Venue Reform Critical to Improving Patent Guidelines in the United States

Michi Iljazi

February 26, 2016

The Taxpayers Protection Alliance (TPA) recently placed Congress on notice reminding them of the opportunity for and importance of getting something done on patent litigation reform. Reforms would help to strengthen intellectual property (IP), which would boost the competitive economy all while benefitting consumers, businesses and taxpayers. As part of any legislation there are many parts and “venue reform” remains an important component to any legislation that would move through Congress.

Venue reform refers to moving the current patent litigation system away from courts that generally favor patent trolls. Patent trolls are generally one or two individuals hiding behind a fictitious shell corporation. They scour the Internet trying to find vague, near-end patents, buying them up with the goal of filing lawsuits to extort settlements from businesses or individuals who can’t afford the high cost of litigation. They issue threatening letters, demanding payment through licensing fees for the use of ambiguous or commonly-utilized technologies, or threaten to sue. Most small businesses can’t afford the steep costs of litigation and instead are bullied into paying excessive licensing fees.

Right now most patent disputes are dealt with in just one court in Texas, that’s right a single court hears most patent disputes in the country. In 2015 the Eastern District of Texas handled 2,540 cases of the total 5,830 (43.6%). That is a higher percentage than of all districts outside the top 3 (41.9%). The court also seems to favor patent trolls, here are some of the ways in which they’ve displayed their bias:

  • Judges institute rules that seemingly contradict federal procedural law.
  • Judges ruling below national average on summary judgments for defendants
  • Judges require parties to turn over greater amount in discovery, increasing costs on defendants and making settlements more desirable

It is clear there is a problem and we can see it with a court created over thirty years ago mainly comprised of patent attorneys who feed off of patent trolls. The numbers show why venue reform is an absolute must sooner, rather than later, further evidenced by stats from the 2015 Patent Dispute Report showing a record year for patent disputes.

One of the main reasons venue reform remains a topic of conversation is because it enjoys widespread support across ideological lines on this issue. Even some of the most ardent critics of recent reform efforts on the patent system agree that venue reform makes sense and should get done.

The raw data shows that patent trolls are an increasing problem and the numbers out of the East District Court support those who have been pushing for venue reform. In a recent op-ed for The Hill, Washington University in St. Louis Economics Professors Michele Boldrin and David K. Levine perfectly summarize the case against the East District Court in Texas:

There are two basic facts that need to be contended with. The first was the creation of a special patent court more than three decades ago. Not surprisingly this court – made up primarily of patent attorneys – loves patent litigation. The second is the technique of carrying out patent litigation by selling patents to patent trolls. While real firms with real products have every incentive to collaborate and avoid mutual destruction through patent litigation, patent trolls have no such incentive. Patent reform to bring both the rogue courts and rogue litigators under control is desperately needed.

TPA continues to support efforts to get something done on bringing the patent litigation system into the 21st Century; this includes H.R. 9, The Innovation Act. However, as Congress continues to keep the discussion going on patents, venue reform must remain a top priority for any action lawmakers may ultimately take this session.

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