US congressmen take on patent trolls with SHIELD Act

US congressmen take on patent trolls with SHIELD Act

Summary: A bipartisan bill aims to bring in a 'loser pays' system for software and hardware patent lawsuits, to protect startups from companies that want to force settlements through the threat of high legal bills

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Two US congressmen have introduced a bill that would force so-called patent 'trolls' to pay the legal costs of the people they sue, if the suit is unsuccessful.

The Saving High-tech Innovators from Egregious Legal Disputes (SHIELD) Act was introduced on Wednesday by Democrat Peter DeFazio and Republican Jason Chaffetz. The congressmen said the move was intended to save tech start-ups jobs, which are often threatened by such lawsuits.

"Patent trolls don't create new technology and they don't create American jobs," DeFazio said in a statement. "They pad their pockets by buying patents on products they didn't create and then suing the innovators who did the hard work and created the product. These egregious lawsuits hurt American innovation and small technology startups, and they cost jobs. My legislation would force patent trolls to take financial responsibility for their frivolous lawsuits."

'Non-practising entities'

'Trolls' — more formally known as 'non-practising entities' or NPEs — usually operate by suing firms for allegedly infringing on the broad patents the NPEs have bought as legal weapons.

Patent cases are costly and the firm being sued can be liable for massive costs even if their defence is successful. Smaller firms in particular therefore tend to settle rather than fight the NPE's claim, as was the case with Lodsys and app developers.

Even large firms sometimes pay up. A good example there is Eolas, an NPE that has been surprisingly successful with patents that supposedly cover much of web technology.

"A single lawsuit, which may easily cost over $1 million if it goes to trial, can spell the end of a tech start-up and the jobs that it could have created," Chaffetz said. "This bill combats the problem of patent trolls by moving to a 'loser pays' system for software and hardware patent litigation."

As Ars Technica has pointed out, the SHIELD Act would not only be limited to NPEs. The wording of the bill targets any plaintiff "who did not have a reasonable likelihood of succeeding" in their patent lawsuit.

Software patents

The site also notes that this is the first piece of US legislation to define software patents. This is significant — as is the bill as a whole — because the US is both the epicentre of the tech industry and a country that allows software patents. Such patents, which often cover little more than ideas, are generally not granted in the EU, for example.

However, people in the EU use tech products developed in the US, and vice versa. Therefore, the actions of NPEs in the US can affect customers anywhere in the world if they use US-made products, and start-ups anywhere in the world can be targeted by US NPEs if they have customers in that country.

According to the Act, the term 'software patent' means: "(A) a patent that covers any process that could be implemented in a computer regardless of whether a computer is specifically mentioned in the patent; or (B) any computer system that is programmed to perform a process described in sub paragraph (A)."

Topics: Patents, Government US

David Meyer

About David Meyer

David Meyer is a freelance technology journalist. He fell into journalism when he realised his musical career wouldn't pay the bills. David's main focus is on communications, as well as internet technologies, regulation and mobile devices.

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38 comments
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  • Long over due

    They should have done SOMETHING about this years ago.
    BrentRBrian
  • Hardware patents.

    They should add the following provision to that bill with regard to hardware patent applications. "No working prototype, no patent".
    That would put a stop to the practice of some majors in this area of hosing the whole of mobile tech space with concept patents intended to do no more than create a gigantic legal minefield in order to restrict competition.
    FrederickLeeson
    • Working prototype, no patent

      The patent has to come first, otherwise the working prototype qualifies as "prior art" and makes the patent invalid.
      anon-coward
  • Not broad enough

    Why restrict this to patents? The trolls are flexible: if patents become too high-risk, they'll shift to copyrights. The whole SCO v IBM fiasco was a copyright suit.
    Robert Hahn
  • The bad news is...

    ...this would be the first act of Congress to explicitly recognize software patents. Better to tighten the standards for granting patents in the first place and make sure that the USPTO has enough money to properly vet applications.

    I'm suspicious of "loser pays" in most circumstances (but I think it should apply in criminal cases), but it may well be appropriate here.
    John L. Ries
  • UMMM... I'm almost speechless.

    Almost. Most patent trolls WIN their initial lawsuits in the lower courts. Not sure how making the loser pay additional fees is going to fix patent trolling this way. In fact... it almost sounds like it'll cause a huge wave of patent trolling?!?!

    Am I missing something here? Is this congress really this F(@(^$% stupid?!?! Hey what's next? Let's call it some cool name like "SHIELD" so that people feel like it's helping them. Kinda like the "Patriot Act". What knucklehead would vote against something called "Patriot", even if several passages read like there were written by right-wing leftovers from the USSR.

    SMHID. Congress. Not sure that just voting is ever gonna fix that mess. It's gonna take a political revolution. Change everything. Change how we vote, who gets voted in, how long they get to stay, where their money comes from, and who gets to talk to them.
    rock06r
    • Yes congress is that stupid, and so have the 100 before them.

      Congressclown, just smart enough to shut up about the bribes and dumb enough to do exactly as their employers tell them to do.
      Reality Bites
    • Not quite

      The problem the Act is trying to address is that of small companies getting threatened and paying up in a settlement, rather than going to court. They do this because, even if they win in court, they face a huge legal bill - therefore, making it 'loser pays' takes away this threat, and removes a huge part of the trolls' business model (i.e. they can't just make money through threats).
      David Meyer
      • Only lawyers would think that fixes anything for small business

        Do you really think that's going to fix anything? As a small businessman, what's the difference between knowing for sure that I'll have a legal bill approaching a hundred grand, and facing the possibility of having a legal bill over -two- hundred grand (because I'll pay if I lose)? Either one of those will cause the same result we have now: I cave in rather than fight it in court.

