- - Sunday, November 15, 2015

One single federal court district in a remote part of the country accounts for nearly half of all patent case filings this year. Indeed, 44 percent of patent lawsuits have been filed in the Eastern District of Texas Court thus far.

East Texas is ranked at the top of the U.S. Chamber of Commerce Institute for Legal Reform’s list of cities or counties with the “least fair and reasonable litigation environment” — likely because it’s been known to offer speedier trials, award large damage rewards and has a high win rate for trolls.

Its plaintiff-friendly local rules make East Texas one of the “best” places for plaintiffs to file suit, and a single judge in this district hears a fifth of all patent cases in the entire country. His current docket contains over 900 patent cases.



It also makes it one of the most expensive places for a defendant to litigate — which is a major problem and shows why “venue reform,” as a component of patent reform legislation, is so badly needed.

Under the current litigation system, trolls are able to file suit virtually anywhere, so long as they can claim the state is a location in which the products or services at issue are “available.” That’s incredibly vague.

Allowing such tangential connections leads to patent trolls and their attorneys shopping around to find the friendliest courts for their suit — many times found in the Eastern District of Texas. It’s gotten so bad that patent trolls have been manufacturing connections to the Eastern District just to keep cases there, setting up empty offices as shells.

Patent litigation has been such a booming business that cities like Marshall, Texas attribute 90 percent of their business to patent litigators, leading to an influx of hotels, restaurants and legal service businesses to this otherwise sleepy, rural town.

Surely generating business for sue-happy trial attorneys and sinister shell entities is not what our Founders intended when they crafted Article I, Section 8 of the U.S. Constitution. They created a robust patent system to ensure real American innovation and intellectual property were protected — not so that exploitative overzealous actors could abuse the already overburdened legal system.

But that’s just what trolls do.

They buy up obscure, near-end patents and look for companies that utilize the technology — much of which is commonplace, such as online shopping cart technology or WiFi connection capabilities. They then issue vague, threatening letters alleging patent infringement violations and demanding “licensing fees.”

Many companies, often unwittingly, choose to pay their ridiculous demands rather than incur the high costs of litigation. Indeed, the median cost for most major cases reaches $5 million — a figure many small businesses certainly can’t afford.

As this problem has been escalating over the past 10 years, Congress has been struggling to address meaningful reform.

The House Innovation Act would make great strides toward tightening up the loopholes and preventing frivolous patent litigation while addressing the critical issue of venue reform.

The venue provision would stop trolls from being able to shop their cases to litigation-friendly districts that have zero connection to the dispute, while still protecting legitimate cases of infringement anywhere that key witnesses and documents are likely to be located.

Patent lawsuits should be brought in the districts where the inventions were made, or the product developed or manufactured. There should have to be a logical nexus to a district in order for a plaintiff to file suit.

Along with venue reform, the Innovation Act would require heightened transparency during litigation. It would force the plaintiff to disclose exactly which patent is being infringed, what product specifically infringes on the patent and how, as well as the disclosure of all parties that have a financial interest in the outcome of the case. It will also force the plaintiff to list every complaint they have filed in the prior three years — in order to single out trolls who exploit the system.

Additionally, the Innovation Act would limit the most expensive part of litigation — discovery — and would shift the cost of overly-frivolous lawsuits onto losing plaintiffs who the judge finds are abusing the system, among other important fixes.

Frivolous patent legislation costs the U.S. economy billions each year and affects businesses big and small. Venue reform would solve a major part of this problem and must be included in attempts to reform the system. The Innovation Act would be a major step forward.

Chuck Muth is president of Citizen Outreach. StopPatentTrolls.info is a project of Citizen Outreach, a non-partisan grass-roots advocacy organization.

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