The vote was 325 to 91, with Reps. John Conyers (D-Mich.) and Mel Watt (D-N.C.) leading the opposition. Timothy Lee discusses in the Washington Post. While I haven’t tried to get into the details, the general drift looks quite good to me. One major provision requires those filing suits to plead with some specificity what the infringement is; another provides for losing parties to compensate prevailing parties toward the cost of the litigation in more cases; yet another attempts to forestall expensive discovery in cases destined to fail on other grounds. Readers who recall my first book, The Litigation Explosion, will recall that I recommended procedural reform as the most promising way to address the incentives to overlitigiousness in our legal system and in particular identified lack of fee shifting, anything-goes pleadings, and wide-open discovery as among the system’s key deficits. So, yes, developments like this make me feel I was on the right track.
Equal time dept.: Richard Epstein takes a different view.
Prevailing parties in patent suits can win attorneys’ fees from losing opponents in cases deemed “exceptional.” “Under the test used to identify exceptional cases, cases must be objectively baseless and brought in bad faith.” That is already a painfully narrow exception, allowing for large volumes of poorly founded litigation, but two cases before the Supreme Court this term may provide clarity on when courts can deem cases “exceptional” and suitable for a fee shift. Broader use of fee shifts — presumably by way of deeming at least some swath of losing cases “exceptional” — would be one way of addressing the patent troll problem that would not call for new legislation. [ABA Journal, related, Corporate Counsel (arguments that judiciary can deal with trolls on its own]
In other developments, the Federal Trade Commission has voted to proceed with an inquiry into the patent troll problem [New York Times] and the Government Accountability Office has released a long-awaited report on the issue [Mike Hogan and Gregory Hillyer, Legal Intelligencer]
More coverage for the Frank Buckley-edited new book on overlegalization, The American Disease [Richard Reinsch/Library of Law and Liberty, Alejandro Chafuen/Forbes] Here’s Buckley in the National Post:
If litigation rates are four times smaller in Canada than the United States, this should not occasion surprise: Subsidize something and you get more of it; penalize it and you get less of it.
Differences in legal ethics matter, too. In America, more than elsewhere, lawyers are encouraged to advance their client’s interests without regard to the interests of justice in the particular case or broader social concerns. American lawyers’ professional culture is unique in permitting and implicitly encouraging them to assert novel theories of recovery, coach witnesses, and wear down their opponents through burdensome pretrial discovery.
A lawyer who’d been widely and scathingly criticized over his handling of a case — unfairly he thought — proceeded to sue bloggers and journalists for defamation, so many that the total of defendants reached 74. It’s over now, but a New York state judge declined to award sanctions, which may possibly say something about the difficulty of obtaining sanctions under today’s prevailing legal standards, especially in New York. [Tom Crane, San Antonio Employment Law Blog; Popehat ("Our legal system is so broken that it can take years to resolve even the most patently vexatious, harassing, and incompetently prosecuted lawsuits like this one.")]
P.S. “Loser pays would have been valuable here. Costs to each defendant would teach a memorable lesson.” [@erikmagraken]
Cathy Gellis, guesting at Popehat, has a long post on the latest in the Prenda Law saga. A relevant paragraph:
The default rule in American litigation is that everyone pays for their own lawyers. But some laws, the Copyright Act being one of them, have provisions so that the loser pays for both sides’ lawyers. … But just because a judge may grant an award of attorney fees doesn’t mean the money will ever be recovered; enforcing a judgment often presents its own expensive challenges, meaning a wronged defendant can still be saddled with the costs of his own defense. However the California Code of Civil Procedure has a provision, § 1030, to help mitigate that financial risk by allowing defendants in similar positions as Mr. Navasca [a man seeking fee recovery from Prenda Law over a questionable copyright action] to require plaintiffs to make an “undertaking;” that is, to post a bond that would guarantee, when the defendant inevitably wins his fees, that he would actually get the money.
Both provisions could prove important in bringing the rogue legal enterprise to heel. If only other areas of law besides copyright had loser-pays, and other states besides California emulated the “undertaking” idea. Earlier on Prenda Law here and here.
