For Patent Trolls, Location Is Everything

This is the year for patent reform. Let’s put an end to forum shopping.

There’s a bill on the U.S. Senate floor that would make it more difficult for patent trolls to pressure innovators with unfair infringement lawsuits. But there’s a key provision missing. Without that provision, we think that the bill’s reforms would not be as effective as they could be.

The PATENT Act (Protecting American Talent and Entrepreneurship Act) would take some big steps to fix patent litigation. It would require patent owners to provide more in-depth information about the alleged infringement at the time when they file suit (it’s a common patent troll tactic to waste defendants’ time and money with unclear allegations). It would make it more difficult for trolls to target end users. When the court rules against a troll, it would allow the court to more easily require the troll to pay the defendants’ legal fees. We’ve written about the PATENT Act before, and we think it’s a promising development.

What’s missing? Venue reform.

Why does venue matter?

Under current law, a patent owner can usually file suit in any district in which the defendant does business. The federal circuit has ruled that for the purposes of determining where a patent case is heard, a business is considered active in any state in which its products or services are available. For many patent defendants, that means that a troll can sue them for infringement in any district in the U.S., regardless of where they’re based or conduct the bulk of their business.

To understand why that’s a problem, look no further than the Eastern District of Texas. In the past 16 years, the Eastern District has become increasingly attractive to patent trolls as a venue for patent infringement suits. In the first half of 2015, nearly half of the nation’s patent lawsuits were filed there.

Earlier this year, we reported that some Eastern District of Texas judges had instituted rules that seemingly contradict federal procedural law. For example, the federal rules allow a defendant to file a “motion for summary judgment,” arguing that the plaintiff cannot win given the undisputed facts of the case. This process is meant to be quicker and more efficient than trial and can discourage patent owners from filing blatantly absurd infringement suits.

But some judges in the Eastern District require defendants to ask for permission to file a motion for summary judgment, with no assurance that the court will give that permission. As for defendants that are granted permission to file a motion for summary judgment, those motions are successful only 18% of the time (the national average is 31%).

Another way the Eastern District favors patent owners is with discovery rules. Discovery is the process whereby litigants request information and documents from each other that will be relevant to the case. Discovery is often very expensive for defendants in patent infringement cases; it’s one of several factors that can make patent litigation much more costly for the defendant than for the plaintiff.

It’s particularly problematic in the Eastern District, where judges require parties to turn over a lot of information without being asked and to do so very early on in the litigation. That increases costs on defendants (who are usually the ones with lots of documents, especially when the patent owner is a non-practicing entity) and helps patent owners push for a settlement.

The upshot is clear: if you’re a patent troll, file your infringement suits in the Eastern District of Texas. They’ll be expensive for defendants, and that expense will give you ample leverage to pressure for a settlement. If they do go to a trial,