“Patent trolls” (now often called by nicer names like “non-practicing entities” or “patent assertion entities”), which seek to make money by buying up patents and asserting that companies have infringed them, have been giving members of IP-heavy industries headaches for a while now.  Patent protection is intended to benefit the economy and society by spurring innovation, but the problem of trolling is becoming so common that it is arguably slowing innovation by many companies and creating harmful economic inefficiencies.  Proposals for solutions to the trolling problem have begun to emerge.  JETLaw member Niels Melius, in his note “Trolling for Standards: How Courts and the Administrative State Can Help Deter Patent Hold Up and Promote Innovation,” argues that Congress should give the FTC substantive rule-making authority to address how a certain troll practice (known as “patent hold up”) should be handled in district courts to achieve more efficient outcomes.  (See JETLaw’s upcoming Volume 15.)

Two Congressmen have also recently proposed a bill that they believe will deter trolling.  The bill, know as the SHIELD (“Saving High-tech Innovators from Egregious Legal Disputes”) Act, would require trolls to pay opposing parties’ legal fees if a court determined that the troll’s suit had no reasonable likelihood of succeeding.  The text of the bill, which is co-sponsored by Reps. Peter DeFazio (D., Ore.) and Jason Chaffetz (R., Utah), is available here.  Although the bill would only apply to software and computer hardware patents, trolling does seem to be a particularly troubling issue in the tech industry: a Boston University study concluded that troll lawsuits costs U.S. tech companies more than $29 billion in 2011.

The SHIELD Act has received the backing of the Consumer Electronics Association, and Mr. DeFazio stated that he was unaware of any major objections to the bill.  What do you think about the possibility of its passing, particularly with the upcoming presidential election (which DeFazio noted might pose a problem because many legislators are hesitant to pass significant legislation on the eve of a presidential election)?  Do you think it will be effective in deterring trolling?

Will Pickens

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One Response to SHIELDing Innovators from Patent Trolling

  1. Niels Melius says:

    Great post, Will. Without having read the SHIELD Act in detail, I have a few concerns about the pending legislation (as it was described). First, I would be hesitant to carve out special rules for software patents, given the inconsistency this would produce in the body of patent law. Second, I wonder how effectively the bill would combat the evils of patent “trolls,” given the amount of debate that surrounds the term itself. Some limit their definition of “trolls” to “patent assertion entities” (the FTC, for example), while some include all “non-practicing entities.” But universities, for example, don’t usually commercialize their patented inventions, so they would fall under a broader definition of trolls, if the bill isn’t careful. Perhaps legislation to fight patent trolling should be aimed at harmful troll-like behavior (viewed from an antitrust perspective), rather than trying to identify and target all patent trolls themselves. The government seems to be paying more and more attention to patent trolls. For anyone interested in the subject, I highly recommend a recent FTC/DOJ workshop on the issue: http://www.ftc.gov/video-library/index.php/ftc-events. Oh, and the upcoming Note Will referenced in his first paragraph is worth a read too :)