The economic perils of patent trolling are well known by now in the U.S. Of course, they do not stop those considered patent trolls — usually bigger companies — from relentlessly pursuing other, smaller companies. Smaller businesses often have smaller wallets, and litigation fees are notoriously expensive. Thus, rather than lose money that could be spent on research or making products better in court, companies forfeit and cede to paying the patent troll to license its intellectual property. Such a system is anti-innovation, and allows patent trolls to — sometimes wrongfully — maintain dominance in markets where they do not contribute other than to function as owners of the intellectual property.

The U.S. government has taken up the issue over the last year of trying to amend the patent system to make it more equitable to companies against which lawsuits are brought. One of the core arguments against patent trolls is the cost it brings to defendants in terms of attorney fees. Who should pay whose fees is a much-belabored point in patent legislation, but the Supreme Court is hearing two cases in order to get closer to a determining ruling on assessing attorneys’ fees in patent legislation. The SCOTUS blog names the two cases the Supreme Court is hearing on February 26: “The first case the Justices will hear (Octane Fitness v. Icon Health and Fitness) considers the standard for awarding the fees in the first instance.  The second case (Highmark Inc. v. Allcare Health Management System) considers the standard of review the Federal Circuit should use to review district court decisions under the statute.”

There are rules in place currently to enable one party in a legal dispute able to claim that its legal fees should be compensated by the opposite side, but they are well known to be quesitonable in practice. The law requires the side seeking recompense to prove that the other side’s patent claim is objectively baseless — and have it approved by a judge. The process by which to do this is cumbersome and additionally expensive — deterring most companies that have become victims of patent trolls to cut their losses and run rather than incur further fees.

These are not two unique cases that the Supreme Court is hearing this year on patent litigation. The Court is scheduled to hear several. InsideCounsel’s David J. Kappos and Christopher Davis reported on the Supreme Court’s recent decision relating to IP in the Medtronic case: “In Medtronic, the Supreme Court put an end to procedural shifting of the evidentiary burden in certain patent cases.” It is proving to be a busy year for patent law in the U.S.


Further reading:

Mitigating smartphone patent litigation

Attorneys general, general counsel hold frank discussion on patent trolls

What credit unions need to know about patent trolls