September 22, 2015

Venue Shopping Is Rampant in Patent “Troll” Litigation

Key materials

Is East Texas the next Silicon Valley? If patent activity were a measure of innovation, you might think so. Marshall, TX, a city with a population of 23,523 located near the Louisiana border, is known to every patent attorney in the country for its prodigious volume of patent litigation.

This chart shows the number of patent cases filed in federal district court in the Eastern District of Texas versus the average of the 93 other federal judicial districts in the first half of 2015, using data compiled by Lex Machina.

In total, there were 3,122 patent cases filed in federal district court in the first half of this year. Of those, 1,387 (44 percent) were filed in the Eastern District of Texas. The other 93 federal judicial districts averaged fewer than 19 cases filed each.

Many of these cases are filed by patent trolls—companies or people who acquire overly broad patents and then use the threat of litigation to seek licensing fees or legal settlements from entrepreneurs who have created socially valuable products.

This sort of venue shopping matters because it can distort legal outcomes. The Eastern District of Texas features a handful of patent plaintiff–friendly judges. By systematically locating cases there, patent trolls are more likely to win in litigation and more able to extract large settlements from innocent defendants.

Legislation under consideration in Congress would help to fix the problem. The Innovation Act, H.R. 9, could limit the venue for action related to patents to a handful of possibilities, including the defendant’s principle place of business, where the alleged infringement took place, or where the inventor conducted the research and development that led to the patent. Such a limitation would prevent trolls from exploiting a handful of friendly judges to secure generous payouts for frivolous claims.