07.09.17

Supreme Court Saves the Day as Latest Statistics Reveal Slump in Patent Litigation (Mostly Trolls) in the Eastern District of Texas

Posted in America, Courtroom, Patents at 11:34 am by Dr. Roy Schestowitz

Delaware now receives more new paperwork than the Eastern District of Texas and the Supreme Court is poised to reaffirm PTAB’s role some time very soon

Summary: The Supreme Court of the United States relentlessly rules against patent maximalism and is expected to tackle patent quality — not just litigation scope — some time later this year (or next year)

THE Supreme Court (SCOTUS) and the patent office of the United States both show signs of improvement and give us hope. Software patents, for example, are already severely hurt, which is good news for software developers.

Over the past couple of months we patiently watched and took note of various bits of news, including data that served to reaffirm the above-mentioned improvement. People out there may disagree with our tone; they may also not like our views. But numbers tend to speak for themselves.

“People out there may disagree with our tone; they may also not like our views. But numbers tend to speak for themselves.”SCOTUS is taking under its wing a growing number of patent cases. It almost always rules against patent maximalism (5 out of 5 recently). As we recently noted, there is SAS Institute Inc. v Lee and a similar case that’s heading towards SCOTUS. We wrote about it also at the end of last month, long after patent blogs had covered it. “The inter partes review appeal focuses on the procedural question of whether the America Invents Act permits the USPTO to partially institute IPR proceedings – as it has been doing,” Dennis Crouch explained.

The America Invents Act (AIA) and IPRs pertain to PTAB, whose purpose is summarised above. We really need to protect PTAB and if SCOTUS rules in defense of IPRs, then that will be another nail in the coffin of software patents.

SCOTUS has meanwhile worked to weaken software patents from several other angles (other than PTAB). Apart from Alice there is also TC Heartland and some people still obsess over Impression v Lexmark — a very important decision with no direct impact on software patents. Patently-O chose to write about how this decision from May impacts drug imports (probably good for the ordinary ill person) and remarked on TC Heartland in quite a professional way. It was covered here several times before, though we overlooked Dennis Crouch’s initial response to it. In a nutshell, TC Heartland appears to have ‘killed’ the trolls’ rocket docket, the Eastern District of Texas (and thus ‘killed’ quite a few patent trolls which relied on it). According to IAM, which is very extrovert about being pro-trolls, “Unified Patents released its US patent dispute data covering the first half of this year yesterday and it showed that the number of new district court cases came in at 1,914, down 12% on the first half of 2016. RPX also released its own analysis late last week, showing that litigation is at its lowest level since 2008 when the firm started collating data.”

“In a nutshell, TC Heartland appears to have ‘killed’ the trolls’ rocket docket, the Eastern District of Texas…”Very good.

“In other words,” said Patent Progress, “the TC Heartland decision was neither a firework nor a sparkler,” but it did lower the rates of abusive litigation.

At Managing IP, Natalie Rahhal, covered the numbers as follows:

Patent lawsuit filing in US district courts held up in June but plaintiffs have deserted the Eastern District of Texas, with Delaware the top venue. Natalie Rahhal analyses how US patent litigation has changed since TC Heartland, including how NPEs have responded

This is all news from the past few days. It confirms as a reality what we hoped for all along! It’s working! TC Heartland will be mentioned a lot for years to come.

Baker Donelson, which IAM likes to boost, is trying to come up with new tricks.

Another recent article from Patent Progress had said that “After TC Heartland [...] Texas [is] less attractive for patent trolls,” even before the data about it was made available. To quote within broader context:

You hear a lot about patent litigation in district courts. And, over the past several years, the new inter partes review procedure has seen a lot of attention (including last week’s renewed effort to try to kill off the single most effective tool we have for invalidating bad patents.)

You don’t hear that much about the International Trade Commission (ITC). But that might need to change. After TC Heartland made the Eastern District of Texas less attractive for patent trolls, they’re looking for a new place to go, and the ITC might be just the thing they’re looking for.

Also see “And… a court says “You could’ve done what TC Heartland’s Defendant did” — a recent article from Patently-O.

This is all very, very encouraging news.

