New bill would require loser to pay in some patent lawsuits

The legislation targets infringement lawsuits by so-called patent trolls

Two U.S. lawmakers have introduced legislation that would require a losing plaintiff to pay legal costs in many patent infringement lawsuits, in an effort to discourage so-called patent trolls from filing court cases.

The Saving High-Tech Innovators from Egregious Legal Disputes (SHIELD) Act, introduced Wednesday, would realign the financial incentives for filing patent infringement lawsuits, said Representative Jason Chaffetz, a Utah Republican and cosponsor.

The legislation, also sponsored by Representative Peter DeFazio, an Oregon Democrat, targets non-practicing entities, companies that own patents but don't sell products. Companies with legitimate patent complaints will still be able to file and win patent lawsuits if the bill passes, he said.

Patent lawsuits by non-practicing entities are "proliferating and morphing in ways that are extraordinary," DeFazio said during a press conference. "It's a solution whose time has come."

The two lawmakers introduced a version of the SHIELD Act last August, but that bill did not pass. The earlier version set up a loser-pays system only for software and hardware patents, but the new bill covers all U.S. industries. Non-practicing entities, sometimes called patent trolls, have expanded their patent lawsuits to many other industries in recent months, including retail users of technology, DeFazio said.

"Patent trolls add no economic benefit to our nation," Chaffetz said. "They are hampering the innovation that our country deserves."

The legislation targets non-practicing entities by exempting some patent holders from a loser-pays requirement. Exempted from paying the court costs if they lose are the original inventors, universities and their representatives, and companies that have made "substantial" investments in bringing the patented invention to market.

The bill allows defendants who win in a patent infringement lawsuit to petition the court to order the losing party pay their attorneys fees and other court costs.

Many tech firms have complained that it's too easy for non-practicing entities to file expensive lawsuits against them. Microsoft, Oracle and other tech vendors have voiced support for a loser-pays patent law, and the SHIELD Act won support from several tech trade groups, including the BSA, the Consumer Electronics Association, and TechAmerica.

The SHIELD Act would "offer some needed protections for tech companies increasingly hit with baseless lawsuits and would offer some disincentives to those trying for quick lucrative settlements," Ed Black, president and CEO of the Computer and Communications Industry Association, said in an email.

Grant Gross covers technology and telecom policy in the U.S. government for The IDG News Service. Follow Grant on Twitter at GrantGross. Grant's e-mail address is grant_gross@idg.com.

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