Hulk Hogan victory over Gawker shows problems with a bond requirement


A Florida jury recently awarded $115 million to former professional wrestler turned reality TV star Hulk Hogan.  As you might expect, Gawker immediately announced they would appeal. Unfortunately for Gawker, thanks to Florida law, they could be required to post a bond of up to $50 million for the privilege of appealing this decision. Posting a bond that large, Gawker argues, would imperil their ability to defend themselves and mount an appeal. Indeed, this verdict could destroy Gawker altogether.

Without getting into the substance of the Hogan vs. Gawker lawsuit, the issue of posting bonds to appeal is quite relevant in the ongoing debate over patent reform. While the philosophy behind a bond requirement makes some sense, in practice there are serious issues with prohibiting a party from appealing a decision unless they can post a ridiculously expensive bond.

The issue of bonds has been an important matter for innovators. The bond requirement has been promoted by Senator Orrin Hatch (R-UT), for example, as a way to curb abusive patent litigation by forcing those who have lost to reasonably assure the victorious party that the losing party can cover any resulting losses to the appellee before they can appeal.  VCs, universities and others object to the bond requirement and related measures that would enable defendants to get “real parties in interest” to shift fees, arguing that the real motivation is simply to make it financially impossible to ever assert a patent in the first place.

These issues and question facing Gawker and playing out on the front pages of the tabloids are exactly the same issues and questions that have so animated innovators who want strong patent rights in order to successfully protect their innovations. Without strong patent rights that can be enforced against infringers, the business of inventing is simply not economically practical. Large multinational corporations can walk all over smaller innovators, and universities too. Therefore, meaningful access to the courts is essential for patent owners, including meaningful access to appellate courts.

Without meaningful access to courts, the problem of “efficient infringement” becomes even more problematic. Efficient infringement is already a growing and concerning trend within the industry. For example, today it is perfectly reasonable fiancially to choose infringement as the preferred business strategy, rather than to respect patent rights and enter into a licensing deal. Given how weak patent rights have become, how easy patent rights have become to invalidate, and how impossible patent rights have become to enforce in litigation, businesses of all sizes would be foolish not to at least consider infringing as a viable option to negotiating a resolution with a patent owner. Of course, this new business reality facing patent owners means that if they are to get paid for the fruits of their labors, they must turn to litigation. Thus, any reforms that would make access to courts more difficult is viewed as a non-starter for many.

Between fee shifting and onerous bond requirements, innovators could be forced into betting their entire company in order to seek redress for infringement. That calculation is what efficient infringers are banking on. If pursuing litigation becomes so onerous and so full of risk, fewer and fewer will do it. Thus, efficient infringement creates its own feedback loop that reinforces the behavior.

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