Patent trolls are facing another legislative threat from Sen. Orrin Hatch (R-UT), who today introduced the Patent Litigation Integrity Act (S. 1612). This bill is a fairly simple—but very important—one that would curb patent trolls' dangerous litigation practices. We strongly support the bill and sent Sen. Hatch a letter today saying as much.
The Litigation Integrity Act is a fee-shifting bill. Fee shifting, often called "loser pays," is not a new idea. It's long existed in copyright law, for instance, allowing a court to award a winning party costs and fees in certain cases. In patent litigation, this type of provision would help tilt the playing field slightly more in favor of the good guys. To understand, think about the patent troll business model: making broad claims of infringement based on patents of questionable validity is the troll's favorite move. It's no wonder that many defendants choose to pay up rather than take the time, energy, and especially the money to fight in court. Fee shifting would empower innovators to fight back, while discourging trolls from threatening lawsuits to start.
Even more, this bill would explicitly give courts the tools to require that the troll put up a bond at the outset of litigation. In other words, if the court thinks the party bringing a suit is a troll or otherwise has not brought a good claim, it can require that party to put aside the money it would need to cover the defendant's legal fees and costs at the end. Because trolls use shell companies with very few assets to sue, the bond requirement is an important one that would require patent trolls to put their money where their mouth is.
The Innovation Act, currently pending in the House, also has a fee-shifting provision, but it lacks this important bonding provision.
This is what we told Sen. Hatch today:
The troll business is one of litigation and licensing, not creating and providing products and services. Thus, the high costs of litigation are baked into their very business model. This is not true of the productive businesses targeted by trolls, particularly smaller ones. And, in fact, it is these smaller businesses that bear the brunt of troll litigation. More than half of the defendants in troll suits make under $10 million annually.
This problem will not be fixed until those facing threats from trolls can fight back. Currently, the costs associated with taking up that fight in federal court are staggering. If taken to verdict, defending a lawsuit can easily cost nearly $3 million, according to findings by the American Intellectual Property Law Association. And when these cases make it to judgment, the troll only wins a shockingly low 9.2 percent of the time.
The Patent Litigation Integrity Act would remedy a core component of the patent troll problem. It would give those facing troll threats the tools necessary to fight back while also giving trolls a disincentive to bring harassment suits. Importantly, the bill would not affect any party bringing a meritorious suit. Currently, the system is skewed heavily in favor of the trolls; the Patent Litigation Integrity Act would rectify this problem.
Thank you, Sen. Hatch, for introducing common-sense litigation that would protect inventors, startups, consumers, and the rest of the innovation economy from the scrouge of patent trolls.