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Is Fee Shifting The Solution To Abusive Patent Litigation Practices?

Mark MalekBy: Mark Malek

I read an article on Dennis Crouch’s Patently-O website about possible solutions to abusive patent litigation.  In his article, Professor Crouch referenced a  NY Times article.  In response to the NY Times article, Professor Crouch suggests that fee shifting is not the solution to abusive patent litigation practices. In fact, Professor Crouch suggests that such fee shifting may be beneficial to plaintiffs as it substantially increases the litigation risk.

Personally, I believe that although fee shifting is not the solution to abusive patent litigation practices such as, for example, patent trolls (yes-I know it is a derogatory term and the more politically correct term would be non-practicing entities, but I don’t care), but it could be a good start.  Patent litigation is, inherently, risky and the stakes are generally very high.  Attorneys’ fees on cases like this are generally astronomical.  That is the main factor that generally dissuades small businesses and others from fighting off a patent litigation suit that may not necessarily have much merit. 

Fee Shifting in patent litigationBy the time that the parties may be deep into patent litigation, there could be hundreds of thousands of dollars already spent on attorneys’ fees.  For the defendant, there are not people willing to take such cases on a contingent fee, unless there is one heck of a counterclaim.  Therefore, this is a monthly out of pocket cost that most defendants have not even thought of when doing their budgeting.  The typical non-practicing entity, however, will likely offer a certain sum for licensing that allows the alleged infringer to continue their business and discontinue the monthly onslaught of litigation.

While fee shifting may be helpful in solving some of the abusive patent litigation practices that are out there now, this can only be useful if a patent litigation cases are taken the distance. In other words, fee shifting principle only applies if the defendant decides to see the case through to its conclusion and only if the defendant actually wins the case.  The new bill that is discussed in the NY Times article also allows the judge to still not award the fees if the judge finds that the case is “reasonably justified.”

What does “reasonably justified” mean?  Great question.  It means whatever the judge on that particular day and in that particular district thinks it means.  In some districts, it is known that judges will not award attorneys’ fees if it is not necessarily required.  You can bet that those judges will likely not award attorneys’ fees if there is a way that they can get around it.

I agree that the fee shifting provision doesn’t hurt, but at the end of the day, it seems as though there needs to be more to the solution then just providing judges with the ability to award fees in a patent litigation case.  In fact, judges already have that authority to do so.  Therefore, I suggest that if fee shifting was the solution to frivolous patent litigation, it would have already happened.

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