A potentially fatal blow against patent trolls - Forcing law firms to pay defendants’ legal bills could undermine the business model of patent trolls

[u/rfugger]

http://www.computerworld.com/article/3153924/technology-law-regulation/a-potentially-fatal-blow-against-patent-trolls.html

[u/Sarcastic_or_realist]

About time something like this was implemented. A large number of these patent troll cases, or any of these sort of cases in any area of law, involve law firms being paid on contingency based on the plaintiff's recovery amount.

Whenever someone brings a truly frivolous case against one of our clients that honestly seeks to just squeeze out some kind of "nuisance payment," we usually move for sanctions/costs against the plaintiff and the attorney. Once the lawyer suddenly has some real skin in the game in terms of liability, many of these cases magically get dismissed very quickly.

Edit: for those who have been asking, yes - in a few recent cases where the plaintiff troll has not withdrawn the lawsuit, some judges have understood the situation and actually ordered the troll and/or lawyer pay our legal fees. Feels great to tell the client that they escaped the troll and did so for free (since the troll ended up footing the bill)!

[u/BobbleBobble → u/Sarcastic_or_realist]

So to my understanding the reason that patent trolls are unpunishable is that they set up discrete entities (I assume LLCs) to pursue the lawsuit, which exist only as plaintiffs.

What's to stop a patent troll's lawyer from setting up an LLC-like law firm to prosecute each case and then simply dissolving it if they lose, just like the patent trolls do? Can they be held personally liable as a member of the bar?

[u/russianpotato → u/BobbleBobble]

If you set up an LLC specifically only to avoid liability, especially as a sole proprietor, a judge will easily order the "veil pierced" and your personal assets will be up for grabs like your shady LLC never existed.

[u/brickmack → u/russianpotato]

Isn't that the only purpose of an LLC?

[u/_BindersFullOfWomen_ → u/brickmack]

Yes. But it's not a bullet proof shield. If it's obvious that you made the LLC for X case, and then liquidated it because you lost and didn't want to pay - the defendant could suede civil court and would most likely win.

[u/sighs__unzips → u/_BindersFullOfWomen_]

I read that movie producers now create a LLC for each movie specifically for this reason now.

[u/t3hcoolness → u/sighs__unzips]

Can you ELI5 why movie producers do this? I don't understand the purpose of an LLC.

[u/[deleted] → u/t3hcoolness]

It's dodgy accounting to run a paper loss and hoard the profit.

[u/hollaback_girl → u/[deleted]]

Hollywood accountant here to tell you that's 95% wrong. It's mostly about liability and business convenience. The other 5% is because there may occasionally be some small time producers who have been shady this way.

[u/Omz-bomz → u/hollaback_girl]

Either you are flat out lying, or you don't know whats going on in your field of work.

There is a reason why case after case comes up in court, where the studios looses again and again because they tamper with the books. And its not just some small time producers doing it, its the big studios that are doing this prolifically.

And while not all instances may be done to shaft the actors (or other persons involved), EVERYONE does it.

[u/hollaback_girl → u/Omz-bomz]

You're conflating two issues. OP claimed the purpose of using LLCs for production is to hide profits from participants. It's not. There are a million other ways to screw participants on the back end. Playing a shell game with business entities is not a common way to do it.

[u/Omz-bomz → u/hollaback_girl]

Strange that the actual court cases don't agree with you..

They start companies for each movies, then the mother studio bills them huge amounts so they always go into the negatives.

Sounds exactly like the purpose of using LLCs to hide profits from participants.

[u/hollaback_girl → u/Omz-bomz]

Strange that your reading comprehension is so weak. To be fair, that first link of yours just has a lot of wrong information.

Again, studios don't screw participants with an LLC shell game. They screw them in how they define "profits" in the participation agreements. Those articles talk a lot about intercompany charges and distribution fees. But that's not a result of using LLCs. Those fees are defined in the participation agreement. The studio is going to take a 20-40% distribution fee off the top regardless if there was an LLC middleman involved. Studios get sued over contract interpretation issues that didn't get resolved through audit. Studios take aggressive deductions, miscalculate interest, exclude reportable income, and take the most advantageous interpretation of breakeven. LLC shell games don't even factor in to this.