Sunday, January 2, 2022

Anti-judge-shopping initiative by Judicial Conference may spur internationalization of patent enforcement, further concentration of NPEs and litigation funders

There undeniably is a problem to be solved when one United States District Judge--Judge Alan Albright--gets about 20% of all U.S. patent infringement complaints. With the greatest respect for his admittedly tremendous expertise in patent litigation and his ability to work both smart and hard, it's mind-boggling when you consider that there are roundabout 700 U.S. district judgeships, and every district judge can hear patent cases (unlike in jurisdictions where patent complaints may be brought only before specialized divisions of particular courts).

Apart from his reluctance to transfer cases out of his district (and his division, unless he gets to preside over them anyway), and some other positions that patentees love him for, he may actually be much more balanced than people think. For example, he has recently invalidated patents on Alice abstraction (§ 101) grounds in a Facebook case and some other case. There was a fracking case last year in which I acknowledged he had a point. I listened in to a VLSI v. Intel trial, at the end of which Intel was cleared of infringement last summer, and saw no indication of pro-patentee bias. Let's put it this way: I keep watching developments in that district, but I try hard not to be intellectually dishonest when I voice criticism.

Now, it looks like his "market share" is going to go down soon. The annual report of the Judicial Conference under Chief Justice Roberts contains the following passage that is all about the W.D. of Tex.:

"The third agenda topic I would like to highlight is an arcane but important matter of judicial administration: judicial assignment and venue for patent cases in federal trial court. Senators from both sides of the aisle have expressed concern that case assignment procedures allowing the party filing a case to select a division of a district court might, in effect, enable the plaintiff to select a particular judge to hear a case. Two important and sometimes competing values are at issue. First, the Judicial Conference has long supported the random assignment of cases and fostered the role of district judges as generalists capable of handling the full range of legal issues. But the Conference is also mindful that Congress has intentionally shaped the lower courts into districts and divisions codified by law so that litigants are served by federal judges tied to their communities. Reconciling these values is important to public confidence in the courts, and I have asked the Director of the Administrative Office, who serves as Secretary of the Judicial Conference, to put the issue before the Conference. The Committee on Court Administration and Case Management is reviewing this matter and will report back to the full Conference. This issue of judicial administration provides another good example of a matter that self-governing bodies of judges from the front lines are in the best position to study and solve—and to work in partnership with Congress in the event change in the law is necessary.

"Chief Justice Taft was prescient in recognizing the need for the Judiciary to manage its internal affairs, both to promote informed administration and to ensure independence of the Branch. He understood that criticism of the courts is inevitable, and he lived through an era when federal courts faced strident calls for reform, some warranted and some not. [...]"

This Chief Justice is particularly institutional in his thinking. One can see that all the time, such as when he managed to avoid an overturning of the Illinois Bridge doctrine while still finding for the plaintiffs in the Pepper v. Apple dispute. Here, his desire--and he's obviously not speaking for himself alone--is to address the issue with the means at disposal of the judiciary, hoping to obviate the need for legislative intervention. It's about self-governance by the courts to the greatest extent possible.

The solution designed to curb Judge Albright's market share is to assign the patent cases brought in the W.D. of Tex. to different judges there, even though plaintiffs would obviously choose Judge Albright and file their complaints with the Waco division, which amounts to judge-shopping under the current framework.

Let's analyze this like any proposed solution to any identified problem must be looked at. Is it going to work in principle? Are there workarounds? And what about unintended consequences?

I would be shocked if the highest echelons of the federal judiciary of the United States couldn't make it work in principle. The proposal wouldn't have reached this milestone if they knew they couldn't make it happen--and in this case probably without requiring help from Congress.

But whether something works or "works-works" are two separate things. Would defendants necessarily be better off in other W.D. Tex. divisions? I know companies who would probably answer with "it can't get worse." Still, some of the other judges in the same district may also develop a predilection for patent cases, and in any event they'll likely look at the local case law. There are currently 13 district judges there plus 6 senior district judges.

