Initial House attempts to mitigate the negative effects on competition caused by NPE litigation may not be such a good idea

The Congressional Research Service has taken a look at Non-practicing Entities (NPEs), commonly referred to as patent trolls, which the CRS refers to as PAEs (patent assertion entities), in order to assess the net effect of NPE litigation on competition and to explore the need for legislative remedy.

NPEs are individuals or companies that own patents for the sole purpose of enforcing their rights without any intention to manufacture or sell products made possible by the patent. For the most part they acquire the patents directly or indirectly from inventors, which defenders say provides liquidity to the system and value to patents.  The CRS report states, “The PAE business model focuses not on developing or commercializing patented inventions but on buying and asserting patents, often against firms that have already begun using the claimed technology after developing it independently, unaware of the PAE patent.”

On August 1, the Saving High-Tech Innovators from Egregious Legal Disputes (SHIELD) Act of 2012 (H.R. 6245) was introduced in the House and referred to Committee. The bill would pave the way for a court to award full litigation costs to a defendant in a lawsuit “alleging the infringement of a computer hardware or software patent,” if the patent holder “did not have a reasonable likelihood of succeeding” in the lawsuit.

IP Value Wire believes the law of unintended consequences would attach to this bill should it gain traction in Congress. With the extraordinarily high costs of litigation in patent infringement cases, small, under-capitalized patent owners would have to add the attendant risk of being unsuccessful in asserting its patent rights to its own costs of litigating. Patent value would suffer, as value is directly related to the owner’s willingness and wherewithal to defend its IP.