Warning to Patent Trolls: Supreme Court Could Endorse Fee-Shifting in Frivolous Patent Suits
In the morning of February 26, 2014, the Supreme Court heard arguments in two cases concerning who should pay attorney fees in frivolous patent cases. The Court will decide, under the attorney’s fees provision of 35 U.S.C. § 285, when a federal judge may order the plaintiff to pay for the defendant’s attorney’s fees as punishment for having brought a patent infringement lawsuit that is deemed frivolous by the court. The two cases have the potential to severely hinder the activities of patent holding companies and non-practicing entities (the so-called “patent trolls”). The current law states that one side in a patent case may be forced to pay the opposing side’s attorney’s fees only if its argument is “so out of bounds of proper and objective argument” that the court must deem it frivolous, and such decisions are rather infrequent.
Proponents of a new fee-shifting rule argue that the current standard for fee-shifting is too high and hence is a poor deterrent to patent trolls bringing frivolous infringement claims. Opponents, on the other hand, claim that such a rule would unduly harm small independent inventors and therefore stifle innovation.
The two cases before the Supreme Court are Octane Fitness, llc v. Icon Health & Fitness, Inc. and Highmark Inc. v. Allcare Health Management Systems, Inc.
Transparency in Assertion of Patents Act on Fast Track
In addition to the judiciary, patent trolls face another threat. Last December, the House had passed the Innovation Act by an overwhelming vote of 325 to 91. The bill was aimed at discouraging frivolous lawsuits by patent holders and was backed by major technology companies including Apple, Google, and IBM. Just three months later, there is now report that “[w]hile patent reform advocates wait for the Senate Judiciary Committee to move a comprehensive bill to crack down on patent trolls, another bill providing some limited relief is moving fast in the Commerce Committee.”
On February 27, Sen. Claire McCaskill, chairman of the consumer protection subcommittee, introduced the Transparency in Assertion of Patents Act to make vague demand letters claiming patent infringement more transparent. The bill would address threatening and deceptive demand letters from patent trolls by empowering the Federal Trade Commission (FTC) to require minimum disclosures in these letters and allowing the agency to specify for businesses exactly what constitutes a threatening or deceptive demand letter.
The bill was put on the committee’s schedule to take up on Wednesday, March 5. Just last week, the White House had “call[ed] on Congress ‘to finish the job’” on patent troll legislation. To the delight of major technology companies, it appears that the Senate is answering the call.
Samsung Inks Patent Cross-Licensing Deal with Cisco
Perhaps due to litigation fatigue from its courtroom battles with Apple, Samsung Electronics signed yet another patent cross-licensing agreement to safeguard against future infringement suits, this time with Cisco. It is the third such agreement Samsung has signed in the past month following similar packs with Google and Ericsson. The ten-year arrangement specifically provides each company access to the other’s existing patent portfolios and new patents filed during the lifespan of the agreement.
Such cross-licensing deals have become very popular lately, with Cisco having also concluded a similar agreement with Google less than a month ago. This trend is unsurprising, given that these deals provide technology companies with the freedom to operate their businesses without fear of patent infringement claims.