Bill in the House Would Make Losing Patent Owners Pay Some Litigation Costs

Reps. Peter DeFazio (D-OR) and Jason Chaffetz (R-UT), have introduced the “Saving High-Tech Innovators from Egregious Legal Disputes (SHIELD) Act.” The bill, if passed, would award attorney’s fees and costs to the winning putative infringer if the judge finds that the patent owner “did not have a reasonable likelihood of succeeding…” The bill is limited to patents related to computer hardware and software.

There are a few things I want to point out. First, despite the statement (reported by arstechnica.com) from Rep. Chaffetz that “A single lawsuit, which may easily cost over $1 million if it goes to trial, can spell the end of a tech startup and the jobs that it could have created,” this bill will likely not affect cases that go to trial. While not congruent with the standard for summary judgement or a Rule 12(b)(6) motion, I don’t think many cases that make it to trial would fit the standard set out in the SHIELD Act.

Second, the bill does not address the situation of an accused infringer who loses a case in which they did not have a reasonable likelihood of succeeding. This puts a disincentive on patent owners, especially small business patent owners (many of whom are technology startups), who would otherwise want to defend their intellectual property. At the same time, it encourages infringers to drag their feet, avoid settlement, and force the patent owner to rack up legal fees even if the infringer has a strong feeling they may lose on summary judgement.

Many technology startups chose to use patents to protect their ideas. Those patents are only useful if they can be enforced and this one-sided legislation will make it harder for small businesses to do so. It may also impact their value to potential suitors who may chose to emulate the technology rather than acquire it.

A better approach would be to impose a “loser pays” system across all patent cases (or even all cases brought in federal court). Whatever is done, it should be done across the board to apply to all technology areas.

As the bill stands, I doubt it will impact the behavior of patent trolls. Defendants will still settle because the mere hope of recovering their defense costs won’t offset the potential downside of not settling. The suits that will be deterred are those brought by innovative startups who now will have to fear paying the accused infringer’s costs should the startup lose. Those costs could break a small company and the fear of paying them will keep small businesses from asserting valid patents.

Apple v. Samsung: Independent Development is Not a Defense

There has been a lot of coverage of the Apple v. Samsung case going on. I’ve posted on the value of design patents that this litigation highlights. One topic is that of the public release of excluded evidence by Samsung’s lawyers. Some tech blogs have taken issue with the ruling saying Samsung should be able to show evidence that the design was their own idea.

This misses a critical point. Independent development is not a defense to patent infringement. Even if you never saw the design or the patent you are accused of infringing, that will not protect you. This is true even in you came up with the idea first.

Unless an earlier developed design fits into a statutory category of prior art (such as a printed publication, patent, article for sale, etc.) then its existence is irrelevant to validity and infringement. This surprises some people and it is different than other areas of intellectual property law.

For example, trade secret law protects against misappropriation; copyright law protects from copying. In these areas, a defendant can avoid liability by demonstrating independent development. I’m sure the attorney’s for Samsung were well aware of this, and it will be interesting to see what Judge Koh does in response to the public statements and release of evidence that was deemed irrelevant.

Patenting for Myself

Over the years I’ve had some ideas that I could have filed patent applications on, but I never did. One of these ideas showed up in a product later, and when I checked the filing dates of the patent listed on the product package, it was about six months after I had first thought of the idea. Thankfully I am not flexible enough to do much damage when kicking myself.

I recently had another idea, and will be filing an application. I’ll have to piece enough time to prepare it in my spare time, so this may take a little while. I will disclose it here when the application publishes. I don’t know if it will be commercially successful, but I think the ensuing process will be interesting to write about.

I will provide updates as the application progresses and think this could provide a series of posts that, in sum, will give other inventors and idea of how the process works.