A Florida jury recently awarded $115 million to former professional wrestler turned reality TV star Hulk Hogan. The trial will now continue with a punitive damages phase, which could increase the award owed by Gawker, the online publication that published a sex tape that led to this lawsuit.
Gawker is already planning their appeal, but there is already a question about whether they will even be able to withstand the financial burden of appealing the decision. Gawker claims that the jury did not hear all of the evidence, that the verdict is incorrect, that they should have prevailed but that the cost of appealing would be crippling because they could be required to post a bond of up to $50 million. 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 a contentious one, and if you ask me there is something fundamentally unfair about requiring a party to pay in order to challenge what they believe is an erroneous or unfair ruling. It seems particularly wrong in the patent space where we know that strange and mysterious things transpire in the name of “efficiency,” but which over the years increasingly seem like code for nothing short of denying property rights to patent owners. Yet, pending patent legislation would impose a bond requirement to exercise what seems like a fundamental right — to seek redress for an incorrect, unfair or unjust ruling.
When a victorious party has succeeded during litigation the court can require the losing party to post a bond before allowing any appeal. The theory is that with the bond being posted there is some assurance that a defendant is not merely trying to stall payment of judgment, and that the defendant will have the assets to cover the judgment should they ultimately lose on appeal. Similarly, if the plaintiff, such as a patent owner, is required to post a bond it provides assurance that the non-infringing defendant can seek redress for wrongfully being charged with infringement.
But what happens if there really is a travesty of justice during the trial and the defendant is required to pay for a crippling bond in order to seek redress from an unjust verdict?
The issue of bonds has been an important matter for innovators, particularly so during the latest round of patent reform discussions in Congress. The bond requirement has been promoted by Senator Orrin Hatch (R-UT), for example, as a way to curb abusive patent litigation. VCs, universities and others protest the bond requirement and related measures that would enable defendants to get “real parties in interest” to shift fees.
Gawker recently took on private investment for the first time. Apparently Gawker management did so to anticipate the costs of this lawsuit. Will these investors now have to shoulder the expense of the bond and the downstream risks of greater damages and attorneys’ fees being shifted? What if Gawker runs out of cash? Can Hulk Hogan go into the pockets of the management team and investors?
These issues and question facing Gawker and playing out on the front pages of the tabloids and across virtually every social media platform are exactly the same issues and questions that have so animated innovators who need strong patent rights. Without strong patent rights that can be enforced against infringers the business of inventing is simply not possible. Large multinational corporations can walk over smaller innovators, and universities too.
The problem of efficient infringement is very real – it is perfectly reasonable and rationale to choose infringement rather than to respect patent rights or 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. With no business deals to be done as a result of the rationale business choice to engage in efficient infringement, patent owners are forced into costly litigation in hopes of vindicating whatever rights they can salvage. But it is unrealistic to believe even the most careful and cautious patent owners will be correct 100% of the time.
Between fee shifting and onerous bond requirements innovators could be forced into betting their entire company or the future of their family in order to seek redress for infringement. That is, of course, what the efficient infringers are banking on and why they want to make it more onerous for patent property rights owners to sue. Make it more costly and place personal liability at the feet of investors, that is a recipe for ensuring that infringers are never brought to justice and called to account for their infringing activities.