After TC Heartland we can certainly expect disputes over legitimacy of patent lawsuits that happened in the Eastern District of Texas. “There’s going to be a lot of litigation over whether a defendant who failed to object to venue pre-TC Heartland can raise it now,” Patently-O wrote. “In fact, why not a plaintiff?”

“After TC Heartland we can certainly expect disputes over legitimacy of patent lawsuits that happened in the Eastern District of Texas.”The decision and its impact is truly profound, but a lot of the mainstream media — not to mention its readers — does not find it interesting enough to cover. Maybe it’s assumed that readers would not be interested and would not “click” much (to “consume” ads). When the mainstream media does cover it it tends to get the facts wrong. In fact, it gets some of its ‘facts’ from Association for Competitive Technology (ACT), which is “a well-known Microsoft proxy association” that “lobbied for software patents in Europe in the name of small companies.” Benjamin Henrion noticed and said that.

Shame on the corporate media for quoting Microsoft AstroTurfing groups in relation to a case where Microsoft has high stakes (Microsoft uses trolls for competitive leverage). Some other corporate media, AOL for example, published “Supreme Court Clarifies Venue Rules for Patent Infringement Suits” and did not resort to spin such as “The Supreme Court’s big ruling on ‘patent trolls’ will rock businesses everywhere” (as if it’s bad for everyone, everywhere). Sadly, no matter how often we berate the press, some of the press still quotes Microsoft AstroTurfing groups in relation to a decision that businesses actually celebrate, don’t get “rocked” by. How about the paragraph in which the Microsoft front pretends to represent small developers, quoting “Morgan Reed, president of ACT | The App Association”?

Should they not just quote actual app developers rather than a group pretending to represent them?

Anyway, Natalie Rahhal, writing from New York, framed the above as a “Heartland attack” (like heart attack). Funny twist on the case, eh? It’s no attack but a much-needed blessing. Unless you love blood. Or patent trolls…

Suffice to say, patent trolls in the US are panicking (as does Watchtroll, a site which supports the trolls, not to mention IAM; In “IAM speak” — being a megaphone of patent trolls — suing with patents in the Eastern District of Texas is “extract[ing] value”). No doubt they’ll lobby against this decision, just as they did against Alice (a subject to be covered separately some other day). It’s already dealt with by political means, even though SCOTUS is supposed to be apolitical. To quote Patent Progress:

Tomorrow morning, the House Judiciary Committee’s Subcommittee on Courts, Intellectual Property and the Internet is holding a hearing titled “Examining the Supreme Court’s TC Heartland Decision.” In advance of the hearing, I wanted to take a look at why there’s a special patent venue statute at all, and why the decision in TC Heartland makes sense in light of that history.

As someone put it last month, the decision makes patent lawsuits in Texas acceptable if, for example, the “user’s smartphone is in the Eastern District of Texas,” but not otherwise.

Back in May the decision made it into television. Two months ago (when I was away) PBS covered everything in this programme that the patent microcosm recommended. HBR covered it too and there was this article titled “Why it matters that patent trolls won’t be able to force their cases in Texas” from around the time of the decision. Later on HBO did a programme related to this; See “HBO’s ‘Silicon Valley’ tackled an issue that’s all too familiar to startups: The threat of frivolous patent litigation” (early June) — an article that’s quoted as saying that “Hollywood is doing its part to bring light to this shady practice, but Washington needs to do more…”

From the article:

The latest episode of HBO’s “Silicon Valley” took on an issue that is all too familiar to startups across the country — the threat of frivolous patent litigation.

In the show, the startup, Pied Piper, breaks into the Top 500 on the App Store, and almost immediately, the company receives a demand letter stating that it is violating an existing patent. Pied Piper soon discovers that it is being sued not by another well-intentioned startup, but an unscrupulous attorney, or a patent troll. The troll in the show explains that he buys up vague patents at auction and “prints money” suing startups for settlements. Despite the fact that Pied Piper eventually outsmarts the patent troll, the startup ends up paying more in attorney fees than it would have cost to just settle.

