Only certain things can pierce the corporate shield, like unpaid workers comp. Legal fees, thankfully, don't.
Of course patent trolling always becomes a discussion of corporate shielding instead of the conversation we need to have: a radical reform of the patent system and a re-thinking of what should be patentable, especially in the software world.
This conversation always gets derailed by the tort reform crowd on the right or the anti-corporate shield crowd on the left. Those are just symptoms to a larger problem and both of those things (torts, shields) exist for valid reasons. Fix patents instead.
The patent wars are hardly a recent phenomenon. They go back to tremendous and crippling fights over the telegraph, telephone, auto, movies, radio, television and airplanes.
It's a bit hard to see how patents promoted anything - they mostly seemed to retard progress. The airplane patent wars were so bad that aircraft development shifted overseas out of reach of US patent courts. The movie industry packed up and left for Hollywood to evade patent courts. Industry progress on the TV happened only when the patents expired. And on and on.
Absolutely. James Watt didn't invent steam engine but came up with an innovative design that gave him a big advantage. He based this on other, unpatented, technologies. Then he sued the living day lights out of all his competitors and if argue prevented innovation for years.
Unpatented? Not quite. Savery's patent (which Newcomen licensed because it would last longer than any he could have gotten himself) had long since expired, and Boulton and Watt had to work around Pickard's patent on the crank (!) using planetary gears.
Pretty sure this is the 3rd time we've had this exchange :-) but... it is a myth that the Wright patent held back the US airplane industry, as demonstrated by industrial data from the period:
As for the movie industry moving to Hollywood, it's not like they were building competing or advancing technology that was blocked by patents: they were just consumers that straight-up refused to pay for the technology they took advantage of.
> Industry progress on the TV happened only when the patents expired.
I read the paper, thanks. It is mostly concerned with events from 1916 on. The Wrights had earlier demanded and gotten 20% royalties, and had a history of liberally and repeatedly suing other aircraft manufacturers. It is also pretty clear, despite the paper's claims, that the leaders in manufacturing and innovation were in Europe.
Note also that current patent litigation hasn't exactly retarded the computer industry, but it has imposed huge costs on it, and it's hard to see any evidence that such patents have promoted the arts and sciences in any way.
> The Wrights had earlier demanded and gotten 20% royalties, and had a history of liberally and repeatedly suing other aircraft manufacturers.
Because all the manufacturers were using the technology they had invented, the very technology that made controlled heavier-than-air flight possible at a time when people were starting to doubt that it was possible. Many chose to fight the patent, but courts time and again found it to be valid and infringed. The Wrights may have gotten a bad rap for being litigious, but only because many like Curtiss tied them up in court for years to avoid paying royalties on technology they clearly owed.
> It is also pretty clear, despite the paper's claims, that the leaders in manufacturing and innovation were in Europe.
Not so sure about that. Most historical accounts still show America as being more innovative than Europe. Things like the seaplane were invented by Curtis in America.
>... hard to see any evidence that such patents have promoted the arts and sciences in any way.
There are a number of studies showing how patents help the arts and sciences. For instances, there are studies showing a direct increase in r&d expenditures and increase in strength of IP laws. Patents have been shown to increase the chance of finding from VCs and other sources. This has also been shown to apply to the tech and computer industries. It may be hard to see because few think of the huge role money plays in the vast majority of innovation.
I'm in favor of a strong legal shield. A business started in good-faith with some legal uncertainty that loses a lawsuit shouldn't cause its owners to have their wages garnished for the rest of their lives.
Shell companies whose sole purpose is to shield the owners from lawsuits that they're planning to make seem like a different matter, though. It would be dangerous to limit them while preserving the usefulness of the first case, but I was mainly asking if there was already something in the law for this. It sounds like there isn't?
One way to deal with the shell problem us to require a bond to be posted, that's forfeit if the lawsuit is found without merit. An insurance company then can pick the risk and set the premium according to their assessment whether the lawsuit has been filed in bad faith.
The court will have to work extra hard to make the distinction, but that might be the acceptable compromise in dealing with shell companies.
Here's an idea: undertake tort reform, don't allow corporate shields to exist that allow for shell companies like this one, and fix the very broken patent system.
I'm certain that all three things can be done in parallel.
Do you really want to be on the hook for legal fees? You start company x. Company y, a larger wealthier foe, pummels you in court over questionable claims, say another broad and abstract patent. You lose, get a judgement and have to pay legal fees.
Your company folds. Company y then requests your corporate shield be taken down. Now you personally have to pay his $5 million in legal fees which are now on you. You lose your house, you get your wages garnished forever, etc.
Under the American rule (as opposed to the English rule) loser pays is very rare. Specifically for patents the law only authorizes them in "exceptional cases". In this case they were ordered for filing numerous frivolous lawsuits. Nothing in the scenario you outlined suggests anything exceptional. Defendants are allowed to defend themselves.
If a court finds a defendant meets this high burden as to the plaintiff's actions, then yes I think the real parties in interest behind the corporate veil should be on the hook. What's the alternative? That defendants who were the victims of frivolous lawsuits have to pay hundreds of thousands of dollars out of their own pockets? Who knows what assets had to be sold to raise that money or whose livelihood was destroyed? How is that an equitable outcome?
We also do not want what we have now - where you can sue with impunity as a patent troll as a means for profit. Because you cannot hold individuals liable for their businesses, people can exploit that loophole for profit.
But what you touch on is a more fundamental issue that the "justice" system in the US is more often than not a competition between who has the most money on hand, and as a means for lawyers to profit generously, rather than anything righteous or just.
It's a great system in commonwealth countries. It discourages litigation from larger companies precisely because the judge has discretion to award costs. In some cases the judge can even award in favour of the plaintiff, and then award costs against them as well. Yes - you should want this.
Of course patent trolling always becomes a discussion of corporate shielding instead of the conversation we need to have: a radical reform of the patent system and a re-thinking of what should be patentable, especially in the software world.
This conversation always gets derailed by the tort reform crowd on the right or the anti-corporate shield crowd on the left. Those are just symptoms to a larger problem and both of those things (torts, shields) exist for valid reasons. Fix patents instead.