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CONTACT: Patrick Ross
February 9 , 2006
(202) 289-8928
"Loser Pays" Rule Could Deter Patent Trolls
Singleton Cites Incentive to Litigate, Not Settle, Nuisance Suits

WASHINGTON D.C. - Adopting a "loser pays" rule concerning attorney fees in patent litigation would discourage nuisance suits by encouraging defendants to litigate, as opposed to settling the claim, states Solveig Singleton in, "Patents and Loser Pays: Why Not?" a new Progress on Point released today by The Progress & Freedom Foundation. Singleton, Senior Adjunct Fellow at PFF, states that a "loser pays" rule is the fairest way to ensure the winner of the suit is fully compensated.

In her piece, Singleton examines current patterns in patent litigation. These include: the increasing cost of patent litigation; low incentives to invalidate weak patents because doing so could help competitors; and a high incentive to settle patent suits because of the high cost of bringing such cases to trial. Singleton identifies the increasing importance of patents and the US Patent Office's ineffectiveness at screening out weak patents as contributing to these issues.

In European and commonwealth countries where the legal system adopts a loser pays rule, "[t]hese countries have much less predatory litigation than in the United States, making the rule attractive to advocates of tort reform," explains Singleton. The loser pays rule lessens the incentive to settle nuisance lawsuits just to avoid the high cost of litigation. In the long term, this could reduce the number of nuisance lawsuits as plaintiff's attorneys and repeat plaintiffs such as businesses gain experience with the new system.

Singleton acknowledged that the benefits of adopting a loser pays rule could be limited in scope. The amount of time it takes to litigate a patent case could deter companies from defending patent claims, pushing them to settle. Opponents of loser pays worry it could unfairly benefit well-heeled litigants, but Singleton believes these concerns are misplaced given the current practice of targeting well-heeled litigants; in-so-far as the concerns are valid, can be addressed by other measures, including judicial limits on fees or insurance. Others are concerned that the uncertainty of the legal system makes loser pays unfair; Singleton argues that legal uncertainty has been greatly exaggerated by academic focus on a few cases in the higher courts. Singleton concludes, "loser pays is the fairest rule as a general matter, because it alone leaves the party in the right wholly compensated after the lawsuit."

The Progress & Freedom Foundation is a market-oriented think tank that studies the digital revolution and its implications for public policy. It is a 501(c)(3) research & educational organization.



The Progress & Freedom Foundation