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IP, Patent

Please, By All Means, Keep Calling East Texas “Plaintiff Friendly” Even When It’s Not True

If you read any contemporary articles, blogs or lawyer commentary about patent litigation, the two phrases “plaintiff-friendly” (or “patent owner friendly”) and “East Texas” are often found close together.  I, for one, like this characterization because I like inventors (they’re nice people, really) and I want patent owners to be successful when they try to license their patents.  Successful patent owners tend to want to re-invest their returns into more patents, which gives inventors hope that future patents will also be worth something … and thus they keep inventing.

The urban myth of the “plaintiff friendly” East Texas courts helps convince patent infringers that they should “fear” the court’s results.  Longtime attorney for legendary inventor Jerome Lemelson, Jerry Hosier once said “This business is not based on what’s right or what’s wrong. It’s based on fear.”  And if that “fear” means patent owners that are known for using East Texas courts get better results, so be it. However, I am a stickler for facts, and the fact is it just ain’t true.

If you’re just looking at the fabled “win rate” statistics, I reported those back in January:

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.
See Eastern District Of Texas – Leveling The Playing Field

In fact, 2007 was generally considered the year of the defendant in East Texas as patent owners lost more cases than they won, and the score card has pretty much held even since then.  While there have been some big plaintiff wins this year, one of the biggest (Mirror Worlds) was taken back by Judge Davis.

In any event, win rates aren’t the only factor.  In fact, given that 80 percent of cases settle, it might be the least relevant.  Lawyers trying to get their clients out of East Texas frequently did so only to put the case in a  jurisdiction with no specific procedural rules for patent cases.  This indicates less familiarity with nuances of patent litigation, and less predictability.  As I wrote in IAM Magazine this spring, if use of local rules is your proxy, “by uniformly requesting transfer regardless of specifics in the case, your lawyer is statistically more likely to put you in a worse position than if you simply agreed to remain in East Texas.”  (See Sued in East Texas – should you stay or should you go?)

My article also mentioned several other factors to consider before transferring, including time to trial (which bears a significant correlation to damages) and “trial” win rates versus overall win rate.  For example, the supposedly “defendant” friendly Northern California actually boasts a higher trial win rate (71%) than East Texas (66%).  However, Judge Davis provides yet another reason to stay put rather than ask to be severed off and transferred.  Michael Smith over at the Eastern District Blog reported that Judge Davis held a consolidated hearing in a case involving a whopping 112 defendants.  After considering an issue common to the entire case, Davis agreed that trial was unnecessary as to 99 of the 112, and ruled on his own that there’s no possible way those 99 companies infringe a patent owned by Parallel Networks.  (In lawyer-speak, Davis “grant[ed] summary judgment of noninfringement as to 99 of the  112 defendants”).  More impactful, however, were Judge Davis’ closing remarks in the order (which are usually poignant):

The Court notes that in many patent cases before it involving multiple defendants, it is frequently faced with motions for severance and transfer to many different districts. Had the Court taken that approach in this case, Parallel and Defendants would be litigating this patent all over the country in many districts at great additional expense to all parties and the judiciary.
The Court commends the parties in this case for working together to identify issues common to nearly all Defendants and moving the case to resolution of these important issues in a timely and economic manner. By doing so, this case was resolved in a manner of months—as opposed to years—for the vast majority of Defendants. By all Defendants remaining in one case in one District, the Court was able to resolve the controversy in the most judicially economic manner sparing many other courts from repetitive work, and at the same time saving the parties very significant sums of money in attorneys fees.

On the downside, the law firms of 99 companies won’t be able to milk out hourly fee invoices for years to come.  Wait, is that a downside?

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