New SHIELD Bill Introduced in House

Last year, several members of Congress sought to limit patent infringement suits concerning computer hardware and software.  If the suit did not have a “reasonable likelihood of succeeding,” the losing party would be required to pay all of the legal costs of the lawsuit, including attorneys’ fees.  This was sought to be a deterrent to frivolous litigation.

Now, Reps. Jason Chaffetz (R-UT) and Peter DeFazio (D-OR) are at it again.  They have introduced H.R. 845, Saving High Tech Innovators from Egregious Legal Disputes (SHIELD).  Now, instead of targeting the computer hardware and software industries, they have set their sights on non-practicing entities (NPE) or patent trolls.

The new bill discards the “reasonable likelihood of succeeding” standard (presumably because it was too vague) in favor of simply requiring any losing NPE to pay the costs and fees associated with the litigation.  Put simply, if you don’t practice the patent and bring an infringement suit, if you lose, you pay.

The bill defines an NPE in the negative.  A party is not an NPE if (1) it is the original inventor or co-inventor of the patent, (2) it is the original assignee of the patent, (3) it is a university or technology transfer organization associated with a university, or (4) “[s]uch party can provide documentation to the court of substantial investment made by such party in the exploitation of the patent through production or sale of an item covered by the patent.”

The defendant in such litigation would simply file a motion with the court that the patent owner is an NPE.  The patent owner would then have 90 days to prove that it meets one of the four criteria to not be deemed an NPE.  If the court determines that the patent owner is an NPE, the patent owner would be required to post a bond to cover the entire costs of the litigation.  This amount would be awarded to the defendant in the event it prevails.

Analysis

The bill is an improvement over the previous one in that it doesn’t target a specific technology area.  It is still, however, completely unnecessary.  The power to award attorneys’ fees to the prevailing party already exists under § 285.  Perhaps this section should be applied with more frequency than it currently is.  This would be a simpler fix than that proposed by the SHIELD bill.

There are definitely entities that seek to exploit the fact that patent litigation is very expensive by filing lawsuits that lack substantial factual or legal basis.  These lawsuits are a drain on the target’s resources.  A patent, however, is a property right.  As such, it may be bought, sold, transferred, or otherwise alienated as its owner sees fit.  If an inventor cannot transfer or sell its patent to an NPE, that patent now has less value as the market for its exploitation is smaller.  In this regard, the SHIELD bill seems misguided.

Weeding out frivolous lawsuits, not just in patent law but in all areas of the law, is an admirable idea.  The SHIELD bill, however, does not appear to be the answer.

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4 Responses to “New SHIELD Bill Introduced in House”

  1. John Doe Says:

    A party is not an NPE if said party is investing in producing a product incorporating the patent, This bill would make patents less valuable only to trolls, and NOT to any company actually trying to build a product based on the patent.

  2. industrial biotechnology Says:

    industrial biotechnology…

    [...]New SHIELD Bill Introduced in House | INVENTIVE STEP[...]…

  3. Joseph Says:

    While I understand why some entities may feel that they are burdened by the “patent troll”; it has been my experience that the small inventor has little means for enforcing his or her patent rights other than to sell the patent to a NPE. This is because, even when a small inventor approaches an infringing entity with a cease and desist letter, the infringing entity, understanding the limitations of the resources of the small inventor, usually ignores the small inventor. Without the millions of dollars necessary to bring and maintain suit, the small inventor usually finds that the patent he or she has prosecuted at great expense, is essentially worthless in his or her own hands. The next step is then to find patent litigation attorneys that will take the case on contingency or to sell the patent to an NPE.

    If the patent is to be thought of as a weapon for enforcing a period of exclusivity, it should be understood that this weapon is not a short sword but a 500 pound war hammer. While anyone may obtain a patent, few individuals have the power to wield it.

    Unless and until Congress devises an effective means for small inventors to enforce patent rights against large infringing entities, preventing the small inventor from handing off his or her patent weapon to a strong NPE is to block an important means by which small inventors may obtain redress for patent infringement.

  4. Flurry of Bills to Reduce Litigation by Patent Trolls | INVENTIVE STEP Says:

    […] As noted earlier, the SHIELD Act in the House in February (and in the last Congress) to require losing NPEs to pay the costs of litigation.  A few weeks ago, a new business method review bill was introduced in the Senate. […]

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