        The problem it solves it the one of -big- companies facing these suits. Trolls frequently sue big companies just to shake the coconut tree and see if anything falls out. Many big companies will send a token bag of money just to make the troll go away. Loser pays would make the big companies more likely to assess their odds and actually fight some of the claims in court.
        Robert Hahn
      • Re: Not quite

        rocko6r has this spot on. This act does not address the problem it's trying to address. It is handwaving at best and likely actually harmful. There are already mechanisms to recovery attorney fees for the filing of frivolous lawsuits, and (as it's reported here) it is not clear that this act would raise the bar at all. What's the definition of "reasonable likelihood of success"?

        And if the bar for filing is raised so that it is easier to recover attorney fees, defendants may be more inclined to stay in litigation longer and through trial, thereby still clogging the courts.

        But NPE's have very little interest in going to trial to even determine whether this bar will be met. They want a license and will almost always set the cost of the license after negotiations at some amount far less than the projected cost of litigation fees. For most companies, they will eventually pay these fees and move on.

        Lastly, NPEs do not file lawsuits where there is not a reasonable chance of success. Their attorneys typically get paid on contingency fee basis so they will not file a suit unless they think they have a chance of getting get paid eventually. Even so-called nuisance suits must be filed in good faith with a cognizable legal claim.

        All this legislation does is waste Congress's time and will serve to bring one more bump of uncertainty in patent law.
        gwartnet
    • If there were any leftovers from the USSR, they would be left-wing

      leftovers, since, the Soviet Union was a left-wing type of government, in fact, a Marxist type of government, similar to what Obama wants the U.S. to become.
      adornoe
      • Sort of

        It was theorized in the 1980s that few people east of the Elbe still believed in Marxism and that seems to have been born out by subsequent events. Soviet era holdovers ended up retaining power in most former Soviet republics, but the Marxist economic program was jettisoned in all of them of which I'm aware. Authoritarianism without socialism appears to have great appeal throughout the former Soviet bloc, just as it does in still formally Communist China and Vietnam.

        If the Communist Party is the only game in town, people interested in advancing themselves will tend to apply, whether they actually believe in the ideology or not, which is why one party states quickly start being more about power than principle; just like political machines here in the West.
        John L. Ries
        • Not "sort of". It's, "in fact", since, the USSR was a leftist type of

          government, and Marxist at that. What happened after the dissolution of the Soviet Union doesn't change the fact that, there are still many, in fact, far too many people in Russia who long for the "good old days" of Soviet style communism. Putin himself would like to reconstitute the old Soviet Union, but, he's being blocked by most of the region and the U.S. Putin never really stopped being a KGB agent, and his legacy will have been a failure if Russia is not made completely communist and totalitarian again. He doesn't come out and declare his desires, but, his actions indicate that, he loves power, and that, he'd like to be the leader of another Soviet Union.
          adornoe
          • Obama a soviet leader? Insanity

            Anyone who is dumb enough to classify Obama in the same mold as Stalin and other power hungry despots is insulting all the people who suffered and died in Stalinist regimes.

            Go read some history. You are showing your lack of education by this sort of shrill posturing. Just one tiny almost immeasurably small step away from the classic "just like Adolf" claims of tinfoil hatters.
            Indulis
          • Akkk! Sorry for the comment!

            My apologies, I misread the comments! Now I feel like a complete twit! (and no delete post on ZDnet that I can find....
            Indulis
  • Nothing will change the Patent Parasites love it this way.

    Parasite Lawyers love it, they do nothing, make nothing, create nothing, are nothing and will always be nothing but they steal 24/7. Time to excuse the lawyer parasites from the gene pool.
    Reality Bites
  • This has Apple written all over it

    Apple = the worst patent trolls ever.
    gtatransam@...
    • Worst Patent Trolls...

      Perhaps Apple is, but there's a long list and in software in particular, these patents can be issued for just thinking of something, not necessarily doing the work to develop and apply the idea.

      A good example that was finally overturned in court was ClearChannel patenting the idea of recording live concerts, essentially with off the shelf hardware and software that most of us in Recording were already aware, and putting them together like most of us did, and you have a duplicate recording available for sale within minutes of the end of a concert.

      Totally known to anyone with live recording knowledge and experience, but ClearChannel only wanted to make money off of people doing what they normally do. It really wasn't an applicable patent because there was no development on the part of the patent holder, other than writing up a piece of paper to vaguely describe the process without even coming up with a wiring diagram or interface standard for the system because all of that was already covered by AES standards. Yet they got a patent.

      So having a functional product of at least some original thought on implementation should be an absolute requirement. It can't be taking a TV and wiring it to the stereo and trying to patent it.
      RWNorman
  • Couldn't agree more, but

    This is long overdue, but as someone has already said the best thing to do here is to actually tighten the process for software patents or maybe in some cases get rid of them altogether.
    striker67
  • This actually legitimizes software patents

    Which is a real problem. Just can them completely. Software is protected by copyright (which as we have seen is hard enough to deal with in court). Patenting something which is an expression of mathematics is pointless, stifling and expensive. It is a major drag on innovation.

    Software Patents Must Stop.
    dimonic