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New ruling makes losers fund both parties’ costs for lawsuit and patent lawyers

May 7, 2014

The U.S. Supreme Court recently issued rulings that should send“patent trolls” scurrying back into the shadows, or at least make them pay for their unscrupulous suits. Literally, pay. In the recent decisions, the court made fee-shifting more available to court determinations in bad patent suits, according to this article on TheVerge.com. If the losers are made to pay the fees for the winner’s patent lawyers, it is hoped that fewer frivolous suits will be brought in by patent trolls – entities who buy up rights without ever producing with the sole purpose of filing suits.

Though “patent trolls” elude a fixed definition, they’re generally understood by their practice of bringing lawsuits against small businesses “using broad, tangentially related or likely invalid patents.” Victims of these companies trawling for suits claim that the patent trolls often force companies to settle rather than engage in an arduous and costly lawsuit.

But that may change. The decisions issued in Octane Fitness v. Icon Health and Highmark V. Allcare Health by the Supreme Court this week, where the cases were kicked back down to lower courts for reconsideration, came when Justice Sonia Sotomayor, in a majority opinion, instituted a laxer interpretation of a 2005 decision of the fee-shifting provisions available to courts. For some time, fee-shifting has been a provision “that lets courts punish people who bring patent claims…involving inappropriate conduct, obviously baseless claims, or clear bad faith,” by saddling the losers of the case with both parties’ court and patent lawyers costs. Fee-shifting had rarely been exercised though, due to that 2005 decision that was “rigid and mechanical” and difficult to apply fee-shifting rules to cases.

Not so anymore. And not only with this most recent move by the Supreme Court. A House patent-reform bill is in the works, too, and has already gained significant support, and a provision added to the Innovation Act that stipulates a “loser pay” condition for patent suits already passed the House of Representatives last year.

Some critics, however, aren’t so optimistic about forcing the loser to pay costs for court and patent lawyers, saying that more frequent use of fee-shifting could stop patent holders from bringing legitimate claims if they aren’t sure they’d win. This could skew the advantage toward those with more money to afford patent lawyers and suits in general, as well as intimidate small businesses who could build valid cases with expert help.

The frequency and visibility of patent lawsuits is on the rise, particularly in the technology world and around big names like Apple and Samsung, and the Senate’s patent reform debate is continually evolving. The Supreme Court’s most recent interpretation that loosens those “rigid and mechanical” guidelines for fee-shifting is just one move in the larger debate, and one that shifts the tone significantly. Now, with the new interpretation issued by Justice Sotomayor, “there’s not need to add an extra fee-shifting rule,” in the Innovation Act. Whether more aggressive patent reform measures will follow is yet to be seen, but the impact the Supreme Court’s interpretation will have on patent cases even now is undeniably in favor of rooting out patent trolling altogether.

 

 

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