Last week, BSAâ”‚The Software Alliance and the National Association of Manufacturers held an event on Capitol Hill to talk about the benefits of software patents and what steps could be taken to improve the patent system while preserving its role as an engine of innovation. Microsoft participated in the event, and we outlined proposed steps that would increase transparency, curb litigation abuse, and improve patent quality. In doing so, we noted that no single actor can address shortcomings in the system, and that all interested parties – private companies, the USPTO, Congress, and the courts – have a role to play in ensuring that the patent system works to drive innovation, economic growth, and job creation.
The BSA/NAM event was just a start to the discussion. Today marks another milestone, with the introduction of the SHIELD Act by Representatives Peter DeFazio and Jason Chaffetz. As our recent blog discussed, one challenge operating companies face is suits brought by patent assertion entities (PAEs) – companies that make no products of their own nor seek to facilitate a secondary market in IP, but instead lie in wait and then “hold up” companies that are in the marketplace and provide products and services to consumers. Microsoft is harassed by PAEs as much as anyone in our industry: at any given moment, we face as many as 60 PAE suits, comprising the vast majority of patent cases brought against us.
Today, PAEs face no disincentive to bringing cases as their litigation costs are often financed by third parties and they face no risk of countersuit, as they make no products themselves. By requiring PAEs that bring a patent infringement suit and lose to pay the defendant’s litigation costs and attorney’s fees, the SHIELD Act would encourage such entities to to consider more carefully the strength of their case beforehand and reduce their incentives to sue. As we said last week, we believe the ideal way to achieve this result is through a pure “loser pays” rule applicable to all patent infringement cases. But the SHIELD Act is an interesting effort to address a real problem and represents a thoughtful contribution to the debate about how to curb litigation abuse. We welcome its introduction, and look forward to continuing to participate in further discussion as the legislative process proceeds.