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Hi, I’m Brad Feld, a managing director at the Foundry Group who lives in Boulder, Colorado. I invest in software and Internet companies around the US, run marathons and read a lot.

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Sawyer Opines on the Eastern District of Texas

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My friend Sawyer is back with another post in his series of talking about software patent issues.  As I mentioned before, Sawyer is a real person named after our intrepid friend in LOST (I haven’t seen it this week – no spoilers please) who has agreed to help us navigate the parallel universe known as software patent land.  I’m channeling Sawyer’s points of view as a public service announcement since he’s uncomfortable being named publicly – these are his words, not mine.  Today’s post is on the famed “Eastern District of Texas” (EDTX), one of the most popular places in the United States for patent litigation.

In the past several years, the Eastern District of Texas (EDTX) has become one of the premier venues for patent litigation, along with NDCAL, CDCAL, DDEL, and WDWIS. Although the dockets are packed now, when the trend first started, plaintiffs could anticipate trials in short order, perhaps 12 to 18 months, and plaintiff-friendly juries.  There is also a basic sense of unfairness that defendants, rightly, feel when they have nothing or almost nothing to do with the district and yet get hauled down to court there, but the ability of plaintiffs to do that is a more fundamental flaw in the Supreme Court’s personal jurisdiction jurisprudence that is best left for another discussion.

There are a lot of stories told about EDTX and how it became a big spot for patent litigation. I won’t name any names here because EDTX lawyers have a tendency to sue anyone who says anything that could be portrayed in a negative light (see, e.g., the Troll Tracker defamation suit.) The basic story I’ve heard though, is this: EDTX was well-known as district with plaintiff-friendly juries after a raft of tort litigation where juries handed down large judgments. The judges and practitioners in area, seeing the coming wave of patent litigation, got together and decided to retool the district for being “patent-friendly.” This mainly involved adopting rules to streamline patent cases, similar to NDCAL, so that plaintiffs would get to juries faster. It’s important to note that this isn’t per se a bad or unethical thing – lots of federal districts are known as “rocket dockets” for one kind of case or another because of concerted efforts to attract and streamline litigation of certain types of cases.

The adoption of those patent local rules, along with a general unwillingness of the courts to throw cases out before trial on what’s called “summary judgment,” lead us to where we are today. Another thing to note, which is changing due to recent appellate decisions, is that EDTX courts have been very unwilling to transfer cases out to other venues. The Fifth Circuit and Federal Circuit have issued an unusually high number of reversals of EDTX decisions not to transfer, and the message seems to be taking and moderating both the desire to keep cases and any “pro-plaintiff” bias one could see.

These days, EDTX actually isn’t so bad for defendants. They win a significant number of cases, primarily because defense counsel has figured out how to navigate the courts, how to wear the “white hat” with the judges, and how to appeal to the juries down there. Still, the data show that when plaintiffs win in EDTX, they tend to win bigger than in any other court; and, when certain defendants develop “bad” reputations with the court or with juries, they get hit with big judgments repeatedly.

It’s also appears that EDTX has made a concerted effort to be “patent friendly,” and that the concomitant economic impact on the area, particularly in Tyler and Marshall, Texas, has been significant. From observation, EDTX is also where most of the software NPE/troll cases are filed these days because it’s still the fastest and most friendly docket for those cases.

That said, blaming EDTX won’t solve the underlying problem of patents and the patent system, especially in software. If there was no EDTX, another district would crop up to attract the big-ticket software patent suits, especially the NPE/troll cases. As long as the expected value of an NPE suit is positive, plaintiffs will find friendly places to file, and districts will make themselves friendly to those suits to stay busy, attract the economic windfall, and generally stay relevant. Don’t get me wrong, venue is a significant issue and has a big impact on the outcome of cases, but focusing reform and publicity efforts on grumbling about the courts won’t get us anywhere. The real problems are more fundamental to how people get patents, what is patentable, what the patents themselves look like, and how the legal system allows them to be used; focusing on the mechanics of where suits are filed is a distraction from the real issues that are bleeding our most innovative technology sectors and slowing down technological progress.

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