There was a time when the Munich I Regional Court--a different jurisdiction, but one that has a rotational intradistrict assignment in place--had one plaintiff-friendly rocket docket and another division that was pretty much the opposite (by now they have three that are all very similar). What plaintiffs did there might also work in W.D. of Tex., provided they assert multiple patents from a portfolio and not just one or two patents:

Plaintiffs could bring multiple cases, either asserting patent P1, P2 and P3 separately against defendant D1, or a pattern of P1 v. D1, P2 v. D2, and P3 v. D3. They would then see to whom those cases get assigned, and then drop cases assigned to other judges in favor of amending their complaints pending before Judge Albright or a likeminded judge in the same district by adding more patents and/or more defendants. A patentee with a very large portfolio might actually bring the first few cases over patents that aren't as important as the ones that would be introduced later (through amended complaints). Now, it probably won't be practical to really bring dozens of cases just to be sure that one case will end up with Judge Albright. But if a few other judges there also turn out plaintiff-friendly, then the gamble might work.

What could patentees do for whom the workaround doesn't solve the problem--or if the workaround was thwarted as well?

That question leads us to a limitation of the focus of the Judicial Conference on intradistrict assignments. They try to do what they can, and no one can criticize them for that. Still, the ultimate impact may fall short of the expectations with which some companies and lobbying entities have lobbied Congress for this (which in turn got the Judicial Conference interested).

Patentees seeking to enforce their intellectual property rights increasingly have to "think global." If a patent is on the verge of expiration, or has already expired, then it's all about damages and there's probably no better place in the world to sue for damages than the Western District of Texas--or the Eastern District, but after TC Heartland some defendants are in a better position to get cases moved out of there (the rise of the Western District, where many tech companies have actual operations, is a result of TC Heartland to some degree). But the most effective kind of enforcement is to obtain injunctions (or import bans, such as from the ITC, which are just a special type of injunction).

As I wrote on LinkedIn a few hours ago, the Western (and also the Eastern) District of Texas can "compete" with venues like Munich, Mannheim, or London--not on injunctions (due to eBay), but by giving patentees leverage through the threat of major damages verdicts. Any change in U.S. patent enforcement policy (such as a new position paper by three federal agencies) that softens, slows down, or otherwise complicates enforcement results in ever more litigation in other jurisdictions:

  • In Europe, the "race to the bottom" continues and will likely heat up when the Unified Patent Court (UPC) commences its operation sometime this year. For a long transitional period, patentees can choose to bring their complaints in the equivalent of a U.S. district court or a local UPC division-and if they assert more than one patent, they can do both in parallel and see how it works out. After Brexit, the UK judiciary is no longer bound by European Court of Justice decisions, which has actually made the UK an even more attractive place to enforce (though a local legislative initiative concerning standard-essential patents may reverse that trend in the specific context of SEPs). So if one seeks leverage from patent enforcement in Europe, one has the choice between multiple national courts, the UPC, and the UK, which is totally independent.

  • China is an increasingly important patent litigation venue. And there are other Asian countries. For example, OPPO is now defending against patent infringement complaints by both Nokia and InterDigital in India, where InterDigital won an anti-antisuit injunction against Xiaomi that probably helped it obtain a settlement last year.

Globalization favors big budgets and large portfolios. I believe that the America Invents Act (AIA)--while the idea wasn't bad--is part of the reason (as is eBay) we've seen the rise of "mega-NPEs." The "anti-Judge-Albright rule" might further contribute to that.

Again, I do understand the concerns of those who have been sued in the Western District of Texas lately. But they should all think it through. The less leverage a person or entity holding a single U.S. patent has, the more the patent enforcement game becomes a battle of materiel, a question of scale. And then the same ones who lobby for stronger defendant's rights are exactly the ones who will complain about hedge funds and other major litigation financiers becoming involved.

The UPC favors deep-pocketed patent holders. What's happening (or about to happen) in the United States with respect to SEPs and the Western District of Texas will serve to reinforce the trend toward consolidation and concentration. We may see some of the effects this year, but more likely in 2023 and 2024.

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