When should patent trolls pay legal fees? Supreme Court reviews “objectively baseless” claims

U.S. Supreme Court

One reason the U.S. patent system is such a mess is because there’s really no downside for those who abuse it. If you’re a patent troll, you can file baseless lawsuits against anyone under the sun and if you win, you strike gold. If you lose, you can just pick up another old patent and try again while your targets are stuck paying their legal fees.

This economic asymmetry is what drives the patent troll problem, and explains in part why the Supreme Court is hearing two cases on Wednesday that seek to determine when a bad patent actor should pay the other side’s legal fees. The issue is important enough that a host of major companies, including Apple and the New York Times, have submitted briefs urging the Court to change the rules.

The details of the cases involve arcane procedural and evidence issues, but much boils down to a rule that companies must show that the other side’s patent claim is “objectively baseless” in order to recover legal fees. That standard is nearly impossible to meet in practice, so it fails to provide any real deterrent for trolls and other bad actors in the patent system.

The Supreme Court’s decision to hear the case reflects its ongoing attempts to correct the decisions of the country’s patent appeals court, which it has overruled unanimously on multiple occasions and which has been labeled a “rogue court.” The Supreme Court is also hearing another case this spring involving software patents, which could curtail what types of inventions are eligible for patents in the first place.

The Supreme Court cases come at a time when all three branches of government are actively trying to reform the patent system, which a growing stack of academic evidence suggests has become a burden rather than a spur to innovation. In response, large patent trolls like Intellectual Ventures are taking steps to halt reform, including launching a PAC to lobby for trolls.

For more details on the legal aspects of today’s cases, SCOTUS Blog and Patent Docs have extensive summaries, and Ars Technica has a feature on the legal and business implications for trolls.

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