Congressmen Peter DeFazio (D-Oregon) and Jason Chaffetz (R-Utah) have introduced the SHIELD Act (Saving High-Tech Innovators from Egregious Legal Disputes, H.R. 6245) to combat the perceived threat of non-practicing entities (NPEs) to American innovation.

Specifically, the Act would allow a court to award attorneys’ fees to a prevailing party in cases involving computer patents without a showing that the losing party brought the case in subjective bad faith.

Currently, section 285 of the Patent statute gives a court discretion to award reasonable attorney fees to the prevailing party in an “exceptional” case. 35 U.S.C. § 285. As the Federal Circuit highlighted earlier this month, the current statute requires a prevailing party to establish that a case is “exceptional” by clear and convincing evidence. See Highmark, Inc. v. Allcare Health Management Systems, Inc., Case. No. 2011-1219 (Aug. 7. 2009).

There is both a subjective and objective component to this showing:

It is established law under section 285 that absent misconduct in the course of the litigation or in securing the patent, sanctions may be imposed against the patentee only if two separate criteria are satisfied: (1) the litigation is brought in subjective bad faith, and (2) the litigation is objectively baseless.

Id. The new legislation would amend § 285 to allow a court to award “full costs,” including reasonable attorneys fees, to the prevailing party in a dispute if the court determines the losing party alleged infringement of a computer hardware or software patent without “a reasonable likelihood of succeeding.”

In recent years, lawsuits by NPEs have captured the attention of Congress and the public. A June 2012 study estimated that NPEs cost defendants $29 billion in 2011 alone.

For more, please see:

Wall Street Journal Law Blog, “Bill Would Require Patent Trolls to Pay Legal Costs”, “Bill would force patent trolls to pay defendants’ legal bills”

Corporate Counsel, “Congress Takes Aim at ‘Patent Trolls’ With SHIELD Act”

Boston University School of Law: “The Direct Costs from NPE Disputes”

This article was prepared by Andy Liddell ( / 512 536 3043) from Fulbright’s Intellectual Property Practice and Saul Perloff ( / 210 270 7166) from Fulbright’s False Advertising Practice.