Patent Trolls and the SHIELD Act

The SHIELD Act proposes making patent trolls’ lives harder by putting them on the hook for legal costs of filing frivolous lawsuits against businesses in order to extract a settlement, or money to resolve the lawsuit without a judicial hearing.

However, I find it unclear about what happens when a startup doesn’t have “millions of dollars” to survive the legal process to be assigned recompense.

While most startups without that amount of capital don’t usually get targeted, patent trolls are known to camp the Regulation D filings that often break the news that a hot startup is announcing funding.

A startup newly endowed with funding wants to focus on scaling, not fighting off lawsuits. Fighting off the lawsuits costs money and time, both precious to young companies. A startup that folds—its capital drained by legal costs or any other failure mode—can have its assets bought for pennies on the dollar, adding to the arsenal of the patent troll.

The SHIELD Act definitely seems to make patent trolling more of a risk, but if a startup is targeted, a backloaded cost to the troll could still come too late for founders and their companies.

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