back to article SHIELD Act proposed to make patent trolls pay

Shell companies that threaten legal action over patent infringement without actually producing anything themselves could be driven out of business if the newly proposed and risibly backronymed Saving High-tech Innovators from Egregious Legal Disputes (SHIELD) Act becomes law. In an all-too-rare display of US congressional …

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How on earth is it going to help, making shell companies liable for costs if they lose? Limited liability, folks!

They'll still try shakedowns, they'll still (occasionally) go as far as the courtroom steps - or even into the courtroom.

Lose? Want to give up? Shaken down enough?

No problem. They'll just let the shell company go through bankruptcy and start again with another shell.

This will fix *nothing*.

Reg. has it right; only cure is rollback Lehman and everything he did. Congress giveth patents, congress can take them away.

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I gotta agree with you. As I started reading I was thinking, 'oh, this is a good start.' Followed by 'oh, uh huh, ok, well then it looks like more "we have to do something" legislation.'

I agree that the only winning play is to hit the patent rewind button but if not perhaps they could say something to the effect of "infringement accuser isn't liable for both sides' legal fees but has to transfer the IP in question to the accused should they lose." That way only the owner of the IP can sue or the owner would have to agree to hand it over prior to the suit. It's the only bond that would really work.

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Not to mention, these are lawyers, they will find a way round anything. So their 'shell' company starts making things, or licensing out the patents to someone else who makes it and they claim its made under contract.

I agree with the principal that innovation should be protected (by IP law) but also that the whole patent troll thing is way over the top and needs to stop, but this seems like a token gesture that won't have the desired effect. So pretty much politics as normal then.

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Anonymous Coward

Trivial, watson, trivial

In cases like this it is a standard practice for the court to ask to post a bond. You cannot sue someone if by default you are liable for the fees and are already known not to be able to pay them. Hiding your true assets and pretending you can pay while you cannot is actually even worse as this gets you under a whole raft of statutes for fraud (most of them criminal).

So, if that practice is kept and a troll tries to pester you the default reaction becomes an immediate "sue me".

End result - this will once again feed the lawyers - just the "bar" lawyers and courts instead of in-house patent lawyers.

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Re: Trivial, watson, trivial

Still slightly better than the US situation as it is...

Now I'd like to see them extend the principle to ALL civil lawsuits!

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FAIL

No problem for the trolls

They'll just sue their victims in Texas. Then they'll never lose!

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FAIL

Still a fail...

Can't see how this is suppose to work short of making the troll stump up a bond to cover potential costs before they can commence

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Re: Still a fail...

It actually does require them to stump up a bond.

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Re: Still a fail...

"It actually does require them to stump up a bond."

Where does it say that? All I read was it required them to pay the costs if they lose.

If they lose, they go bankrupt and the $2 company falls over leaving the winner to pay the costs

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Just remember...

Most members of congress are lawyers, and the trial lawyers association is a VERY powerful lobby.

Need to have a "put up a bond" provision to cover fees!

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Re: Just remember...

The problem then is who decides if the "troll" rule applies?

I invent some new computer gizmo, I patent it and show it to IBM/Samsung/Apple

They copy it and I sue them.

They claim that since I am not making a computer/phone/tablet then I am an NPE and to sue them have to put up a bond to cover their costs.

They claim that they are using 1000 company lawyers at $1000/hour so if the case will take a year - I have to put up $2.5Bn bond, I can't and so they get a default judegment against me.

Remember just like how Patriot Act and RIPA were only going to be used against terrorists - it will be upto the big corps to decide who is a troll

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Re: Just remember...

"I invent some new computer gizmo, I patent it and show it to IBM/Samsung/Apple"

You start producing the item and then sue and you're not a NPE anymore

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Re: Just remember...

So if the invention is an improvement to part of a CPU all I have to do is design the rest of the CPU, build a $5Bn fab, write an OS and sell the new chip and that proves I'm no longer a troll?

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Re: Just remember...

"You start producing the item and then sue and you're not a NPE anymore"

Ha ha ha ha ha. The cost of even just developing an excellent idea can cost a fortune, especially the part where you get it from a working model to the finished product. You then need to set up manufacturing facilities & pay for those, pay for materials, then publicity/selling costs etc. The only practical way a smaller inventor (e.g. one who isn't working for a multibillion pound company) can get their work into production is to license it to a manufacturer, or a big company who has the finance to get it from prototype to customer.

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Re: Just remember...

"You start producing the item and then sue and you're not a NPE anymore"

Shows how much you know!

Let's say I came up with a fairly simple, but non-obvious and innovative, enhancement for, say, a car engine. It is not something which can easily be retrofitted. I have developed the idea and patented it, but I don't have the money to produce the new engine myself.

I go to a few car companies with this enhancement idea. Some are interested, but they don't license the idea, they just steal and use it.

