This is the final article in our series addressing patent reform proposals aimed at alleged patent system abuse by non-innovating, non-practicing patent monetization entities. In our first article, we counseled tweaking — not revamping — the U.S. patent system (the greatest system for innovation ever known) and examined proposed uniform procedural rules for patent cases. Our second article considered proposed “end user” protections. This final article reviews proposed cost-shifting in patent cases to discourage questionable lawsuits or discovery requests.
In U.S. litigation, each party generally bears its own costs and attorneys’ fees whether they win or lose (unlike in many international systems, such as the U.K., where the loser pays not only their own, but the other side’s attorneys’ fees and costs). This “American Rule” seeks to increase access to the courts by avoiding the chilling effect caused by the prospect of paying the other side’s fees and costs should a party not prevail on what they considered a meritorious claim or defense. Some have raised concerns that non-innovating, non-practicing patent monetization entities use the threat of patent litigation costs to extract nuisance settlements on meritless claims. The argument is that, unlike typical patent litigations between competitors, there is a significant disparity in litigation costs between non-practicing patent monetization entities (whose discovery obligation may involve producing a couple boxes of documents and witnesses) and large corporate defendants (who often face hundreds of thousands of dollars in discovery costs, many witnesses and business disruption).