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Trolls Beware

There was a time when the Eastern District of Texas was the preferred venue of plaintiffs in patent infringement cases. Well, as the song says, “the times they are a ‘changin” – at least with respect to so-called “patent trolls.”

It has come to the attention of Judge Leonard Davis that some ethically-challenged parties have engaged in the practice of asserting “questionable patent claims against a large number of Defendants to extract cost of defense settlements.” One case pending in the district has 370 defendants, another 124. In Judge Davis’ view, in such cases, "Defendants are faced with a Hobson’s choice of spending more than the settlement range on discovery, or settling for less than their cost of defending the case, regardless of the merits of the case.”

“Such a practice is an abuse of the judicial system and threatens the integrity of and respect for the courts” and Judge Davis is determined to put a stop to it. To do this, he has departed from the local Patent Rules and standard docket control procedures in order to help defendants keep their costs down during the opening stages of a patent infringement case. In particular, he is holding “rifle shot” claim construction hearings on key claims terms early in such cases. If this “expedited” claim construction – and related summary judgment motions – does not resolve the case, the matter reverts to a conventional schedule.
This procedure, which is beginning to catch on with other judges in the district, has had a dramatic effect, with the number of settlements falling sharply. To further drive home the point, Judge Davis indicated that he would consider imposing sanctions whenever it appeared that “the cost of defense was more of a driving force than the merits of the case.”

Lest our readers become unduly concerned, we note here that the judge is applying these new standards judiciously. (Uniloc USA, Inc. v. Sony, et al.)

Uniloc asserted the same patent against 95 defendants in the course of 7 different lawsuits. Many of the first 6 cases settled before a claim construction hearing was held. Judge Davis, in setting a schedule for the seventh case, nevertheless, found that it did not “raise the Hobson’s choice concerns that other cases have raised for the court.” Why did Uniloc escape the judge’s ire? “The [patent-in-suit] has already undergone extensive scrutiny. Through a jury trial and numerous appeals [it] has been found infringed and not invalid by both a jury and the Federal Circuit. Thus, Uniloc has demonstrated its willingness to pursue its case through trial.”

The Lessons To Be Learned – (1) Uniloc is not a patent troll – at least in this instance; and (2) if y’all plan to sue a whole passel of defendants, with the aim of settlin’ quick and cheap, you’d best avoid the Eastern District of Texas and, in particular, the courtroom of Judge Leonard Davis – the patent law west of the Pecos.

whack-a-mole

Yes, but it's probably a bit like the arcade game Whack-a-Mole -- eliminate one target, and another one pops up somewhere else. Patent trolls will continue to find venues conducive to their schemes. It seems the only way to adequately deal with trolls is to disincentivize them.