Patents Post-Grant: Loser Pays Patent Troll Legislation Flawed

Since the enactment of the America Invents Act (AIA) in September of 2011, the "patent reform" embodied by the AIA has been slowly rolling out. In fact, the bulk of the truly significant changes to patent law are only months old, some still weeks away. These changes include the change over to the first inventor to file model on March 16th, and the kick off of the new post grant patent proceedings 6 months back. With so much recent change it would seem premature to consider further changes to patent law until the last round has had time to take effect...but politicians disagree.

Evidently at least one Congressman feels that the AIA does not go far enough to combat patent "troll" lawsuits. Congressman Defazio of Oregon is sponsoring yet another bill entitled "Saving High-Tech Innovators From Egregious Legal Disputes Act." The bill, like its 2012 predecessor, proposes that the costs (including attorney fees) of certain types of patent lawsuits should be recoverable from the Patentee once the court finds the patent invalid, or not infringed. The 2012 version of the bill was limited to software type inventions and mandated payment for only frivolous suits. 

The 2013 version of the bill now applies to all technologies and mandates that certain losers pay (i.e., trolls) regardless of whether or not the suit was frivolous. The bill defines a troll as an entity that is: (1) not a university, (2) not an original inventor, (3) not an original assignee, or (4) an entity that has commercialized the invention by selling a product.  (revised bill here). The bill provides for a determination on the front end of a lawsuit as to whether the plaintiff falls into the definition of a troll (which will surely cost several hundred thousand in briefing and assorted legal wrangling). If qualifying as a troll, the plaintiff would post a bond that guarantees that the defendant could recover their fees should they ultimately prevail some 3-5 years later.

While Congressman Defazio's most recent effort is an improvement over the last, it still fails to recognize that fighting a patent suit to a final determination is not a realistic solution for defendants, bond surety or not. Very few small companies will gamble with that kind of expense/distraction and loss of productivity.  These same companies can settle with the troll for 5-10% of the cost of fighting it out to the end in court.

What is really needed is a low cost alternative to patent litigation that will break the troll/contingency business model. Fortunately, such an alternative was just recently introduced into law by the AIA.

View more from Patents Post-Grant. 

[Editors Note: To hear another view, read Law360's recent article, New Patent Troll Bill Gets High Marks From Attys]

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