Have you Been Targeted by a Patent Troll? New Proposed Legislation to Deter Weak NPE Lawsuits

On February 27, 2013, new legislation was introduced that proposes shifting attorneys fees to non-practicing entities (NPEs or trolls) if they lose patent infringement cases. The proposed legislation is referred to as the SHIELD Act of 2013, and is a welcomed improvement to targets of NPE litigation.According to the act, a troll would be considered anyone who is not:

  1. An original inventor, a joint inventor, or an original assignee of the patents;
  2. A party that can provide documentation of “substantial investment” made by the party in the exploitation of the patent through production or sale of an item covered by the patent; or
  3. An institution of higher education, or technology transfer organization related to an institution of higher education.

The intent behind the act is to disincentivize what President Obama has characterized as weak patent suits by NPEs that attempt to “hijack somebody else’s idea [to] see if they can extort some money out of them.” This revised version of the bill tightens up earlier versions, where the definition of patent trolls was too vague and the legal standard for the fee shifting provision to kick-in was limited to patents covering computer software and hardware technology.

A defendant may move for judgment to classify the plaintiff as a troll at any time after asserting invalidity or noninfringement. The NPE has 90 days after the date of the motion to prove that it meets at least one of the conditions above and, therefore, should not be subject to the fee shifting provisions of the SHIELD Act. Within 120 days after a party moves for judgment, the court shall make a determination on the issue. If the court grants the motion, the plaintiff will be required to post a bond in an amount sufficient to cover the full costs and anticipated reasonable attorneys fees of the defendant.

A question remains as to what will constitute sufficient evidence from a NPE to meet the “substantial investment” requirement to defeat a motion for judgment. However, the other two requirements are relatively straightforward. The full bill can be reviewed here.

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