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IP, Patent

Eastern District Of Texas – Leveling The Playing Field

If you read about, get involved in, or otherwise pay attention to patent litigation, then you’ve heard of Marshall, Texas.  For instance, Marshall is on the radar screen of judges in Washington, DC, as evidenced by the recent decision in In re Microsoft (one of several in the past couple of years) forcing the District Court to transfer a case to a new locale.  According to Craig Tyler, even his “Pacific Rim” clients know about the small town of 20,000 or so residents sitting on the Louisiana border.  As a guy who grew up in another small town of about 20,000 on the Louisiana border (El Dorado, Arkansas), Marshall reminds me of home.  Tyler’s clients, however, do not share my affinity.  Tyler explains:

“When you say ‘Marshall, Texas’ to your Pacific Rim clients…they know what you’re talking about.” And their response is rarely a happy one, he adds.

Their response isn’t happy because they were more than likely sued in Marshall, and either lost an infringement trial or ended up paying a settlement to avoid one.  Indeed, Marshall quickly garnered a reputation for being friendly to patent owners, and that reputation was not lost on court followers.  A 2006 Technology Review article called it “a haven” saying:

[P]laintiffs have such an easy time winning patent-infringement lawsuits against big-tech companies that defendants often choose to settle rather than fight.

That same year, the New York Times wrote “What’s behind the rush to file patent lawsuits here? A combination of quick trials and plaintiff-friendly juries, many lawyers say.”

However, before the ink was dry on these articles, the tides had already started to change.  According to a study published in 2007 by Price Waterhouse Coopers, the cumulative win rate “after summary judgment” (presumably meaning at trial) from 1995-2006 was a whopping 83%, and the overall success rate was pegged at 60%. (PWC 2007 Study pg 20).  However, just a year later, according to the 2008 study, the win rate for decisions from 1995-2007 (incorporating just one additional year of decisions) had fallen to about 72% at trial, with the overall success rate falling to just shy of 55%. (PWC 2008 Study pg 17).  The most recent figures show decisions from 1995-2009 with a 67% win rate at trial, and a 55% win rate overall.  (PWC 2010 Study pg. 22).  Thus, the trial win rate between 2006-09 has been dramatically lower than the years from 1995-2006, and the overall win rate has held more or less steady the past three years.

David's use of a small, fast moving projectile gives him an unfair advantage over the lofty Goliath.

Nevertheless, the plaintiff-friendly perception of the Eastern District of Texas persists, both in mainstream (such as the Dallas Morning News in 2010 calling it “extremely plaintiff-friendly“) and technical media (such as Ars Technica in 2009 referring to the “patent-troll-friendly Eastern District of Texas“).

This perception also still permeates conventional knowledge, as casual observers (such as Tim Berry) use phrases like “drastically slanted playing field” to describe the district.  I don’t fault Berry for having this perception, and he did post links to the reports that I mentioned above so that his readers can make their own conclusions.

However, let’s assume for the moment that the perception is true.  Berry further criticizes East Texas litigants like Yale University’s David Gelernter, saying:

It all sounds good to me. Except then he went and set up an office in East Texas, pretty damn far from Yale, to sue in East Texas patent troll heaven.

In a moment of understanding, Berry adds:

But wait — is he wrong to do what optimizes his chances to win?

In that rhetorical question, Berry highlights the purpose of exploiting a perceived advantage: to increase your chance of success against a more formidable opponent.  Criticizing particularly small companies for the mere fact that they bring their lawsuits in East Texas is a bit like criticizing David for daring to use more advanced weaponry (small, high speed projectiles) against Goliath, reportedly armed only with more conventional weapons like a spear and a sword.

Berry queried later in the day, asking if I thought “east Texas courts are no longer biased towards plaintiff?”  Of course, this assumes I believed the courts to be biased in the first place.  The truth is, whether a court is biased or not is not something you can glean from jury trial win rates.  Winning a jury trial is more about communicating with the jurors than anything else.  Plaintiffs who expressly chose to file in East Texas can be presumed to be have planned accordingly, defendants tend to be more reactive.  As the statistics show, they’re catching up.

Nevertheless, even during the more imbalanced period prior to 2007, strategically filing in the Eastern District wasn’t less about tilting the playing field in your favor, and more about exploiting one advantage to neutralize advantages of larger, wealthier opponents.  Today, despite the falling win rate, the Eastern District still prevails as one of the forums of choice because of the efficiencies it promotes, such as an organized, structured time table for discovery, and fixed trial dates.

You might expect all courts would provide these things, but you’d be wrong.



10 thoughts on “Eastern District Of Texas – Leveling The Playing Field

  1. “drastically slanted playing field” It’s not the eastern
    district that’s slanted, but rather the reporting on. Most writers
    understand little about patent law and appear to be little more
    than PR arms of large infringers. True, patent law is
    complicated…but is it THAT complicated?? Geez! It’s widely known
    (by those who haven’t stuck their heads in the ground) that most
    judges hate patent cases. It’s all about time to trial and having a
    judge that doesn’t hate you and your case before you even start.
    Small entities need a short time to trial. Infringers prefer to
    wait until hell freezes over.

    Posted by staff | January 8, 2011, 10:49 am
  2. “patent trolls” Prior to eBay v Mercexchange, small
    entities had a viable chance at commercializing. If the defendant
    was found guilty, an injunction was most always issued. Then the
    inventor small entity could enjoy the exclusive use of his
    invention in commercializing it. Unfortunately, injunctions are
    often no longer available to small entity inventors because of the
    Supreme Court decision so we have no fair chance to compete with
    much larger entities who are now free to use our inventions. Worse
    yet, inability to commercialize means those same small entities
    will not be hiring new employees to roll out their products and
    services. And now some of those same parties who killed injunctions
    for small entities and thus blocked their chance at commercializing
    now complain that small entity inventors are not commercializing.
    They created the problem and now they want to blame small entities
    for it. What dissembling! If you don’t like this state of affairs
    (your unemployment is running out), tell your Congress member. Then
    maybe we can get some sense back in the patent system with
    injunctions fully enforceable on all infringers by all inventors,
    large and small. Call it what you will…patent hoarder, patent
    troll, non-practicing entity, etc. It all means one thing: “we’re
    using your invention and we’re not going to pay”. For the truth
    about trolls, please see http://truereform.piausa.org.

    Posted by staff | January 8, 2011, 11:03 am
    • Again you raise some good points. Being in business necessarily involves the management of various risks. When automatic injunctions were taken away, the risk of infringing became much lower because the decision to grant a license is effectively taken out of the patent owner’s hands after trial.

      While bad faith might still color a court’s analysis on setting royalty rates, but at the end of the day the patent owner has no control to exclude others from practicing. Increased infringement and decreased willingness to negotiate was an inevitable result of this change.

      Posted by Patrick | January 8, 2011, 1:12 pm


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