Report: Patent Litigation Bounced Back, Migrated to Texas in 2015

March 15, 2016, 10:10 PM

The number of patent cases filed in federal court jumped up in 2015, and the Eastern District of Texas emerged as the single most popular place to file cases by a large margin, according to a report scheduled for release on Wednesday.

Issued by data analytics company Lex Machina, the report looks at intellectual property litigation in U.S. District Courts, using data mined from PACER, the federal courts database.

The report found there were 5,819 total patent cases filed in 2015. That’s up 14.7 percent from 5,070 in 2014 but still lower than the previous high of 6,113 in 2013.

Jon James, co-chair of Perkins Coie’s intellectual property practice, cited two key developments that caused the temporary dip in 2014. In Alice Corp. v. CLS Bank International, the Supreme Court decision restricting the ability to patent computer software, which killed many cases. Secondly, the Patent Trial and Appeal Board, established by the America Invents Act in 2012, gave defendants an alternative forum to challenge patents and derail any parallel federal lawsuits.

James said he believes the drop in filings in 2014 was only temporary while the plaintiffs’ bar contemplated the impact of those developments. Now, patent filing rates are back.

“If you go back, things really fell off the table in third and fourth quarters of 2014,” he said, referring to the drop in filings. “When people really started to internalize the impact ofAlice and PTAB, there was a little bit of pause to reprice and reassess. Markets adjust.”

The report also found another shift in filing patterns: Until 2015, both the Eastern District of Texas and the District of Delaware had rivaled one another as the most popular patent courts in the country. But this past year, Texas easily surpassed all other courts.

Total filings in the Eastern District of Texasshot up 78 percent in 2015, where 2,540 new filings Texas accounted for 44 percent of all patent cases filed nationwide.

Meanwhile, filings in Delaware were down 42 percent.

[caption id="attachment_8286" align="aligncenter” width="1860"][Image “Courtesy of Lex Machina” (src=https://bol.bna.com/wp-content/uploads/2016/03/annual-trend.jpg)]Courtesy of Lex Machina[/caption]

“There were a couple of federal judges in Texas who put on their marketing hats and said, ‘If you bring your case down here, we’ll move it along and you’re gonna have a trial,’” said Lee Carl Bromberg, a long-time patent litigator at McCarter & English.

In a typical patent litigation, after the plaintiff files a federal court complaint, the defendant files a PTAB petition challenging the validity of the underlying patent.

John Allcock, global co-chair of DLA Piper’s intellectual property and technology practice, said Eastern District of Texas judges have been more reluctant than Delaware judges to stay litigation pending PTAB proceedings, making Texas suits more costly for defendants.

The Eastern District’s increasingly outsized-share of patent litigation has raised some eyebrows: “You go down to this little town in Texas, and inside are 200 lawyers in very expensive clothes representing some of the biggest companies in United States,” Bromberg said. “What’s wrong with this picture? Why should this little corner that’s not particularly a hotbed of innovation have such an important role to play in patent law?”

Several lawsuits have challenged the venue rules that give plaintiffs wide latitude to file in Texas. Bromberg also pointed to pending legislation in Congress which would require that the locations where patent suits are filed “have some reasonable connection to the dispute.”

[caption id="attachment_8316" align="aligncenter” width="1628"][Image “Courtesy of Lex Machina” (src=https://bol.bna.com/wp-content/uploads/2016/03/trend-districts.jpg)]Courtesy of Lex Machina[/caption]

Several lawyers said that litigation analytics and reports like Lex Machina’s have had an impact on litigation strategies, but also cautioned against drawing too many conclusions from data about filings: Much of the activity is driven by a relatively small number of plaintiffs and firms, and settlement values are confidential, they said.

According to the report, the top three plaintiffs — referred to in the report as “patent monetization entities” — were Edekka (101 new cases in 2015), Data Carriers (85), and Cryptopeak Solutions (66). Samsung overtook Apple as the top defendant in 2015, facing 64 new cases whereas Apple faced 57. Mylan Pharmaceuticals faced 50 new patent cases last year, the third highest number.

“The fact is, with a lot of these serial filers, these are very very low-end cases,” said James, of Perkins Coie. “Their opening offers are in the mid-five-figures, even for huge defendants. I recently settled a case for a very large company for $15,000 and a couple of phone calls.

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