Eastern District Of Texas Continues To Lead Until America Invents Act Is Signed

Article by James C. Pistorino¹ and Susan J. Crane²

Originally published in Bloomberg BNA's Patent, Trademark & Copyright Journal.

I. INTRODUCTION

In 2010, the Eastern District of Texas led the United States in patent filings by virtually any measure, including: (1) the number of cases; (2) the number of plaintiffs; (3) the number of defendants; (4) the number of defendants per case; and (5) the number of defendants per plaintiff. See James C. Pistorino, "Concentration of Patent Cases in Eastern District of Texas Increases in 2010," 81 PTCJ 803, 04/15/2011 (BNA). This was so despite eight writs of mandamus from the Federal Circuit transferring cases from the Eastern District of Texas in the period 2008-2010.

The patent case filing statistics for 2011 show that the Eastern District of Texas was on track to have even more cases against slightly more defendants through the signing of the America Invents Act (AIA) on September 16, 2011. Annualizing the pre-AIA case filings, the Eastern District of Texas would have had 396 cases by 567 plaintiffs against 3,955 defendants for the year 2011.

Since the AIA was signed, however, Delaware has taken a commanding lead. Indeed, even before the AIA was signed, filings in Delaware increased dramatically. While much of the pre-AIA increase in Delaware can be explained by a small number of mass defendant cases, there was still a notable uptick in Delaware patent case filings even factoring out those cases.

The following article presents 2011 patent case filing statistics that factor out false marking cases. The article also examines the effects of the AIA on patent case filings through the end of 2011. In addition, we examine possible reasons for the 2011 filing statistics.

A. The Data Sources

Docket data on patent lawsuit filings across the United States from January 1, 2011 to December 31, 2011 were retrieved from PACER and compiled into a database. PACER classifies each party in a suit as a plaintiff, defendant, or something else (e.g., intervenor, third-party plaintiff/defendant, and counter/cross-claimant). We filtered out the secondary classifications and examined only the primary plaintiff(s) and defendant(s). For the year 2011, the dataset included information on 21,334 parties involved in 3,981 cases. Combined with the previous analysis of cases between 1999 and 2010, the dataset includes information on 158,097 parties involved in 36,163 cases.³

The number of false marking cases seen in 2010 declined somewhat, but was still substantial in 2011. To isolate the effect of the false marking cases, we took steps to factor out those cases. The listing of false marking cases at www.grayonclaims.com was used for this analysis, and a complete listing of all the cases considered false marking cases as well as all the underlying data is available upon request.

B. 2011 Patent Filing Statistics

As shown in Table 1, in 2011 the Eastern District of Texas led the United States in patent filings based on: (a) the number of cases; (b) the number of defendants; (c) the number of defendants per case; and (d) the number of defendants per plaintiff. In 2011, the average patent case in the Eastern District of Texas involved a single plaintiff suing six defendants. By comparison, in 2010 the average patent case in the Eastern District of Texas was a single plaintiff suing seven defendants.

As an absolute number in 2011, nearly 24% of all defendants named in patent cases were sued in the Eastern District of Texas. By comparison, the District of Delaware had 17%, the Central District of California had 7%, and no other district reported more than 6%.

Compared to 2010, case filings in 2011 increased from 3,512 to 3,981 (13%), and the number of parties increased from 18,595 to 21,334 (15%).

In 2011, 321 false marking cases were filed, down significantly from 695 in 2010. Table 2 shows the same data as Table 1 with the false marking cases factored out.

Excluding false marking cases, the District of Delaware had the most cases and plaintiffs, while the Eastern District of Texas had the most defendants. As discussed below, many of the differences in the numbers for 2011 compared to 2010 are attributable to changes in legislation.

C. The Impact of the AIA

On September 8, 2011, Congress passed the America Invents Act (AIA), and the President signed the bill into law on September 16, 2011. With regard to venue and case filings, the AIA contains two important provisions:

1. A provision requiring false marking cases to be brought by competitors and making it more difficult to recover monetary damages; and
   
   
2. A provision designed to address concerns about joinder of multiple defendants in the Eastern District of Texas. See H.R. Rep. 112-98 at 55, n.61.
   
   

Both provisions had a dramatic impact on case filings. Although 321 false marking cases were filed in 2011, only 15 of those were filed on or after September 16.

Table 3 shows statistics for non-false marking cases filed before the AIA went into effect on September 16. Table 4 annualizes, but does not seasonably adjust, those numbers for ease of comparison to both the actual 2011 filings and the 2010 filings.⁴

The pre-AIA 2011 case filings appear generally in line with the 2010 filings. Indeed, the top seven districts by case filings were the same in both years, and the Eastern District of Texas continued to have more case filings and substantially more defendants and defendants per case than the other districts.

Table 4 shows that before enactment of the AIA, the Eastern District of Texas was on track to have a 32% increase in the number of cases, a 39% increase in the number of plaintiffs, and 2% more defendants over its 2010 figures. Through the signing of the AIA, more than 11% of the patent cases filed in 2011 were filed in the Eastern District of Texas, naming 24% of all the defendants.

