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No you sue for enough to cover the costs of both.
You sue me, it costs me X to defend against a frivilous suit. I sue you for X + Y, Y being the cost of suing you for the X amount. If the suit was realy stupid, you could sue for X+Y+Z, Z being penalities for being an idiot.
This is better than loser pays, in that it will only work if the original suit is frivilous or unreasonable.
If you really want to make it work, loser's LAWYER pays. That would stop a LOT of stupid suits, IMO.
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