Patent News

Apr. 5, 2014

News & Observer: Some fear proposed patent legislation could hurt inventors, by David Ranii

This article originally appeared in News & Observer on April 5, 2014.

Congress is weighing whether to make the losing party in a patent lawsuit pay the winning side’s attorney’s fees.

It’s one of several proposals aimed at curbing so-called patent trolls – also known as non-practicing entities, or NPEs – that have polarized the debate in Congress.

In December, the House passed a bill containing a “loser pays” provision by an overwhelming margin, but the concept has encountered turbulence in the Senate. Senate leaders reportedly were close to finalizing a bill at the end of last week, but details weren’t available late Friday.

It’s clear why NPE opponents are pushing for such a change.

Patent suits can cost millions of dollars to defend, which makes settling cases appealing in many instances. But the potential to shift those costs with a successful defense could rewrite the rules of the game.

“That has the potential to be very effective in reducing the number of troll suits that are filed,” said Swain Wood, an intellectual property attorney’s with Raleigh law firm Wood Jackson.

But companies and organizations that are by no means NPEs see a dark side to such a change.

A group that represents the companies that invest in innovative startups, the National Venture Capital Association, contends that the loser-pays rule “places small companies using the patent system at a significant disadvantage against their larger competitors. This will be the case irrespective of whether the small company is the plaintiff or defendant in the patent case.”

Louis Foreman, the CEO of Charlotte-based Edison Nation, also objects to a loser-pays rule. Last week Edison Nation sponsored an “inventor fly-in” to the nation’s capital where 10 independent inventors from across the country met with lawmakers.

Edison Nation produces the “Everyday Edisons” show on PBS and teams up with inventors and entrepreneurs to create “As Seen on TV” products.

Foreman said his company could technically be considered an NPE because it is a patent holder that doesn’t make products. Its 70-person staff designs and develops new products and then licenses them to companies that manufacture and market them.

But, he stressed, Edison Nation doesn’t get involved in “troll-like behavior.”

“In 14 years of business, we have never litigated against anyone,” Foreman said. “We have never threatened litigation.”

Still, he fears that the potential of having to pay millions of dollars in attorney’s fees would prevent inventors with a legitimate beef from having their day in court.

“The intimidation alone would deny access of justice to any inventor,” he said.

Foreman said he’s not an obstructionist and would welcome legislation that aimed a surgical strike against “bad actors” who are using the legal system to extort money from companies.

But he likens the legislation that Congress has been considering to a homeowner who tackles a couple of weeds by “dumping hundreds of gallons Roundup and killing everything.”