Noteworthy in Table 3 is the general increase in the number of defendants per case across all districts. In 2010, of the top 10 districts, only the Eastern District of Texas averaged more than four defendants per non-false-marking case. By contrast, through September 2011, six of the top 10 districts averaged more than four defendants per case.

The increased filings and numbers of defendants in the District of Delaware in the pre-AIA period were remarkable. On an annualized basis, the District of Delaware was experiencing a more than 50% increase in case filings, an 18% increase in the number of plaintiffs, and a 324% increase in the number of defendants. But much of that pre-AIA growth can be traced to filings by a small number of plaintiffs against a very large number of defendants. Eight plaintiffs filed 47 cases naming 1,054 defendants in the District of Delaware in the pre-AIA period. This small number of plaintiffs drove the District of Delaware's pre-AIA defendants-per-case figure to 7.2 compared to 3.5 for all of 2010. Nevertheless, even factoring out these cases, Delaware was still on track for a 29% annual increase in the number of cases, an 8% annual increase in the number of plaintiffs, and a 54% annual increase in the number of defendants.

In sum, the pre-AIA data show that as a percentage of non-false marking patent cases filed in the United States, the Eastern District of Texas was on track to increase its percentage of cases and plaintiffs while holding relatively steady in the percentage of defendants. While not yet in the lead, the District of Delaware was experiencing a tremendous surge.

Table 5 reports the numbers for non-false marking cases filed on or after September 16. As shown in that Table, the impact of the AIA on the number of defendants per case was dramatic. In the Eastern District of Texas, the average was reduced from 10 defendants per case to less than three defendants per case. After the AIA, only a single district had more than three defendants per case, compared to nine before.

Table 6 annualizes the post-AIA figures for ease of comparison to the actual filings and the 2010 data.⁵ Had the post-AIA filing rate prevailed throughout 2011, there would have been 4,160 non-false-marking cases nationwide, filed by 6,556 plaintiffs against 9,399 defendants. These numbers would reflect a 14% increase in the number of cases, a 7% increase in the number of plaintiffs, and a 34% decrease in the number of defendants.

Importantly, the provisions of the AIA related to joinder were not retroactive. To the extent plaintiffs wished to avoid the joinder provisions of the AIA, they had the incentive to file more cases in the period leading up to the effective date of the Act, and that is what the data shows.

Table 7 shows case filings through seven days before the AIA passed Congress, during the seven days after passage but before the President's signature, and the period after the Act went into effect. From January 1, 2011 to September 15, 2011, 11,419 defendants were named in non-false-marking cases. More than 15% of that total (1,787) were named in cases filed in the week between passage of the Act by Congress and the President's signature. Figure 3 shows the number of defendants named in each calendar week in 2011. Week 36 corresponds to the week of September 8-15, 2011.

II. WHAT EXPLAINS THE 2011 FILINGS

A. Eastern District of Texas

As noted above, before the enactment of the AIA, the Eastern District of Texas continued to lead the nation in non-false-marking case filings, by virtually any measure. This was so despite several factors that some expected to reduce filings there. While none of the factors discussed below reduced the absolute growth in Eastern District of Texas filings, it is possible that these factors reduced the rate of growth.

1) Writs of Mandamus

Between 2008 and 2010, the Federal Circuit issued eight writs of mandamus ordering Eastern District of Texas judges to transfer cases to other districts. Some predicted that these writ grants would reduce case filings in the Eastern District of Texas, on the theory that plaintiffs would prefer to pick a jurisdiction where venue would stick rather than being transferred to a venue preferred by their opponents. But that did not happen. By the end of 2010, non-false marking filings in the Eastern District of Texas had increased by nearly 20% over the 2009 filings, and the Eastern District of Texas had more non-false marking filings than any other district in the nation. Indeed, more than 25% of all defendants named in non-false marking patent litigation in the United States in 2010 were named as defendants in Eastern District of Texas suits.

In 2011, the Federal Circuit issued three additional writs ordering cases transferred from the Eastern District of Texas. See In re Verizon, 2011-M956 (Mar. 23, 2011) (writ issued to Judge Ward); In re Morgan Stanley, No. 2011-M962 (Apr. 6, 2011) (writ issued to Judge Davis); In re BioResearch, No. 2011- M995 (Dec. 22, 2011) (writ issued to Judge Ward). Two of those writs issued before the signing of the AIA. Nevertheless, as detailed above, filings in the Eastern District of Texas were on track to increase through the signing of the AIA. Thus, the writs did not stop the growth in Eastern District of Texas filings. As mentioned above, it is possible that the writs reduced the rate of growth (i.e., absent the writs there would have been even more cases and defendants in the Eastern District of Texas). Alternatively, the Federal Circuit's denials of writs of mandamus relief in other cases, see, e.g., In re Google Inc., No. 2011-M968 (Mar. 4, 2011) (affirming denial to sever and transfer by Judge Davis), combined with continued reluctance of some Eastern District of Texas judges to order transfers, may have encouraged even more filings in that court.

