Texas regains title as capital of patent litigation
By Jordan Ray, Jordan Rubio, Matt Dempsey, Stephanie Lamm
Texas is again the place to file patent infringement lawsuits in the U.S.
Businesses and individuals filed 747 patent complaints in Texas during the first six months of 2020 — double the number from a year earlier and twice as many as any other state so far this year.
The spike in Texas follows a national trend. Yet while patent infringement lawsuits jumped 16 percent between Jan. 1 and June 30 nationwide, the number of new disputes in Texas soared 96 percent, according to new data provided exclusively to The Texas Lawbook by Androvett Legal Media Research.
“We are definitely seeing an increase in new patent filings, and the increase is highlighted most in Texas,” said Doug Kubehl, intellectual property law partner with Baker Botts. The firm represents oil giants such as Exxon Mobil and Halliburton. “A lot of this is attributable to the economy and what is happening with the pandemic. When lawyers are not in trial, we have more time to look at new cases and to file new cases.”
The Eastern District of Texas, a perennial favorite jurisdiction for patent plaintiffs’ lawyers, which includes Marshall and Tyler, saw a 33 percent increase in new complaints as of June 30. The Southern District, which covers Houston, experienced a 43 percent jump in new patent violation cases, according to the Androvett data.
The eyes of the legal and business worlds, however, are focused on Waco, the Western District of Texas and U.S. District Judge Alan Albright. The district witnessed a historic wave of new patent infringement cases — a jump of 350 percent over the past year — and is now the most popular court in the U.S. to litigate intellectual property disputes.
The Western District reported only 37 new patent lawsuits during the first half of 2018. This year, the number ballooned to 454 new patent cases — an 1,127 percent escalation over two years.
As a result, Albright is now the most popular — and busiest — judge in the world of intellectual property disputes.
Michael Hatcher, a partner at Sidley Austin, said the Texas courts are witnessing a “perfect storm” for patent litigation.
“Judge Albright joined the federal bench with such deep experience as a patent lawyer and a former federal magistrate, and he set up rules and procedures for patent cases that plaintiffs and defendants appreciate,” Hatcher said.
The new patent-focused court in Waco also started up only a year after a U.S. Supreme Court ruling in 2017 significantly limited jurisdiction in patent infringement disputes to venues where the parties have actual operations.
“Judge Albright found himself in the perfect spot because so many tech companies have operations in Austin,” Hatcher said.
IP law experts said there are other key reasons for the increase in patent infringement cases.
“A lot of this surge is related to the economy,” said Baker Botts’ Kubehl. “Many companies have cut expenses, and they are now looking for new sources of revenue, and they see monetizing their patent portfolio as one possibility.
“This is combined with a significant rise in patent litigation investment companies, which provide more opportunities for lawsuits to be filed,” he said.
Hilda Galvan, an intellectual property law partner with Jones Day, and others said a significant portion of new patent filings involve nonpracticing entities, or NPEs, which could be businesses, universities or even private equity firms that own patents for products they do not manufacture.
“We are seeing quite a few lawsuits by NPEs,” Galvan said. “But these are much more sophisticated and more aggressive NPEs. They are not willing to settle quickly for the mere cost of the litigation.”
Only a few years ago, most NPEs were considered “patent trolls,” which were essentially hedge funds that sue dozens of defendants with hopes of scoring early settlement agreements.
“Every NPE is not the same, and these newer NPEs are definitely different,” Hatcher said. “These are not the NPEs that are patent trolls who file just to harass or for nuisance purposes.
“We are definitely seeing an uptick in NPE suits that are much higher-value cases,” Hatcher said.