Originally Posted 12/11/06 written by Shane Percival
On August 3, 2006, Senators Orrin Hatch (R-UT) and Patrick Leahy (D-VT) introduced Senate Bill 3818, the Patent Reform Act of 2006. Although it remains to be seen what effect a Democrat-controlled House and Senate will have on the bill’s progress, recent discussion has arisen regarding what effect the fee-shiting provision of the bill would have on individual inventors (see Dennis Crouch’s “Patently O” patent law blog article at http://www.patentlyo.com/patent/2006/12/ipo_supports_at.html).
If passed, federal law governing the distribution of attorney’s fees in a patent infringment lawsuit would change. Currently, the federal law governing attorney’s fees states that a court “may” award attorney’s fees, but only in “exceptional cases.” The bill would change the language to requiring a court to award attorneys to the previaling party (“The court shall award, to a prevailing party, fees and otther expenses…”).
Why does this matter? Well, this practice may enable deep-pocket defendants to bully indvidual inventor plaintiffs. Essentially, the argument is as follows:
Little Inventor wants to sue Big Infringer, but doesn’t have the money to fund litigation. Today, a law firm may take such a case on a contingency basis (a percentage of any settlement or judgment received), financing the litigation costs out of it’s own pockets. In this scenario, although Little Inventor only receives a portion of what he is actually due, with the rest going to the law firm, he is able to receive some of the compensation that Big Infringer has essentially stolen from him. Plus, simply filing a lawsuit many times increases the chances for settlement.
If Senate Bill 3818 were to pass, patent litigation firms may be less likely to represent Little Inventor on a contingency basis due to the increased risk of paying opposing counsel’s fees. When Big Infringer gets sued, Big Infringer can easily run attorney’s fees up in excess of $1M, (between 2 large companies battling over a patent, attorneys’ fees can easily be in the $10M or even $100M+ range). $1M+ is a huge liability for a law firm to take on, especially given the unpredictability of judgments in patent infringment cases. Therefore, if passed, the new Senate bill may kill the ability for any Little Inventor to take on a Big Infringer. Result? Chalk up one more win for Corporate America.
However, all is not lost at this point. First, Senate Bill 3818 is simply that – a bill. It is not law, and with the change of committe chairs from Republican to Democrat, the direction of congressional laws may shift from a pro-corporation stance to a pro-individual inventor stance. This means the bill may be amedend prior to passage, or killed altogether before a vote is taken. Additionally, other options such as insurance have been discussed. Under this scenario, it is possible that law firms would continue to take on contingency cases under the new law, but would purchase insurance to help cover the costs of any loss where attorney’s fees were required.
Given the potential windfall for a lawfirm who takes on a patent infringement suit on a contingency basis, it is likely that some firms will see the upside as too good to pass up. Let’s keep our collective fingers crossed. One thing I am certain of, however, is that even though this is my first blog article as Leyendecker & Lemire’s new associate, it won’t be my last blog article on this subject.
