• US Congress’s Latest Bill on Restricting Patent Trolls
  • October 2, 2013
  • Law Firm: Lee Tsai Partners Attorneys-at-Law - Taipei Office
  • US Congress House of Representative in early 2013 has passed a legislative bill (HR845) called: Saving High Tech Innovators From Egregious Legal Disputes (SHIELD). As a general matter, this would severely suppress the so called “NPE” (Non Practicing Entity), also known as “patent trolls”, in alleging patent rights - should it become law - as it would surely raise up their litigation costs to do so. The main reason is, according to the bill, an NPE should pay for all of its defendant’s attorneys’ fees and litigation costs (which usually boil down to several millions US dollars) in the event the patents in suit are eventually invalidated.

    Based on this bill, an “NPE” shall mean a patent holder, not being the original inventor or assignee, who has not substantially contributed to the material development, or commercial use of the relevant products, of the patent in question, provided, however, that universities shall NOT constitute an NPE.

    The bill’s power lies in the fact that a future patent litigation defendant can move for court’s recognition of the plaintiff being a NPE, subjected to, however, the plaintiff’s right to rebuff within 90 days. In case the court recognizes the plaintiff to be an NPE, it will then be exposed to significant financial burdens, which in turn substantially raise its litigation costs, if its patent is invalidated.

    To a certain degree, this bill constitutes a follow-up on the America Invents Act (AIA) that has become law since 2011. This is because the AIA, which largely overhauls the then US patent law structure, has created a “Post Grant Review” system to allow patentability challenges by any interested persons within nine months of granting the patent. This opens up a channel to challenge low-quality patents (that eventually may go into an NPE’s trove) for those potential defendants before the fact by spending less money than they would otherwise have to by challenging them in courts.

    However, SHIELD does NOT seem to be able to become law very soon because serious controversies remain unresolved. One key element is the fact that patent right is a property right protected under the US Constitution. So that it could give rise to relentless debates over whether “equal protection” requirement is violated if the law restricts a group of people’s (NPE’s) right to enforce their property right to the advantage of another (non-NPE defendants in patent lawsuits).

    However, the developing trend is clear in view of the high-pitched noises made recently by the American enterprises hoping to strengthen up restrictions on NPEs. As such, it’s likely that both the courts and legislature would beef up their endeavors in the future. In the past few years, the courts have loosened up threshold for patent invalidation, added up requirements for injunctive reliefs, and restricted the number of defendants which an NPE can sue in one lawsuit - and all these measures serve as examples to show possible future developments - suggesting that additional restrictions are taking shape to exert more pressure on NPEs.