Could This Law Really Defeat The Patent Trolls?

The SHIELD Act will attempt to stymie the activities of patent trolls, which Rep. Peter DeFazio says amounts to "blackmail."

Today, a pair of lawmakers introduced a bill designed to stymie the bloodthirsty vampires otherwise known as patent trolls. In an interview with Ars Technica’s Joe Mullin this morning, Democratic Representative Peter DeFazio talks about how a Democratic congressman from Oregon and his co-sponsor, Texas Republican Jason E. Chaffetz, got involved in the patent troll problem:

I was visiting a local company--which needs to remain unnamed, because of the fear of attracting more attention from patent trolls. We have quite a few software developers in Eugene, as well as up in Portland. This was a small, growing company, about 80 employees. They were on the verge of launching a new product. And typically, that’s when patent trolls strike.

In talking to the CEO of this company, I found out that basically, [the threat] came at a point where they needed to add employees. But because of the pending litigation, they were afraid to add anyone, because of the added cost. That brought it home. I’ve got a district that’s desperate for jobs. And when you’re talking to someone who’s got an established and growing small business, and can’t add jobs…

DeFazio’s bill is called the SHIELD Act, and it’s designed to force the loser in a litigation battle to pay the legal fees--which regularly climb into the millions. Why will this work? Well, patent trolls extort money from small companies by demanding a licensing fee, lest they initiate an expensive legal battle. Most startups hedge their bets by paying the fee, rather than risking a drawn-out court case. SHIELD--at least in theory--will make it less risky for a small company to stand up for itself in court, and hopefully will dissuade trolls from pursuing claims in the first place. How is SHIELD different from the similar bill that floundered in 2012? DeFazio explains:

Last year’s bill was a procedural standard, and a little more subject to judicial interpretation. Now, it’s a more straightforward pleading. It will be like an initial motion or pleading in the case, to make it clear to the troll that it’s going to potentially cost them a lot of money. We’ve got the three-part test, which is for the people who do R&D, people who manufacture--and the third part is the toughest part, to have some allowance for people who hold patents beyond what they’ve developed themselves, but are not trolls. That’s the trickiest standard. This is tricky. I’m not going to say this is easy to do.

While some note that patent trolls might not be a hot topic in Congress right now, DeFazio makes a smart move by framing the problem in terms of job creation. From his perspective, patent trolls are hindering innovation in America--an issue that reps from districts far afield of Silicon Valley have a stake in, too. Check out the full interview on Ars Technica.

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2 Comments

  • Chris McLaughlin

    This is an important, but overlooked issue that needs to be addressed.  One of the companies we invested in, was slapped with this before they even made the workings of their product public.  It's great to see support from both sides of the aisle on this as well as the great work from organizations such as the EFF. 

  • Jon Garcia

    This is a good start and maybe there's more to the legal process than I'm aware of, but this still a scary prospect for small companies. Patent trolls have a lot of money from their years of license fee collecting. I've read that even major companies don't take the current legal risk either. Only occasionally and more recently do we have a few companies like New Egg spending the millions of dollars and taking the years of legal battles to fight patent trolls.

    My understanding is that the patent office itself is what really needs the overhaul. Regardless, I'm happy to see bipartisan efforts to making headway on this issue as it relates to job creation.