Tommaso Alba, Christian Helmers, and Brian J. Love have posted a paper on ssrn titled A Tale of Trolls and Fees: The Role of Fee-Shifting in Patent Litigation. Here is a link to the paper, and here is the abstract:
Patent Assertion Entities (PAEs) are often viewed as taxing innovative activity; we show how fee shifting in patent litigation can effectively deter their more frivolous assertions, increasing exposed firms' R&D, innovation output, and startup success. Our identification relies on the U.S. Supreme Court's 2014 ruling in Octane Fitness v. ICON Health & Fitness, which broadened courts' discretion to award attorneys fees against exceptionally weak infringement claims. Using a quasi-regression discontinuity design comparing cases pending at Octane's release with those filed and decided before or after, we find that the decision increased defendants' willingness to contest weak claims and prompted plaintiffs, especially PAEs, to file stronger ones. Pending cases saw more fee awards and lower settlement as well as plaintiff success rates; subsequent PAE cases involved stronger patents and higher success rates. A difference-in-differences analysis further shows that Octane boosted innovation: public firms that were particularly exposed to PAE assertions prior to Octane increased R&D and patenting in response, and private startup firms performed better in venture capital markets.
On a somewhat related note, the Federal Circuit last week affirmed a judgment awarding fees in EscapeX IP, LLC v. Google LLC, precedential opinion by Judge Stark joined by Judges Taranto and Stoll. The court found no abuse of discretion in view of the district court’s finding—“well-supported in the record and . . . part of the totality of circumstances,” that "EscapeX failed to conduct an adequate pre-suit investigation” (p.8). The court also affirmed additional fees and an award pursuant to 28 U.S.C. § 1927, in connection with the patentee’s Rule 59(e) motion to amend the judgment.
