Why you should support the SHIELD act

I’ve said before, and often repeated, that software patents are evil. Ask almost any experienced software product engineer — especially in an open source project — and they’ll tell you software patents are a bug, not a feature. The worst problem they face is patent trolls appearing from nowhere and enaging in a legal shakedown. Even President Obama says, “They don’t actually produce anything themselves. They are essentially trying to leverage and hijack somebody else’s idea and see if they can extort some money out of them.”

Now a partial fix may be coming, in the shape of the SHIELD Act, an initiative in Congress that’s intended to thwart patent trolls. You may be surprised who supports it.

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There are companies that benefit from their ability to interpose themselves in other people’s innovation and defend software patents because of it. Microsoft, for example, is said to earn significant income from Android, a platform it has had no direct or indirect involvement whatsoever in developing, based on the likelihood there will be ideas within Android over which Microsoft can claim rights.

We’re rarely talking wholesale copying here, like the original framers of the Constitution may have envisaged when they created the power for Congress to permit patents. Back in those days, patents were mostly about big ideas realized as manufactured goods; copying was as clearly discernible as it was wrong. Today, we’re talking the equivalent of the spacing on the thread of the screw to hold the name plate on the plough. An idea that’s merely a small, additional detail to a software project may be enough for a patent holder to claim fealty and demand tribute today.

What is the problem? All the same, even Microsoft is worried. The same mechanism that lets it tax the innovation of others threatens their own business; those who live by the sword also need to watch out for other fencers. Microsoft suffers significant expense defending itself from companies that exist purely to extort money out of innovators over patents. Most of us call them “patent trolls,” but those who use the same techniques in ways they consider legitimate prefer to use more obscure terms — like “nonpracticing entity” or “patent-assertion entity” (PAE) — to distinguish between themselves and patent trolls with no products.

In normal patent engagements, the two parties involved will normally both have products and patent portfolios. They will thus be able to meet privately, decide whose sword is biggest, and agree on a settlement that involves cross-licensing of each other’s patents and a cash payment to balance the difference in weapon size. Both parties are incentivized to settle, as both could be sued by the other if the encounter failed. We hear little of these settlements; they rarely reach court and are almost always covered by draconian nondisclosure arrangements.

But a PAE has no products, just a patent portfolio. There’s no scope for negotiation. There are only two options: Surrender to its blackmail early and secretly, or brace for a hugely expensive lawsuit. PAEs are able to build a self-sustaining campaign against the technology industry, using the (large) profits from each successful shakedown to fill a war chest and battle with the one or two victims willing to stand and fight. They’re helped in this endeavor by the fact that patent suits do not involve the loser paying costs. Each victim knows they will have to pay their own costs, and even if they win, they still have to spend that money.

This knowledge encourages unjust early settlement, filling the PAE’s war chest and posing little threat to its cash reserves beyond its own costs in pursing each court case. Victims know they will have to pay regardless, and the extensive and costly discovery process will paralyze their internal operations. The statistics show PAEs have a low success rate in court, but the fact their victims will be punished simply for choosing to go to court means they’re rarely forced to do so.

What is the SHIELD Act? Fortunately, there’s a move in Congress to address at least this small corner of the dysfunctional patent system. The SHIELD Act, HR 845, — so short and clear you’ll have no trouble reading it — finally does something about PAEs. Submitted by Reps. Peter DeFazio (D-Ore.) and Jason Chaffetz (R-Utah), it’s a bipartisan initiative that actually stands a chance of succeeding. The Act takes three significant steps:

1. First, and most important, it amends patent law so that victims of patent trolls can recover their costs if they prevail in court. That measure alone might be enough to break the cycle.
2. Patent trolls are often insubstantial, mercurial legal creations and might vaporize on defeat. The real king trolls frequently create shell companies to perform the shakedowns, and a victim might not recover costs even if they win. Thus, the Act allows judges to require the troll to post a bond covering the full cost of the case. Even if the shell companies play a shell game, there will be cash to compensate the victim.
3. The Act limits the discovery that can be performed. In other words, the troll can only ask for evidence from the victim directly related to the allegation and not go on a general fishing trip through their emails and records looking for information to identify other victims. By restricting discovery, the Act further reduces the impact on the victim in an area where costs could not be claimed.

This may not be all good news. Trolls may decide to target larger numbers of smaller victims to build their war chest, rather than starting with midsized companies as they do now. But the measures proposed will certainly impact patent troll business models.

Who supports the SHIELD Act? The SHIELD Act is bipartisan politically, and it’s supported all over the technology industry. VC Fred Wilson backs it, for example. Longtime advocates of patent reform Red Hat are supporters. Mark Bohannon, Red Hat’s vice president of corporate affairs and global public policy, told me: “NPEs have used the large number of vague and overbroad software patents to engage in litigation abuse. Legislation, like the SHIELD Act, recently introduced with bipartisan support, can be an important step to reducing the power of NPEs, as we continue to work to narrow software patentability and fix our broken patent litigation system.”

Google directed me to a blog post by its senior patent counsel Suzanne Michel, who says: “Congress should also make it easier for companies to recover money spent defending against frivolous troll suits. Legislation, such as the bipartisan SHIELD Act re-introduced this week in the House, can do much to reduce troll litigation.”

The winners of the current patent system support it too. For example, Microsoft pointed me at a posting by general counsel Horacio Gutierrez, who says, “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.”

What should you do? While only a small part of the solution, the SHIELD Act seems to be a great idea with wide support. But in today’s political arena, even great ideas can go nowhere if the political will is lacking. That’s why the Electronic Frontier Foundation is making it exceptionally easy for us all to tell our representatives we’d like to see the SHIELD Act become law. With just your ZIP code, the EFF’s action page will speed your encouragement to your representatives in under a minute. Why not take the time to go there now and send patent trolls the unmistakable message their unwanted game is over?

This article, “Why you should support the SHIELD act,” was originally published at InfoWorld.com. Read more of the Open Sources blog and follow the latest developments in open source at InfoWorld.com. For the latest business technology news, follow InfoWorld.com on Twitter.