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I understand and agree with the fairness in the losing party having to pay the other party's attorney fees. However, won't this foster a chilling effect on the "little guys" (we, the peasants) from suing the "big guys" (big business)?

For example, if Microsoft or Apple infringe on your intellectual property, or your iPad causes you to slip and fall down 11 flights of stairs, or whatever, I'd still be hesitant to sue a company like either of these, given you could potentially have to pay their attorney fees, which amount to one gold bar per hour, give or take. Per attorney.

Is there any law or provision that addresses this or takes it into consideration?

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The US has what's known as the American Rule, where each party pays their own attorney's fees. However, there can be conditions under which the loser has to pay. At the federal level, this is the default per Federal Rules of Civil Procedure 54(d)(1), but 28 USC 1927 says that

Any attorney or other person admitted to conduct cases in any court of the United States or any Territory thereof who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, expenses, and attorneys’ fees reasonably incurred because of such conduct.

Various states have laws allowing the prevailing part to recover attorney's fees.

I think the problem is that your initial assumption that the loser pays is wrong. In the US.

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    Worth noting, in addition to the vexatious litigant situation, there's also the "common fund" principle, where a court may award attorney's fees to a party whose suit "creates or preserves a fund of money, or obtains a benefit, for others as well as itself." justice.gov/jm/civil-resource-manual-220-attorneys-fees. Many statutes allow for it; likewise, many of those statutes include limits on the amount. Often the amount must be reasonable. Interestingly, Nevada has a rule that if a party declines a settlement offer & fails to get a better result at trial, he's liable for fees!
    – A.fm.
    Nov 27 '19 at 6:06
  • But I've seen time and time again in the US contracts where it's stated that the losing side will pay for the other side's attorney fees, and seen cases where this does happen (though only pre-trial). What am I missing? Nov 27 '19 at 23:22
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Both of the rules offered so far rely on the "American Rule," i.e., each side pays its own fees, but neither makes any mention of the many, many exceptions in which a party may end up paying for everyone's lawyers simply because they lost.

One category that you mentioned an interest in -- slip-and-fall cases -- will rarely be one of thsoe exceptions, but the rule may vary from state to state.

The other category -- IP cases -- can frequently allow for fee-shifting to a the prevailing party. Federal statutes governing patent (35 U.S. Code § 285), trademark (15 U.S. Code § 1117), and copyright (17 U.S. Code § 505) litigation all allow courts to order the loser to pay the winner's legal fees.

And there are many, many more kinds of cases that permit fee-shifting under varying circumstances, including civil rights (42 U.S. Code § 1988), FOIA (5 U.S. Code § 552(a)(4)(E)), FLSA (29 U.S. Code § 216), EAJA (28 U.S. Code § 2412), and antitrust (15 U.S. Code § 4304).

Keep in mind, though, that this means not only that you could be forced to pay the other side's fees, but that they, too, could be ordered to pay yours. You undoubtedly have less money to spend on lawyers, but there are many firms that handle these cases on contingency to address that disparity.

You could fairly say that this has a chilling effect on litigation, but that is probably the point. The courts want to discourage parties from infringing on each other's patents, they want to discourage flimsy assertions of infringement, and they want to encourage the presuit resolution of these disputes.

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  • Thanks, that helps clarify, as I've seen a number of contracts where it's stated that the losing side will pay the winning side's attorney fees, and not only in IP law. I've also known of cases where this has happened, albeit pre-trial (never going to trial, so not technically mandated by any courts). Nov 27 '19 at 23:24
  • Also, I understand the rule in principle and agree with it, I just think that without some oversight, there's an unintended consequence of one side being able to threaten or scare away the other side by "abusing" this rule, so to speak. Because otherwise, what's stopping any business from dangling a blade of mega high attorney fees to any would-be plaintiffs in an attempt to scare them off... even if the business is clearly in the wrong on something. Nov 27 '19 at 23:29
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You can’t look at the laws of a country individually, they come in a package. In the USA, the package is “everyone pays for their lawyers, and everyone can spend as much money on their lawyers as they like”. If you sue Apple for $1000 and they spend a million on lawyers, that’s their problem. Obviously changing only the “loser pays” portion of the package would create a bad law.

Germany for example has a different law: Loser pays, but the court sets the lawyer cost according to the value of the court case. If you sue Apple for $1000, the court will set lawyer and court cost to say $100 each (the exact amount is different). If you are greedy and ask for a million, the cost will be something like 20,000 each. And if you are awarded 1000 of that million, you more than 99% lost the case, so you lose out big time. As a result, people don’t ask for unreasonable amounts of damaged, unlike the USA where asking for a million instead of $1000 has no downside to you.

Summary: If you change to “loser pays”, you have to make some other changes as well, and there is no chilling effect.

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  • But I've seen in many US contracts where it's stated that the losing side will pay for the winning side's attorney fees. Is this just drummed up "show" similar to contracts that say you're agreeing to give up rights, despite such not actually being enforceable in court? Nov 27 '19 at 23:31

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