question I’d have there is:

    “don’t prosecute patents”? Now, who doesn’t prosecute patents? The entity that is suing? How’d they get the patent? Did the patent get new claims and then was sold off? Not sure I buy what you are saying.

    Certainly, my experience is the exact opposite.

  58. 11

    Actually, anon, I’ll take a look at Peter Zura’s article. I am speaking from first hand experience regarding some the giant NPEs that make the news. I know how they work first hand.

    But, you may be right that my perceptions are screwed to what I’ve worked on.

  59. 10

    Actually, you could probably kill 90 percent of trolls by not allowing new claims.

    This is a fallacy in many ways – aside from the actual legal problems with it (you cannot have the Office or the courts use this sua sponte – see Tafas).

    Secondly, there is a misperception by NWPA on how the nominally designated trolls operate. Peter Zura (271 Patent Blog RIP) provided a study showing that the overwhelming number of so-called denigrated “Trolls” do not prosecute patents at all. Disallowing new claims would have ZERO effect on the actual actor targeted.

  60. 9

    A patent shall have the aspects of personal property…

    One of those critical aspects concerns alienability.

    I would be interested in the author’s view on any defense of abridgment of this legal characteristic. The obvious collision of tying substantial due process protections with the classification of ownership must have a basis. What is that basis (aside from conjecture), what is the level of scrutiny involved? and is there a sense of “taking” in lessening rights based on owner as opposed to being based on the objective patent itself?

  61. 8

    “the cost of U.S. patent litigation had become so expensive” — that is because the judges refuse to take charge of it. They would rather the parties just continue with their crazy and excessive pre-trial motions and practices until one of the parties screams “uncle” because of the high cost and disruption of their business and the parties settle before trial.

  62. 7

    Plus here is the problem: (try to start from understanding the problem.)

    1. post-invention patents where people have figured out how to put everything including the kitchen sink in an app.

    2. companies haven caught on to this completely (which they need to) and make their own kitchen sink patent.

    3. 1& 2 aren’t necessarily bad. They can be seen as just an arms race and putting more pressure to innovate.

    4. Not enough enforcement of 112, 102, 103. Too easy to write new claims for a patent with a continuation. Actually, you could probably kill 90 percent of trolls by not allowing new claims. Write the spec, claims, and you can only narrow. Sure there would be some games played, but it would be much harder to game the system that way. and, really broad claims to begin with may suffer from estoppel.

    5. Anyway, try thinking through and understanding the real problems and how the trolls are getting their way. Oh wait, that never happens because the people that write these bills don’t practice patent law and appoint judges that have never practiced patent law. And, most of the people involved don’t understand science or technology so they have no clue whatsoever.

  63. 6

    The SHIELD Act would not apply to a plaintiff who is: the inventor; a joint inventor; the original assignee; someone who has made substantial investment in exploitation of the patent through production or sale of a patented item; a university; or a university technology transfer organization.

  64. 5

    The bill as written as numerous problems, including due process, alienability of property, and a misunderstanding of the nature if the negative rights of patents in general (there is an attempt at introducing a “use” requirement that does not fit the nature of patents).

    There are reasons this bill died in committee last year, and I see no movement here of addressing those reasons.

  65. 4

    Terrible idea. A kludge that will cause more problems than it will fix and will bring into question our entire legal system. And, in general, will hurt small people. The big corp won’t care.

    The real problem is the PTO, which is a problem in a large measure because of Benson and the SCOTUS mucking with patent law. Tighten 102, 103, and 112 to fix the problems–not 101.

  66. 2

    Doesn’t this change make it nearly impossible for a small entity to defend legitimate patents against large corporations?

  67. 1

    The Author says: Takeda Chemical was, of course, a prevailing plaintiff, not defendant, so that enormous award doesn’t actually illustrate the precise point I was making. It does, however, further illustrate the extraordinary cost of patent litigation, generally. PCS

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