Judge Recommends Fee-Shifting to Deter Patent Trolls – Let’s Take the Same Approach with Shifty Cybersquatters

A recent Op-Ed in The New York Times – authored by Randall Rader, the chief judge for the U.S. Court of Appeals for the Federal Circuit and two co-authors – explained that the problem of patent trolling “stems largely from the fact that, in our judicial system, trolls have an important strategic advantage over their adversaries: they don’t make anything so, in a patent lawsuit, they have far fewer documents to produce, fewer witnesses and a much smaller legal bill than a company that does make and sell something.”

Similarly, cybersquatters have a strategic advantage over their victims: they don’t produce or provide a product or service. They simply buy up domain names containing the trademarks of companies that actually do contribute to America’s GDP, then make money when Internet users who inadvertently landed on the site open pay-per-click ads. The victimized company takes the cybersquatter to court or files a UDRP, spending money that could otherwise be spent on producing goods. Cybersquatters can often stay anonymous, return the domain name, and simply move on to the next victim.

These types of Internet abuses also share another marker: quantity.  As the NYT Op-Ed explains, one indication of patent trolling is that ‘a single patent holder sues hundreds or thousands of users of a technology (who know little about the patent) rather than those who make it.”

So if patent trolls and cybersquatters enjoy strategic advantages – albeit using different scams – might the solution to the two problems be similar as well?

Radar and his co-authors point out that, while legislative action against trolls has been “meager”, judges are to patent trolls as Dorothy is to going home – they’ve had the power all along: “Section 285 of the Patent Act, as well as Rule 11 of the Federal Rules of Civil Procedure, give judges the authority they need to shift the cost burden of litigation abuse from the defendant to the troll.”

In other words, fee shifting makes patent or trademark scams less financially palatable to a serial cybersquatter by awarding larger judgments against  them and making them pay for their victim’s legal fees.  As FairWinds IP Attorney Steve Levy explains, “While updated legislation would have a great impact on reducing cybersquatting, fee-shifting to losing cybersquatters would be most effective to reduce the ROI from cybersquatting  – making it increasingly less appealing to bad actors.”


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