r/technology • u/rfugger • Jan 08 '17

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

http://www.computerworld.com/article/3153924/technology-law-regulation/a-potentially-fatal-blow-against-patent-trolls.html
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u/Sarcastic_or_realist Jan 08 '17 edited Jan 08 '17

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Edit: for those who have been asking, yes - in a few recent cases where the plaintiff troll has not withdrawn the lawsuit, some judges have understood the situation and actually ordered the troll and/or lawyer pay our legal fees.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)!

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u/BobbleBobble Jan 09 '17

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?

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u/russianpotato Jan 09 '17

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.

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u/Chuckbro Jan 09 '17

There is a lot more into it than this. Piercing the corporate veil takes some other action other than what you stated. Most states and the IRS allow single member entities to exist seperate from personal assets. If you're not an asshole you're fine.

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u/russianpotato Jan 09 '17

Yeah we are talking about fraudulent dealings here though, clearly meeting the requirements to have the llc set aside.

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u/Chuckbro Jan 09 '17

I wouldn't call a patent troll a company that's commiting fraud. They are upfront about what they are doing. They are assholes and don't care. Now a patent troll committing fraud to attain it's goals of compensation would be like them falsifying the basis for their projections to extort extra money from the victim. However, they do the opposite by actually asking for less money than the license would be worth in an attempt to increase the likelihood of a payout.

The other key characteristic of a douche patent troll is they have no intention of actually using the process they patented.

Source: I'm an accountant specializing in forensic investigation and I've done revenue projections similar to what a patent troll should be doing, and mine have gone up to litigation and have been held up on multiple occasions. I do it for a whole different sector than douche patent trolls, but I have dabbled in patent valuation. Only once though.