Scott Greenfield, contra Radley Balko, believes the idea would prove “problematic, if not disastrous,” in real life, especially if enacted in the form of two-way fee-shifting (as distinct from a one-way fee payable only to defendants). It is worth noting that although legal systems around the world predominantly embrace loser-pays principles in civil litigation between private parties, they more or less uniformly decline to carry a similar principle over to criminal prosecution.
According to a press release from Feld Entertainment, which owns the Ringling Bros.-Barnum & Bailey circus, the American Society for the Prevention of Cruelty to Animals (ASPCA) has agreed to pay $9.3 million to settle racketeering and other charges arising from alleged litigation abuse in lawsuits beginning in 2000 over elephant welfare. Feld says ASPCA and others paid a plaintiff and fact witness in the case whose testimony a judge described as not credible. It says it intends to continue suing other animal-welfare groups that it has named in connection with the episode, including the Humane Society of the United States, and Fund for Animals, as well as attorneys. [more on circus's side of dispute; earlier here, here, here, here] More: John Steele, Legal Ethics Forum.
His speech is titled “Economic Lessons from American History,” (printable PDF version) and one of the lessons has to do with loser-pays:
…if Jefferson’s decimal coinage concept was a good idea that quickly spread around the world, another idea that developed here at that time was lousy: the so-called American Rule, whereby each side in a civil legal case pays its own court costs regardless of outcome. This was different from the English system where the loser has to pay the court costs of both sides.
The American Rule came about as what might be called a deadbeat’s relief act. The Treaty of Paris (which ended the American Revolution) stipulated that British creditors could sue in American courts in order to collect debts owed them by people who were now American citizens. To make it less likely that they would do so, state legislatures passed the American Rule. With the British merchant stuck paying his own court costs, he had little incentive to go to court unless the debt was considerable.
The American Rule was a relatively minor anomaly in our legal system until the mid-20th century. But since then, as lawyers’ ethics changed and they became much more active in seeking cases, the American Rule has proved an engine of litigation. For every malpractice case filed in 1960, for instance, 300 are filed today. In practice, the American Rule has become an open invitation, frequently accepted, to legal extortion: “Pay us $25,000 to go away or spend $250,000 to defend yourself successfully in court. Your choice.” …
…policing the marketplace has long been considered a quintessential function of government. The reason for this is that when policing has been in private hands, self-interest and the public interest inevitably conflicted. The private armies of the Middle Ages all too often turned into bands of brigands or rebels. The naval privateers who flourished in the 16th to 18th centuries were also private citizens pursuing private gain while performing a public service by raiding an enemy’s commerce during wartime. In the War of 1812, for instance, American privateers pushed British insurance rates up to 30 percent of the value of ship and cargo. But when a war ended, privateers had a bad habit of turning into pirates or, after the War of 1812, into slavers.
Predictably, the American Rule has spread exactly nowhere since its inception at the same time as the decimal coinage system. There is not another country in the common-law world that uses it. … Few things would help the American economy more than ending the American Rule.
“After achieving a university entry rank of 99.95, winning fifth place in the state for chemistry and a place at the University of Sydney studying medicine, the former Abbotsleigh student Sarah Hui Xin Wong believed she could have done better in the [Higher School Certificate].” A New South Wales administrative tribunal has now turned down her complaint that she suffered disability discrimination by not being allowed further accommodations on the test, specifically a computer and extra time. But Australia does have loser-pays: “Ms. Wong has been ordered to pay some of the Board of Studies’ costs, including a proportion of the fees of the leading Sydney barrister Chris Ronalds, SC.” [Sydney Morning Herald]
In other Australia schools litigation news, a “former student who is suing Geelong Grammar School says she decided to seek damages after she failed to qualify for her preferred university course. Rose Ashton-Weir, 18, alleges Geelong Grammar gave her inadequate academic support, particularly in maths.” [Melbourne Age] More in update at The Age (“was perpetually disorganised and failed to attend classes, a tribunal has heard.”)
Now posted: a recent Federalist Society podcast of a discussion that includes me, Texas attorney E. Lee Parsley, Texas lawprof Ronen Avraham, Judge Dennis Jacobs as moderator and Dean Reuter of the Federalist Society introducing. Running time is an hour and you can listen directly here. More from me on the new Texas law here.