Can Patent Trolling Be Legislated Away?

Are we finally seeing a tectonic shift toward common sense in the sometimes-nonsensical world of high-tech patent infringement lawsuits?

First, one month ago, the highly respected -- and iconoclastic -- Seventh Circuit Court of Appeals Judge Richard Posner poured cold water on Apple's (Nasdaq: AAPL  ) patent trespassing claims against Motorola Mobility, a unit of Google (Nasdaq: GOOG  ) .

"To suggest that [Apple] has suffered loss of market share, brand recognition, or customer goodwill as a result of Motorola's alleged infringement of the patent claims still in play in this case is wild conjecture," Judge Posner said.

And now, two U.S. Congressmen, in a welcome bipartisan effort, have introduced a bill to remove petty patent litigation from the nation's dockets. The bill's author, Rep. Peter DeFazio (D-Ore.), and its co-sponsor, Rep. Jason Chaffetz (R-Utah), have introduced the "Saving High-Tech Innovators from Egregious Legal Disputes Act," or for those without the patience for long-winded names, the SHIELD Act.

Rep. DeFazio portrayed the bill in a press release as one that would mitigate the effects of companies that "pad their pockets by buying patents on products they didn't create and then suing the innovators who did the hard work and created the product."

In other words, "Patent trolls don't create new technology and they don't create American jobs," DeFazio said.

The SHIELD Act's weapon to crush the threat of patent trolling and the filing of lawsuits that could be characterized as frivolous -- those being ones that "did not have a reasonable likelihood of succeeding," according to DeFazio -- would be to burden the plaintiff with the defendant's legal bills.

It's only money
And those bills can really mount up. Mark Lemley, director of Stanford University's law, science, and technology program, said that Apple and Google "have paid their lawyers more than $400 million" in their patent battles over the past several years. And as of last January, Apple is rumored to have spent $100 million in its lawsuit with HTC over allegedly stealing Apple technology for its Android mobile devices.

I shudder to think of the billable hours (at $500 an hour and up) that the law firms servicing Apple and Samsung have accrued in their global Ultimate Patent Championship circuit, now appearing in 10 countries around the globe. As of a week ago, for the Apple-v.-Samsung patent infringement trial taking place in San Jose, Calif., close to 80 attorneys have filed with the court.

Who invented the rectangle?
Could the threat of having to cover all the legal costs put a stop to the following?

In that San Jose trial, Apple has accused Samsung of "slavishly copying" its devices, from the overall shape of a device, to the size of the screen, and even to how fingers are used to enable panning and zooming on the screen.

Samsung chief product officer Kevin Packingham told Wired that the court battle was like "fighting over rectangles. ... [I]s it just impossible to patent a rectangular piece of glass with a touchscreen, which every smartphone and tablet has today, and is under dispute in the Apple trial?"

And the winner is ...
Those legal costs are certainly passed on down to the consumer. And the courts get so backed up with these cases that important trials get pushed further and further back. As Judge Posner wrote in an op-ed for The Atlantic, "The cost of patenting and the cost of resolving disputes that may arise when competitors have patents are a social waste."

The new bill is meant only for computer hardware and software-related patents, but the authors had to walk a thin line between defining what a software patent is and not suggest that a software patent is necessarily a good thing, or even legal. Indeed, the Supreme Court, in a 2010 decision, essentially left the legitimacy of software patents undecided by its ruling in a business methods patent case.

"The SHIELD Act," according to Rep. Chaffetz, "ensures that American tech companies can continue to create jobs, rather than waste resources on fending off frivolous lawsuits." He continues: "A single lawsuit, which may easily cost of $1 million if it goes to trial, can spell the end of a tech start-up and the jobs that it could have created."

But we shouldn't hold our breath while waiting for the legislation to pass. The odds are its fate will be like many others introduced into the Capitol Hill sausage factory -- it may not even make it to a vote.

Following Apple's patent trials probably won't give investors much insight into the company's potential as a good stock buy or not. A much better use of one's time is to subscribe to the Fool's Apple report. Learn about Apple's opportunities and its risks. Don't be unprepared.

Fool contributor Dan Radovsky has no financial interest in the above-mentioned companies. The Motley Fool owns shares of Apple and Google. Motley Fool newsletter services have recommended buying shares of Google and Apple and creating a bull call spread position in Apple. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.


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