Tag Archives: Patent Trolls

The Supreme Court Ends Patent Troll Friendly Forum Shopping

Walter Olson reports:

This morning’s Supreme Court opinion in TC Heartland v. Kraft Foods… A unanimous Court (8-0, Thomas writing, Gorsuch not participating) rejected the broad reading of a venue statute by which the Federal Circuit had empowered lawyers to forum-shop disputes from all over the country into a few decidedly pro-plaintiff venues, above all the largely rural Eastern District of Texas. From here out, defendants can still be sued in a district such as E.D. Tex. if they have a regular and established place of business in it, but the decision is likely to shrink what I called in my January preview a “jackpot patent litigation sector… that shifts around billions of dollars.” By redirecting cases into more neutral venues, it should bring outcomes closer to reflecting cases’ actual merits, which would in turn do much toward restoring confidence in this sector of the law…

Government Accountability Office on the Need for Patent Office Reforms

Government Accountability Office:

GAO found that district court filings of new patent infringement lawsuits increased from about 2,000 in 2007 to more than 5,000 in 2015, while the number of defendants named in these lawsuits increased from 5,000 to 8,000 over the same period. In 2007, about 20 percent of all defendants named in new patent infringement lawsuits were sued in the Eastern District of Texas, and by 2015 this had risen to almost 50 percent. According to stakeholders, patent infringement suits are increasingly being tried in the predominantly rural Eastern District of Texas, likely due to recent practices in that district that are favorable to the patent owners who bring these infringement suits. GAO also found that most patent suits involve software-related patents and computer and communications technologies. Several stakeholders told GAO that it is easy to unintentionally infringe on patents associated with these technologies because the patents can be unclear and overly broad, which several stakeholders believe is a characteristic of low patent quality.

The U.S. Patent and Trademark Office (USPTO)… does not currently have a consistent definition for patent quality… Without a consistent definition, USPTO is unable to fully measure progress toward meeting its patent quality goals. Additionally… time pressures on examiners are a central challenge for patent quality… Without assessing the effects of current incentives for examiners or the time allotted for examination, USPTO cannot be assured that its time allotments and incentives support the agency’s patent quality goals…

Elliot Harmon on patent troll venue reform

Elliot Harmon:

There’s a new bill in Congress that would finally address the egregious forum shopping that dominates patent litigation. The Venue Equity and Non-Uniformity Elimination Act of 2016(VENUE Act, S. 2733) would bring a modicum of fairness to a broken patent system…

In 1990, the Federal Circuit (the court that hears appeals of patent lawsuits) ruled that a patent owner can file suit in any district in which the defendant does business. A few years later, the court further clarified 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. No one could have predicted the mess that the court invited with those decisions.

Today, nearly half of all patent lawsuits are filed in one district, the Eastern District of Texas. It’s not hard to see why: Eastern District courts have extremely plaintiff-friendly practices in patent lawsuits. Eastern District judges have adopted practices that can make a patent suitmore expensive for defendants. Eastern District judges have routinely imposed rules seemingly designed to frustrate defendants and raise costs…

Let’s be clear: the VENUE Act won’t end patent trolling. It won’t stop the endless parade ofstupid software patents from the Patent Office. Innovators will still be hit with egregious demand letters all the time, and a lot of them will simply pay the fee rather than fight back.

What it will do is take away one of the trolls’ weapons…

Mike Masnick on the possibility of shutting down patent troll forum shopping

Mike Masnick:

the East Texas district court… patent trolls have been flooding that court with cases. The trolls claimed they liked East Texas because the judges worked quickly and because they “understood” patent issues. The reality, of course, is that East Texas became notorious for a few judges who were insanely pro-patent troll…

The top judge for patent cases in East Texas used to be John Ward, until he “retired” to join his son in a local law practice representing patent trolls. Then the crown went to Judge Rodney Gilstrap, who is handling a ridiculous number of patent cases. In 2014, he was given 968 patent cases — or 20% of all patent cases filed in the country… This is the same Judge Gilstrap who has never (not once) granted attorneys’ fees to a defendant, despite all of the cases he’s heard…

It’s pretty clear that what we’ve been witnessing for over a decade is what’s known as “forum shopping” in which plaintiffs seek out specific courts known to favor them… there’s actually a chance to stop it. In 1990, a ruling by the Court of Appeals for the Federal Circuit (CAFC, the “patent appeals court”) in VE Holding v. Johnson Gas basically opened the floodgates for forum shopping in patent cases…

But there’s a new case that has the potential to put an end to this forum shopping. In Re: TC Heartland is another patent forum shopping case, in which an Indiana-based company is looking to get a patent case tossed out of a Delaware court over jurisdiction…

Vera Ranieri on how the Eastern District of Texas became a patent troll haven

Vera Ranieri:

One of the biggest reasons the Eastern District of Texas hears so many patent cases (at last check, almost half of all cases filed this year were filed in the Eastern District) is because of a Federal Circuit case from 1990—VE Holding—that radically expanded the places patent owners could sue for infringement…

VE Holding has allowed patent owners to sue in practically any district in the country, no matter how tenuous the connection to the alleged infringement. In turn, this has given rise to “forum selling,”…

Mike Masnick on how the Bayh-Dole Act turns universities into patent trolls

I couldn’t pass up the opportunity to highlight a piece that hits on two of my topic areas: higher ed and Intellectual Property/Privilege.

