"The suit had cost $3 million, and the financial damage was done."
This is the problem. In all other countries (except Great Britain, AFAIK) the loser pays all costs (including the public cost of the trial and the opposing party's legal fees).
The loser-pays system has three effects:
1. No frivolous lawsuits. Cost of losing is high.
2. The defending party will defend vigorously if it believes itself to be in the right.
3. It is relatively cheap to get legal insurance (almost everybody in Germany has it)
Overall this reduces lawsuits in general, stops or reduces the power of threatening legal action, and it stops or reduces the practice of throwing the equivalent of legal sh*t at the wall to see what sticks.
Loser-pays is a non-starter in a country like the US that uses private civil litigation to enforce everything from workplace racial discrimination laws to environmental regulation.
Honestly, if you study the system a little bit, at least in the US, the problem isn't too much litigation, it's too little litigation. E.g. people complain about all the medical malpractice suits, but a Harvard Medical School study a few years ago suggested that far more people with meritorious claims failed to file suit than the number of people with unmeritorious claims who did file suit. There are tons of meritorious environmental law suits that don't get filed because polluted communities either don't realize they can sue or don't want to take on a big corporation.
"Loser pays" really favors big companies and the status quo, and in the absence of a big pro-active government to vindicate peoples' rights really results in those big companies trampling on those rights.
The problem with doing loser pays in the US is that in the US we use private civil litigation to handle things that would be dealt with by government regulators and agencies in other countries. For instance, we rely on civil litigation to enforce consumer protection and civil rights laws to a larger extent than others do. Loser pays in the US would discourage a lot of meritorious lawsuits from individuals against large companies, because there is always a significant risk of losing even if you have a good case--a jury can be a crapshoot.
As I understand the system, there are usually two mechanisms in place to offset this:
First: The loser pays costs as determined by the court , usually on a preset schedule. It's not like the winner gets to send the loser an invoice for infinity bajillions and they just have to pay up.
Second: You can apply for having the government pay if you loose. You have to file a petition explaining how (a) there's a benefit to society in having the case heard and (b) how you're not financially fit to bear the costs yourself.
It's missing a critical component, however: it doesn't include a bond requirement on the part of the suing company. Therefore it only helps so much as patent trolls typically sue from a shell company with no assets.
This is the problem. In all other countries (except Great Britain, AFAIK) the loser pays all costs (including the public cost of the trial and the opposing party's legal fees).
The loser-pays system has three effects:
1. No frivolous lawsuits. Cost of losing is high.
2. The defending party will defend vigorously if it believes itself to be in the right.
3. It is relatively cheap to get legal insurance (almost everybody in Germany has it)
Overall this reduces lawsuits in general, stops or reduces the power of threatening legal action, and it stops or reduces the practice of throwing the equivalent of legal sh*t at the wall to see what sticks.
Edit: Spelling