Tort Law

A 'Loser Pays' Legal System Will Cut Frivolous Lawsuits, Report Says

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The Manhattan Institute for Policy Research released a report today advocating for a “loser pays” rule to help staunch the exorbitant litigation costs that arise from nuisance lawsuits in the U.S.

“Greater Justice, Lower Cost: How a ‘Loser Pays’ Rule Would Improve the American Legal System,” reports that Americans spend more on tort litigation every year, which is often unfair and inefficient, than on new cars. A loser-pays rule, which is already in place in the rest of the developed world, “would discourage meritless lawsuits,” while ensuring “plaintiffs of modest means but strong legal cases access to justice,” the study says.

The report comes on the heels of a federal judge’s order granting sanctions to Walt Disney Co.’s mobile phone division, LG Electronics and Pantech & Curitel Communications Inc. for a “frivolous” patent infringement suit brought by Triune Star Inc.

U.S. District Judge Michael M. Mihm of the U.S. District Court for the Central District of Illinois granted the defendants’ motions for summary judgment as well as “reasonable costs and attorneys fees,” on Nov. 25, reports Law 360 (sub. req.).

Judge Mihm noted in his order (PDF) that a reasonable investigation would have revealed that none of the accused devices contain a miniature infrared camera, as required by Triune’s claims, and as a matter of law, could not have infringed the patent in question. The judge ordered the sanctions to be paid by Triune and its counsel, Rockey Depke & Lyons for the “baseless action.”

This issue is something Brian Rupp of Drinker Biddle & Reath, who represents Pantech and LG, said he thinks about a lot in regards to so-called patent trolls: individuals and companies that amass patent portfolios—often with no intention to manufacture or market the product—and file infringement suits against other businesses.

“Why aren’t there trolls in Germany and Japan?” Rupp asked. “They are all in the U.S. because of this exact rule,” Rupp said in an ABA Journal interview, “using the enormous costs of patent litigation as leverage to extract a settlement they would not otherwise be entitled to.”

In Triune Star Inc. v. The Walt Disney Co. et al., Rupp says attorney fees and litigation costs totaled “hundreds of thousands of dollars” over the course of a year.

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