From The Houston Chronicle
Businesses and individuals filed a record 851 patent infringement lawsuits in November — more than half of them in the federal courts of East Texas — amid concerns that new court rules could make it more difficult for their litigation to be successful.
Lawyers filed 467 new patent cases last month in the U.S. District Court for the Eastern District of Texas. That’s 32 percent more infringement lawsuits than have ever been filed in a single month in one judicial district in U.S. history, according to legal-research provider Lex Machina.
The biggest wave of new intellectual property cases came during the five business days surrounding Thanksgiving (Nov. 22-30), when plaintiffs filed 341 suits in East Texas, making it the busiest nine-day period in any court jurisdiction ever, Lex Machina data shows.
The litigation blitz, which solidifies the Tyler-based Eastern District of Texas as the patent litigation capital of America, was sparked by a change to the Federal Rules of Civil Procedure that went into effect Dec. 1. The change, approved by the U.S. Supreme Court, requires plaintiffs to provide more extensive details in their initial complaints alleging wrongdoing by defendants.
Legal experts say patent owners rushed to file new cases before the new rule took effect Dec. 1 because they weren’t sure whether trial courts would interpret the new requirement in a way that could have cases dismissed early in the legal process.
“It’s really fear of the unknown,” said Jon Hyland, a partner in the Dallas office of Barnes & Thornburg.
The 467 new patent cases in November in East Texas eclipsed the previous record of 354 filed in the Eastern District in June, which in turn exceeded the prior record of 333 from May, according to Lex Machina.
Roughly 55 percent of the record 851 patent lawsuits filed nationwide in November went to the Eastern District, Lex Machina data shows. The nation’s previous high-water mark was in April 2014, when 684 infringement lawsuits were filed, with nearly 47 percent of those in the Eastern District, Lex Machina numbers show.
A group of 22 high-volume plaintiffs — defined as patent owners that bring 10 or more infringement suits — were the primary reason for the November surge.
This group accounted for nearly half of November’s new infringement litigation. They chose the Eastern District for more than 75 percent of their litigation last month, according to Lex Machina, which is being acquired by LexisNexis Group.
About 37 percent of the United States’ new infringement suits in November were lodged in the Eastern District by one of these frequent-filers.
Before Dec. 1, civil procedure rules mandated only that infringement complaints specify that a defendant had supposedly violated the patent, along with providing a general description of the products that supposedly violated it and the U.S. Patent and Trademark Office number identifying the patent in question.
Intellectual property lawyers say “high-volume filers” want to file cookie-cutter complaints against many defendants at once because it minimizes the amount of work necessary by the plaintiffs. The rule change requires plaintiffs to add details against each defendant sued, which takes more time, effort and expense, legal experts say.
The people who were being sued had a particular distaste for those Spartan filing requirements of before, as they meant defendants had to do additional, pricey pre-trial fact-finding, called “discovery,” experts said.
High-volume plaintiffs often use the big price tag of discovery as a hammer to persuade defendants to settle for less than they would have to pay their lawyers to investigate and fight a given lawsuit.
“Accused infringers were often required to conduct discovery just to learn what they had been accused of” under the previous rules, said Jason Wietjes, shareholder at the Polsinelli law firm in Dallas. “That is an advantageous position to be in for some plaintiffs. Hence the filing rush.”
What it means
The problem now for patent plaintiffs is figuring out precisely what the new rules require them to allege in their complaints and whether the new rules apply retroactively, Wietjes said.
“Under the new pleading standard, plaintiffs will have to demonstrate that their claims are plausible,” Wietjes said.
As a result, he said, it’s likely that more defendants will ask judges to throw out patent cases, arguing that the plaintiffs’ complaints have failed to state a legal claim for which a court could provide some sort of relief.
“It’s not clear exactly how this new standard will be applied,” although it will probably depend on the facts of a given case, Hyland said.
*The story first appeared in the Texas Lawbook.