I am a non-producing entity, and have no way of producing it. Should I have to post the billions in a bond just to be able to sue them for stealing the idea?

The obvious way around this is to exclude the original patent applicant, but what if I had taken my invention and rolled it into a company?

The problem is making sure the legislation doesn't remove rights from those it is intended to protect (i.e. innovators).

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Re: Just remember...

"Most members of congress are lawyers, and the trial lawyers association is a VERY powerful lobby."

Whomever wins or loses, the lawyers always get paid anyway. A bond means the winner get his money back instead of the loser going bust instead of paying up

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Re: Just remember...

"I am a non-producing entity, and have no way of producing it. Should I have to post the billions in a bond just to be able to sue them for stealing the idea?"

It's risk and reward. You could spend $100K to produce 1/2 a dozen motors and sell them and then sue or post a billion dollars and sue or weep quietly into your beer.

What posting a bond does is stop the $2 company with the patent on rounded corners suing you, costing you hundreds of thousands of dollars and folding up when they lose leaving you bankrupt even though you won.

As for your car example, I invented an improvement for engines, got sued by another company, won and was still left with a massive debt despite winning. I've experienced this crap first hand.

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Anonymous Coward

NPE haven't lost anything, so why damages?

I don't see how non-practicing entities can claim to have lost anything if someone uses 'their' patent? ie it's reasonable to be compensated for losses sustained due to infringement, but if they aren't selling product then they haven't lost anything so surely the damages to a NPE should be precisely zero? Pity it doesn't work like that.

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FAIL

Re: NPE haven't lost anything, so why damages?

So ARM gets nothing because it doesn't produce anything?

Or patents give no protection until you've made your first sale?

The trolls will just get another shell company to er, shell out an amount for a license and voila! they are no longer NPEs.

They need to fix the problem (bad patents being issued) not apply band-aids to the wounds.

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Re: NPE haven't lost anything, so why damages?

> So ARM gets nothing because it doesn't produce anything?

How about if the "company doesn't produce anything" clause only comes into effect if ownership of the patent is transferred from the original holder?

* Invent a widget yourself; sue XYZ corp for patent infringement: you are not a troll.

* Invent a widget yourself; sell the patent to XYZ corp, who produce the widgets: XYZ corp is not a troll.

* Invent a widget yourself; sell the patent to WXY corp, who don't make widgets: WXY is a troll if they sue.

* Invent a widget for XYZ corp: XYZ is not a troll.

* Invent a widget for XYZ corp; patent gets sold to WXY corp, who make widgets: WXY is not a troll.

* Invent a widget for XYZ corp; patent gets sold to WXY corp, who don't make widgets: WXY is a troll if they sue.

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FAIL

Re: NPE haven't lost anything, so why damages?

Why on earth should you have to actually build something to stake claim for your idea???

Many others have commented on the fact that a small inventor can come up with a great idea and not have the resources or means to productize it.

It should be perfectly fine for a company to invest in ideas which it believes are worth something (whether we agree is not the issue here). Large corporations do this all the time with patents they don't use themselves but want to keep 'just in case'. Companies also invest a lot in ideas for projects that are then shelved. Are you saying these efforts and patents should then be given away free to everyone else?

This issue here is not really trolls (though we would love to blame them), but the fact that the patent issuing system itself is fundamentally broken.

This proposal is like trying to stop road accidents by saying cars must drive on the sidewalks (i.e. completely stupid in every respect)

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Anonymous Coward

Risibly backronymed?

Was I the only one to read Saving HIgh-Tech...?

What is it with coming up with a crap name that describes the opposite of the act, then devising an even worse backronym for it? It's like the both risibly-backronymed and simply risible Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act.

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Re: Risibly backronymed?

Saving

Highly

Innovative

Entities from

Litigious

Denial of Service.

Much better backroynm if you ask me. And really fairly accurate in my eyes. A lot of companies are basically using the courts as a DOS attack.

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Any alternatives?

Like others I am skeptical about this act. That said can anyone point to any law that are actually in use by a government that have no backfired? Figured this is a good time to learn something new.

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How about SHAFT

"Save Hightechers Against Frackin' Trolls"?

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Re: How about SHAFT

Then companies might feel better about being shafted...

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Anonymous Coward

Patent trolls should be put to the proverbial sword, however...

To focus on a specific quote:

"There is not a successful software company that I'm aware of that doesn't have to spend an exuberant amount of money defending itself against frivolous lawsuits..."

There's part of the patent problem right there. Specifically, software patents are a monstrously bad idea. They always were and they always will be. A simple solution to a major part of the patent problem is to scrap software patents altogether. (But that won't happen in the US for obvious reasons).

As for the rest of the wholly broken and somewhat deluded US patent system, well, it serves as a good model to illustrate somewhat authoritatively how not to approach patents in general.

Think legislation like this will stop the madness? Think again.

