SHIELD Act: Legislation Hopes to Discourage Patent Trolls

Representatives Peter DeFazio (D-Oregon) and Jason Chaffetz (R-Utah) want to put an end to America’s patent troll problem with the newly introduced SHIELD Act, which aims to define patent trolls and distinguish them from honest patent holders. In an effort to discourage those who do nothing more than file patent lawsuits, the bill would create a “loser pays” system for specific types of patent litigants.

“I think the trolls’ focus in recent years has shifted from big companies to growing companies, or even startups, at the point at which they have enough resources to pay a blackmail, or bribe — whatever you want to call what these people are extorting from folks,” DeFazio told Ars Technica.

Patent trolls are targeting companies with enough cash flow to pay fines, but without the legal power of a large company like Google. When these smaller companies pay the trolls, they have to cut costs elsewhere, reducing their hiring power and hurting local economies and communities.

The patent troll problem does not only exist with tech startups, but has even affected airlines (online seat selection software), retailers (online retail formats), and other traditional businesses (Project Paperless targeted companies who used scanners to email documents in PDF format, demanding $1,000 per employee to use the process).

“It will be like an initial motion or pleading in the case, to make it clear to the troll that it’s going to potentially cost them a lot of money,” DeFazio explained in regards to the process. “We’ve got the three-part test, which is for the people who do R&D, people who manufacture — and the third part is the toughest part, to have some allowance for people who hold patents beyond what they’ve developed themselves, but are not trolls. That’s the trickiest standard.”