2) Eastern District of Texas Retirements/ Resignations/Case Assignments

2011 saw three Eastern District of Texas judges resign or retire. On September 29, 2010, Judge Ward announced that he would resign effective October 1, 2011. On March 23, 2011, Judge Folsom announced that he would retire effective March 31, 2012. On June 1, 2011, Magistrate Judge Everingham announced that he would resign effective October 1, 2011. On May 19, Rodney Gilstrap was nominated to replace Judge Ward, and he was confirmed by the Senate on December 5, 2011. Those resignations and retirements did not stop the growth of pre-AIA Eastern District of Texas filings, although they may have reduced the rate of growth. Time will tell whether Judge Gilstrap and other new judges are more inclined to transfer cases than their predecessors.

Notably, plaintiffs have some ability to influence which Eastern District of Texas judges are likely to hear their cases. The Eastern District of Texas has several divisions, six of which are relevant to civil cases. These are: Beaumont (division 1); Marshall (division 2); Sherman (division 4); Texarkana, (division 5); Tyler (division 6); and Lufkin (division 9). In December 2009, the court issued General Order No. 09-20 concerning the assignment of cases to judges in the district. Under that Order, 75% of the civil cases filed in Marshall were assigned to Judge Ward, with the remaining 25% assigned to Judge Folsom. Likewise, 95% of the patent cases filed in Tyler were assigned to Judge Davis and 5% to Judge Schneider. Under the Order, 90% of the Texarkana filings were assigned to Judge Folsom, with the remaining 10% to Judge Ward. Plaintiffs familiar with this allocation had an incentive to file in particular divisions to increase their odds of landing a judge that they deemed more favorable (i.e., less inclined to transfer and more hospitable on the merits). For example, plaintiffs desiring Judge Ward could file a case in Marshall and have a 75% chance of having him assigned to their cases. Likewise, plaintiffs desiring Judge Davis had a 95% chance of having him as their judge merely by filing in Tyler. Plaintiffs wishing for Judge Folsom had a 90% chance of being assigned to him by filing in Texarkana.

Effective October 3, 2011, General Order 11-13 modified the case assignments so that 100% of the Marshall and Texarkana filings were assigned to Judge Folsom. On December 15, 2011, General Order 11-17 reverted to the assignment percentages of General Order 09-20 substituting Judge Gilstrap for Judge Ward (i.e., 75% of the Marshall and 10% of Texarkana filings were assigned to Judge Gilstrap).⁶

The case filings indicate that plaintiffs were making choices based on the judicial assignments. Table 8 shows 2010 and pre-AIA 2011 case filings by division in the Eastern District of Texas. As shown there, filings in two divisions (Marshall and Tyler) dominated, suggesting that plaintiffs were selecting for Judges Ward and Davis. Table 9 shows the post-AIA filings and the switch in preference from Marshall to Tyler (i.e., for Judge Davis in light of Judge Ward's retirement).

Footnotes

^{1 James Pistorino is a patent litigation partner in the Palo Alto, California office of Perkins Coie LLP.}

^{2 Susan Crane is an attorney in Los Gatos, California.}

^{3 Some aspects of the PACER dataset bear noting. First, the dataset includes information from the original case filing as well as any later-added parties. Thus, the reported numbers are not a perfect reflection of the action at the time of filing, as parties may have been added later. Second, the dataset only classifies parties as plaintiffs or defendants and makes no effort to classify the parties as patentees or accused infringers. Thus, in actions seeking a declaratory judgment of non-infringement/invalidity, the party/parties bringing the declaratory judgment action (presumably the accused infringers) will be classified as the plaintiffs and the patentee/patentees will be classified as the defendants. Third, named plaintiffs/defendants are counted each time they appear as a party. Thus, a single party that brings four suits asserting patent infringement is counted as four plaintiffs in the reported data. Fourth, only cases coded as patent cases (code 830) were pulled. Thus, to the extent that cases were miscoded they are not included. At least some false marking cases have been coded as 890 (other statutory actions) or 690 (forfeit/penalty; other). Finally, neither the U.S. Court of Federal Claims nor the International Trade Commission fully participates in PACER, so patent cases filed there are not included.}

^{4 The 2010 data suggest no obvious seasonal variation in the number of plaintiffs or defendants named in each month. As discussed below, however, there was a large spike in filings in advance of the signing of the AIA. Thus, at least some cases that would have been filed later in the year were presumably filed earlier in 2011 to avoid the effects of the AIA. The simple annualization used here may somewhat overstate the pre-AIA trends.}

^{5 As noted above, the spike in case filings in the week before the AIA went into effect may have reduced the post-AIA filings because cases that may have been filed later in the year were filed earlier to avoid the AIA's limitation on joinder.}

^{6 General Order 12-3 provides that starting in March 2012, the civil cases previously assigned to Judge Folsom will be assigned to Judge Schneider.}

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