Mike Masnick:

Apple lost a patent lawsuit filed by the University of Wisconsin, and may be on the hook for up to $862.4 million in damages. This news should serve as a reminder that universities are some of the nation’s worst patent trolls, actively ignoring their own stated missions to widely spread academic research and knowledge…

Notice how much of [the UW mission statement] is about sharing knowledge and improving the world. But, of course, when UW had a chance to say “pay me!” it didn’t skip a beat. And many universities are doing the same thing. It’s a massive problem and it’s one caused almost entirely by Congress. We’ve discussed this a few times before, but in 1980, Congress passed the Bayh-Dole Act, which was supposed to incentivize more research at universities by allowing those universities to patent that research…

What really happened in the wake of the Bayh-Dole Act, was that many universities thought that they’d (1) patent all their professors’ research (2) license it and (3) profit like crazy. The reality was that they did the first part — and then many universities set up “tech transfer offices” to try to license it. And then they ran smack dab into reality, which is that most of their patents sucked and no one wanted to license them. Making matters worse, even when they had a legitimate or interesting patent, the universities massively overvalued those patents, demanding licensing fees that were ridiculous…

The end result was a near total disaster for most universities. Rather than make money, most universities lost a ton of money between all the patent filing and the expensive tech transfer offices that were supposed to be a revenue generator, but turned out to be massive losses for the vast majority of universities that set them up (there are very few exceptions). On top of that, this rush to patent and license resulted in a secondary problem: it actually decreased research and information sharing. Historically, professors would often share research with colleagues and work together on projects. But universities started pushing them not to do that as much, because of the patents. And on top of that, it became riskier to do follow on research over fears around the patents. So the entire intent of the bill backfired drastically…

As a result, many university tech transfer offices followed one of two paths to try to justify their existence: they sold off patent portfolios to patent trolls directly (Intellectual Ventures’ big initial portfolio of patents was mostly them buying junk patent portfolios from desperate universities, who needed to show some sort of return), or they started patent trolling themselves. The University of California at Berkeley became a major patent troll. As did the University of Southern California. And Carnegie Mellon. And, apparently, the University of Wisconsin as well.

This recent ruling is just the latest example of how far we’ve come and just how much damage the Bayh-Dole Act has done. It’s not only diminished university research and important information sharing, it’s now leading these universities to actively attack actual innovators and shake them down for money. If Congress really wants to fix patent trolling, it really needs to roll back the Bayh-Dole Act.

Daniel Nazer on the importance of venue reform to combat patent trolls

Daniel Nazer:

the Eastern District of Texas… An astonishing 1,387 patent cases were filed there in the first half of 2015. This was 44.4% of all patent cases nationwide. And almost all of this growth is fueled by patent trolls

It is just one of 94 federal district courts… If patent cases were distributed evenly among the federal district courts, each one would have received about 33 cases so far this year – a far cry from the 1,387 filings in the Eastern District of Texas.

The Eastern District of Texas was not always so popular. In 1999, only fourteen patent cases were filed there. By 2003, the number of filings had grown to fifty-five. Ten years later, in 2013, it was 1,495.

This massive rise in litigation followed the appointment of Judge T. John Ward in 1999, and his drive to create local patent rules. Judge Ward’s rules, while similar to patent rules in other federal districts, had some additional plaintiff-friendly features such as a compressed discovery schedule and a short timeline to trial. This so-called “rocket docket” attracted patent plaintiffs eager to use the compressed schedule to pressure defendants to settle. For those cases that went to trial, the district got a reputation for huge patent verdicts. As one commentator explained, the Eastern District’s “speed, large damage awards, outstanding win-rates, likelihood of getting to trial, and plaintiff-friendly local rules suddenly made [it] the venue of choice for patent plaintiffs.”…

It’s time for Congress to act. Although the Federal Circuit has overruled some of the Eastern District of Texas’ most egregious venue decisions, it has failed to bring basic fairness to where patent cases are litigated. We need new legislation to clarify that patent cases belong in forums with a real connection to the dispute.

Fortunately, Congress is looking at the problem. Representative Darrell Issa recently offered an amendment (PDF) to the Innovation Act that would tighten venue standards in patent cases. On June 11, the House Judiciary Committee approved the amendment.

Mark Lemley on what patent lawsuits are telling us about IP laws

Mark A. Lemley:

The fact that the most innovative companies in the world today are overwhelmingly defendants, not plaintiffs, in patent cases is a worrisome sign that the patent system is not serving its purpose in many industries… (emphasis added)

Regulation (whether IP or not) tends to restrict market entry in various ways. Doing so interferes with competition. It might be worthwhile to block that competition if the market-entry regulation serves a useful social purpose, and encouraging innovation can be such a useful social purpose. But traditional forms of regulation, including IP, should be viewed with skepticism, because they reflect the government’s judgment that it knows better than the market. That is a judgment that has often proven false…