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exuberant at recieving a lawyers bill

"There is not a successful software company that I'm aware of that doesn't have to spend an exuberant amount of money defending itself against frivolous lawsuits," he said.

To the best of my knowledge no one in history has ever been exuberant about about paying a lawyer.

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Re: exuberant at recieving a lawyers bill

I think it's the lawyer that is exuberant on receiving the money

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Re: exuberant at recieving a lawyers bill

"... an exuberant amount of money ..."

It's the money that's exuberant. Money loves to be spent.

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Anonymous Coward

Re: an exuberant amount of money

Yeah, I thought that was an amusing typo or thinko too. I imagine the word they were looking for was 'exorbitant'.

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Headmaster

Re: an exuberant amount of money

"Yeah, I thought that was an amusing typo or thinko too. I imagine the word they were looking for was 'exorbitant'."

or 'extortionate'.

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Anonymous Coward

Protectionism as usual.

So, the US "patent" system: Anyone can "patent" any old shit, then a US court and US jury shall determine which are the good patents which benefit (their) "high tech innovators". Those (nasty foreign) patent holding losers will then be "fined". Apple Inc. will now be engaging every lawyer and shyster in the country, complete with a very liberal expense allowance, whenever some evil foreign company dares to compete with their walled garden. Produce something with curved corners?.. that'll be $100BEEEELION plus expenses.

Just more blatant protectionism from the Yanks. Nothing to see here.

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Angel

Unrelated, I'm sure...

To the sudden trend of small-scale patent trolls suing large ones.

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A few points

1: Here's another idea. The first raft of 'we are suing you' cases for any given patent have to go through and be proven valid before ANY further proceedings. Sick and tired of seeing cases handled and rewards given out on patents which are then invalidated a few weeks later.

2: Additionally if a patent is proven invalid, that invalidity should roll backwards. Anyone the company contacted demanding money for license fees within a certain timeframe should have their money returned as the patent they were paying for didn't exist. It was fraudulent. This should only span for a year or two backwards.

3: Actually have the patents reviewed properly, the old way. What happened to the good old days where you had to show something working before you patented it?

4: I like the idea of only being able to sue if you produce something based on the patent.

5: Most important one (to me) no selling of patents. Patents are designed to protect the INVENTOR not the company who bought them.

A patent (/ˈpætənt/ or /ˈpeɪtənt/) is a form of intellectual property. It consists of a set of exclusive rights granted by a sovereign state to an inventor or their assignee for a limited period of time,

So stop letting them sell patents between each other. If a company fails they shouldn't be able to sell their IP portfolio, they should just fade into nothingness and have their patents made open, or revoked.

6: I hope that these people get taken to court by Marvel. They're the ones with the rights to SHIELD.

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Unhappy

Re: A few points

> 5: Most important one (to me) no selling of patents. Patents are designed to protect the INVENTOR not the company who bought them.

The problem with that is it stops small time inventors being able to earn a living from real inventions too. Just because you like inventing things, doesn't mean you would be the right person to take it forward as a product.

Sadly this doesn't seem to be an easy area of law to fix. But oh boy does it need fixing.

I like your idea of the patentee having to first prove the validity of the patent.

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Re: A few points

"The problem with that is it stops small time inventors being able to earn a living from real inventions too. Just because you like inventing things, doesn't mean you would be the right person to take it forward as a product."

I thought about this too.

For me, there would be 1 simple way of solving this problem; all patents must be held by an individual. No companies may own a patent: They may license it, but not own it.

There would be a host of problems stemming from this, too, ranging from transfer of the license through to what happens when it is the companies effort (i.e. you are employed and gain a patent on something you do at work), but none of these are insurmountable.

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Re: A few points

The problem with that is it stops small time inventors being able to earn a living from real inventions too. Just because you like inventing things, doesn't mean you would be the right person to take it forward as a product.

And if you do want to turn it into a product, the transferability of that intellectual property is a major asset - probably your largest asset - and thus critical for getting funding. Preventing the sale of patents would harm small inventors tremendously.

And in other news, Reg commentators fail to propose a viable solution to a problem. Shocking!

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Anonymous Coward

Not sure how you legally define a "Troll"....

Technicaly / legally, what is the difference between ARM, MPEG-LA, Google* and Troll Inc.

None of them actually make anything.

ARM design hardware

MPEG-LA designed the software

Google* bought loads of patents

Troll Inc bought loads of patents

How do you legally (not morally) split these?

*Google - referring to the Moto patent purchases

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Re: Not sure how you legally define a "Troll"....

I don't know about legally, but:

- ARM design their cores and license them out to fund more design. There is a continual process.

- MPEG-LA is just a group of companies, really, with licensing deals (I know, far too simplified). Other companies hold the patents, MPEG-LA just makes licensing them all easier.

- Google bought Moto, which are still (IIRC) a separate company and do make things using them.

- Troll Inc just buy patents then try to license them out. They do no development or production of their own, and exist purely to suck money away from others.

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