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SHIELD Aims to Secure World from Bogus Patent Suits

To say July was a bad month for the non-practicing entities of the patent world is a bit of an understatement. First, as we previously blogged about, Congress conducted a series of oversight hearings examining in part how non-practicing entities (the polite term for patent trolls) are increasingly participating in International Trade Commission investigations in lieu of traditional patent litigation. Specifically, NPEs appear to be availing themselves of the ITC in increasing numbers to circumvent Supreme Court and legislative limitations on their ability to assert multi-defendant actions and obtain injunctive relief.

Saving High-tech Innovators from Egregious Legal Disputes

SHIELD

Against that backdrop, in late July two members of Congress introduced bipartisan legislation that would require patent trolls to “take financial responsibility for [filing] frivolous lawsuits.” Perhaps capitalizing on recent pop-culture trends, the aptly named SHIELD (Saving High-tech Innovators from Egregious Legal Disputes) specifically would impose fee-shifting on certain NPEs that file unsuccessful litigation against established corporations. Unfortunately — at least in terms of drawing public attention to the perceived dangers that NPEs present — the proposed litigation would not employ Samuel L Jackson and a team of superheroes to carry out SHIELD’s mission.

But that is what legislative rewrites are for. Until then, it is important to note that Rep. Peter DeFazio (D-Oregon) and Rep. Jason Chaffetz (R-Utah) originally drafted the legislation with an eye toward the impact NPEs were having on the small technology companies in DeFazio’s district. According to DeFazio, the litigation is intended to protect small technology companies that may not be able to afford the legal fees in patent disputes and instead are forced to “buy their way out” of lawsuits.

While it definitely will provide protection to DeFazio’s small technology-company constituents, SHIELD —if passed— also could have a particularly chilling effect on NPE lawsuits against large corporations. While many of the large corporations can afford, and presumably will incur, significant legal fees defending against NPE lawsuits, such lawsuits also present larger financial risks to NPEs that may be forced to pay the costs of such litigations under the provisions of SHIELD.

Both the form and timing of the SHIELD bill present some limitations on the likelihood of it being passed in the near future. For one, the bill applies only to software and computer patents (presumably because those represent the companies in DeFazio’s district most adversely affected by NPEs). One can envision a scenario in which the scope and reach of SHIELD are debated throughout the legislative process, delaying its passage. And even though DeFazio is unaware of major objections to the bill, it can be difficult to pass virtually any legislation in an election year.

Congress is heading in the right direction, but for companies that need protection from bogus patent suits, time is of the essence. As the NPEs continue to prey on their victims, a hopeful corporate world looks skyward, hoping soon to see Rep. DeFazio swoop in with his SHIELD to save the day.