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Androvett Blog

by Robert Tharp at 11:28:00 am

The U.S. Supreme Court will hear two cases next week in which businesses are seeking to recover attorney fees for the cost of defending frivolous lawsuits. The two cases – Highmark Inc v. Allcare Health Management Systems, Inc. and Octane Fitness, LLC v. Icon Health & Fitness, Inc.– ask the Court to revisit the Patent Act and the Federal Rules of Civil Procedure and invoke “loser pays” fee-shifting in patent disputes.

“Making fee-shifting more common in patent litigation could be one tool to help control the rise in filings from patent trolls or so-called non-practicing entities,” says intellectual property attorney Matthew Anderson of Dallas’ Munck Wilson Mandala.

Indeed, patent infringement lawsuits filed by non-practicing entities have risen sharply, costing U.S. businesses dearly. According to RPX Corporation, patent trolls in 2012 filed more than 2,900 infringement lawsuits nationwide (nearly six times higher than the number in 2006).

The cost of defending against bogus patent litigation reached $29 billion in 2011, according to a Boston University study. Lawsuits by "patent assertion companies" made up 61 percent of all patent cases filed in 2012, according to the Santa Clara University School of Law.

Meanwhile, this litigation trend is ncreasingly targeting smaller businesses. In 2005 patent trolls sued 800 small firms (those with less than $100 million annual revenue), the number growing to nearly 2,900 such firms in 2011; the median defendant's annual revenue was $10.3 million.

“Even frivolous patent lawsuits can be extremely expensive for businesses to defend against," Mr. Anderson says. "The Court here has an opportunity to expand the definition of what constitutes an ‘exceptional case’ that allows fee-shifting. A broader application of fee-shifting could discourage trolls from filing suits that are frivolous or primarily aimed at ‘shaking down’ the defendants for a quick settlement.”