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The Independent Institute
Commentary

Does East Texas Hold a Patent on Predatory Litigation?


The Eastern District of Texas has developed a reputation as a “judicial hellhole” with a penchant for patent litigation. That troubles the News-Journal, which recently contended federal courts in East Texas have fair judges and juries. That invites a look at the facts.

The Eastern District of Texas leads the United States in the number of patent cases, patent plaintiffs, and patent defendants. By any standard, the Eastern District ranks on top. Researchers have noted that almost a quarter of all defendants named in patent cases were sued in the Eastern District of Texas.

The New York Times has observed that patent plaintiffs bringing suit in the Eastern District “win 78 percent of the time, compared with an average of 59 percent nationwide.” With these numbers, it is little wonder that Supreme Court Justice Antonin Scalia has called the Eastern District “a renegade jurisdiction.”

The Eastern District of Texas is also a favorite haunt of “patent trolls.” Trolls obtain patents not for the purpose of producing an invention or a technology but to license and enforce the patents. The term patent troll was created by Peter Detkin when he was assistant general counsel for Intel Corporation. According to Detkin, “a patent troll is somebody who tries to make a lot of money off a patent that they are not practicing and have no intention of practicing and in most cases never practiced.”

From 1995 through 2011, 37.4 percent of all decisions rendered in the Eastern District of Texas involved entities holding patents for purposes other than using the patent to actually produce a widget or process. A number of trolls claim East Texas as their headquarters and have set up Texas LLCs to ensure their cases are not transferred to another venue.

East Texas is popular among trolls and other patent plaintiffs for a variety of reasons. Cases very often move on a rocket docket that truncates the amount of time a defendant has to prepare. This keeps a defendant off balance throughout the pendency of litigation.

Statistically, the judges in East Texas are loath to grant summary judgment motions that dispose of frivolous claims without a jury trial. Researchers note that the Eastern District has the lowest rate of summary judgment in patent cases by far: less than 10 percent of all summary judgment motions are granted there, compared to almost 70 percent in the Northern District of California, 50 percent in the Central District of California, and about 40 percent nationwide.

Trials that would take a month in other jurisdiction last maybe a week in East Texas. Thus, East Texas juries do not get to hear a full presentation that juries in other districts get. This leads to oversimplification of claims and Texas-sized outcomes for the trolls. And that has consequences for the nation.

Our economy depends on innovation but the specter of Eastern District litigation makes inventors think twice before devoting substantial funds to developing and bringing a new product or process to market. The cost to our economy runs into the billions of dollars.

It would be unfair to put all the blame on East Texas for predatory patent litigation. But given the facts, it’s a stretch to pretend nothing is amiss.


William J. Watkins, Jr. is a Research Fellow at The Independent Institute in Oakland, Calif. and author of the Independent Institute book, Reclaiming the American Revolution. He received his J.D. cum laude from the University of South Carolina School of Law and is a former law clerk to Judge William B. Traxler, Jr. of the U. S. Court of Appeals for the Fourth Circuit.


New from William J. Watkins Jr.!
PATENT TROLLS: Predatory Litigation and the Smothering of Innovation
Using overbroad patents based on dated technology, patent trolls are stifling innovation by bringing infringement suits against inventors. Trolls typically do not produce products or services, but are in the business of litigation. They lie in wait for someone to create a process or product that has some relationship to the patent held by the troll, and then they pounce with threats and lawsuits.