SHIELD Act seeks to force patent trolls to cover cost of litigation in failed suits
They see me trollin’, they hatin’, House patrolling and trying to catch me riding dirty… (to the tune of rapper Chamillionaire’s “Riding Dirty”)That may be the reaction of patent trolls across the nation to new legislation aimed at combating the high volume of nuisance lawsuits brought by patent trolls against practicing companies, manufacturers, and sellers.
On February 27th, 2013, House lawmakers introduced the Saving High-tech Innovators from Egregious Legal Disputes (SHIELD) Act which, if passed, would force certain non-practicing entities (“NPEs” or “patent trolls”) to cover an accused infringer’s cost to defend should its patent lawsuit fail in court. The bill aims to dissuade NPEs from filing nuisance and/or weaker suits against practicing entities by increasing the risk and potential cost basis of doing so. Notably, this year’s version of the bill appears more popular, as its scope has been expanded to include all industries, not just the oft-plagued computer and software sectors.
Unlike practicing entities, which seek to innovate and bring products to market, the NPE business model focuses solely on acquiring patents and using the threat of costly litigation to derive settlement or damages revenue. Many companies settle, reluctantly making the business decision to pay out, rather than deal with the costs and distractions of an ensuing lawsuit. Depending on one’s perspective, NPE are either despicable “trolls” who stifle innovation, keen investors who leverage intellectual property to generate returns (not unlike real estate speculators), or perhaps in the most minority view, entities that protect the little guy by bringing the fight to corporate bullies who steal their ideas.
In fairness, not all NPEs deserve a parasitic stigma, and a fact acknowledged by several notable exemption included in the legislation. Exempt non-practicing plaintiffs include those who: 1) invented the patented tech themselves, or 2) show that substantial investment and efforts were made to bring the patented invention to market. Both exemptions recognize that it can be difficult for individuals and small companies to raise the required capital to bring a product to market, and to effectively compete with larger companies having leveraged manufacturing and marketing capabilities.
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