This does not directly relate to TC Heartland, but the timing seemed right. “Troll The Tech Patent Trolls”, said one article around the same time, noting that “[s]oftware patents in the last decade have skyrocketed.” (but are no longer potent in the US). This one was definitely about TC Heartland and it alluded to it directly: “A recent court ruling stands to shake up the entire patent-troll sector. Although some declines have been witnessed already, the true nature of this situation has yet to be realized, offering short sellers a rare opportunity to ride stocks to the ground. Recently, the Supreme Court ruled that patent suits should be filed in the state where the defendant is incorporated, and not in the location of the plaintiff’s choosing, as was the previous practice. The ruling will bar many patent owners from bringing forth cases in the Eastern District of Texas, a patent-friendly jurisdiction where more than one-third of all infringement lawsuits are now filed. This puts an end to a majority of cases that sought refuge there in order to gain an advantage and claim victory. It’s about time the patent trolls got trolled on.”

“Let this be a lesson to other patent trolls attempting to extort funds from printing industry service providers and OEMs using equipment and software generic to the industry,” Harvey Levenson, Cal Poly Professor Emeritus said in relation to another SCOTUS decision. “The Supreme Court Continues To Take Aim At Patent Trolls,” said the headline in a patent law firms’ platform.

“SCOTUS Slaps Patent Trolls,” said this article which was published almost immediately after the decision had been published. To quote:

In a unanimous decision (TC Heartland LLC v. Kraft Foods Group Brands LLC), the U.S. Supreme Court gave a kick in the rear to patent trolls. The Verge has this article on the case.

Patent trolls obtain patents not for the purpose of producing an invention or a technology but to license and enforce the patents. In other words, trolls have no plans to actually make the patented product or process; instead, they prefer to lie in wait, letting someone else do the heavy lifting and then suing just as the new creation is about to take off commercially. It is a shakedown process that threatens innovation.

Another piece, “SC [Supreme Court] Ruling Signals New Era for Software Patent Enforcement,” correctly connected software patents to patent trolls.

Going back to Natalie Rahhal and Managing IP, they’re obviously not happy. They front for patent law firms and Managing IP published its third article about the case in a matter of a few days [1, 2, 3]; being a death blow to many patent trolls, it certainly worries them. It also worried Annsley Merelle Ward from Bristows, the friends of patent trolls, as the decision potentially ends/shreds their business with trolls. They were dominating the blog IP Kat around the month of May (as though Bristows almost took over), back when they were writing the majority of ‘articles’, e.g. [1, 2, 3, 4, 5]. To quote Bristows: “So will this be the blow to the much loved (by patentees, anyway) Eastern District of Texas that so many defendants have been dreaming of? Is this a further blow to patent trolls in the US? Will patentees look to other global venues where forum shopping presents more opportunities, for example in Europe and under Article 33 of the UPCA? Or is this just balance returning to forum shopping in the US and it will be business as normal? What do readers think?”

See how they allude to the UPC? They want to make Europe the next Eastern District of Texas. Their friends at IAM, others whose ambition is to have lots and lots of lawsuits, express concern about the case. It would certainly take away a lot of their ‘business’ (litigation). “Historically,” as one person put it, “EDTX often doesn’t consider petitions for change of venue until after discovery is done & defendants have usually spend >$1MM.” That’s money that’s channeled into law firms’ pockets.

Dubbing it the “most significant patent law decision since Alice”, Managing IP also noted: “Filing in the Eastern District of Texas has ground to a halt, one judge has already factored it into an order and IP observers have been busy on social media debating its “seismic” impact – Managing IP collates the best reaction to the Supreme Court’s TC Heartland v Kraft ruling on patent venue” (the figures above serve to confirm this).

The anti-Alice bloggers over at Bilski Blog tried to assess the impact. “That’s against the interests of their own profession,” Henrion remarked. “As it is with software patents and Alice.”

“Patent filings could fall 69% in East Texas after TC Heartland ruling,” WIPR wrote. The headline from WIPR actually makes no sense (suggestive of the writer’s misunderstanding). Filings (not of lawsuits) are done in the US, not in Texas. Either way, these predictions from over a month ago are now better supported by data because, as IAM put it the other day, “post-TC Heartland Delaware overtakes EDTX as top venue for new suits,” based on Unified Patents.

The more SCOTUS intervenes in patent cases, the more the patent microcosm has to worry about. So let’s hope for more. █

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