Inside the Busiest Patent Court in America | FTI Journal

Inside The Busiest Patent Court In America

A Discussion with Chief Judge Leonard Davis

Inside The Busiest Patent Court In America

More than 1,700 patent infringement cases were filed in the Eastern District of Texas in 2013. That’s more than in any other district in the United States. These cases have become increasingly complex and contentious over the past decade as technological innovations create conflicts over just who invented, for example, a specific line of code that enables a new smartphone to do this or that. And the America Invents Act (AIA), a 2011 law intended to help American inventors patent their ideas more quickly by simplifying standards (changing the complicated first-to-invent rule to the putatively simpler first-to-file), already is having unintended consequences in the Eastern District of Texas and the 93 other U.S. district courts.

Chief Judge Leonard Davis has presided over the U.S. District Court, Eastern District of Texas, since 2002, gaining a reputation for fairness and pragmatism. He’s a strong believer in the jury system but also has found ways to avoid lengthy trials and has made the patent claim process more efficient. Chief Judge Davis recently sat down with Christopher Gerardi, Senior Managing Director and Co-leader of FTI Consulting’s Intellectual Property practice, to discuss the Eastern District and the court’s approach to patent infringement cases, the AIA’s unintended consequences and the effect of the growing number of non-practicing entities (NPE) in litigation.

Christopher Gerardi: The America Invents Act is one of the most substantive and major revisions to patent law over the last 60 years. Has that had any major effect on your docket in the Eastern District?

Chief Judge Leonard Davis: The act definitely has had an effect on our administrative and judicial workload: Both have gone up. The AIA prohibits a plaintiff from suing more than one defendant at a time so where you once had one case with 40 defendants, now you have 40 cases. We used to have combined trials. Now we have many more separate trials. And we're also seeing a greater number of transfers [of trials] to other districts because the transfer analysis is a little different. In our district this past year, about 40 percent of the motions to transfer were granted.

Gerardi: With respect to the increased workload and the transfer issue, some say the Eastern District has responded by simply deferring ruling on motions. The court date is pushed out so far that, at some point, it becomes too late to transfer. Is there any merit to that argument?

Davis: Absolutely none. We have a very heavy docket in the Eastern District of Texas. We're a large geographic jurisdiction — it’s bigger than a lot of states — but we have only eight judgeships; and with two long-standing vacancies, we have only six active judges to handle a sizable caseload. I alone have well over 500 patent cases. My colleagues and I get to motions to transfer as soon as we can. I know some parties would like for us to drop everything else and rule on their motion to transfer, but that’s just not feasible. Most of the time, we get them done within six months after completion of the full briefing.

Inside The Busiest Patent Court In America

Gerardi: A lot of the patent litigation activity on Capitol Hill is focused on curbing patent abuse and on non-practicing entities. In your opinion, are all NPEs created equal?

Davis: Well, first I think we have to be careful when we use the term NPE. It’s a buzzword that people love to throw around, and its definition often is in the eye of the beholder.

On one end of the spectrum, you have true competitors that are litigating. On the other end, you may have a company sending out, say, 10,000 demand letters asking for $1,000 per defendant to avoid being sued. They’re basically using the litigation process and the associated costs to extract money from defendants. That clearly is litigation abuse. In between those two extremes, there are NPEs that might have a very weak patent and probably shouldn’t have filed it. That’s abuse, too. But further across the spectrum, you have NPEs holding patents that have merit, and these NPEs paid good money for those patents. Or maybe it’s a failed company that was attempting to become a competitor and just never made it. These entities have every right to assert their property right in court.

In my opinion, what we really should be talking about — what is important — are the merits of the case and the patents, not the nature of the party bringing suit. Jurors are instructed to consider that all parties are created equal and are to be treated equally under the law, and I think the same applies to NPEs. So, yes, some NPEs have stronger patents than others, but the focus should be on the merits of the case, not on the nature of the party.

Gerardi: Do you have the ability to evaluate early on in a case the negotiating posture of the parties when one is an NPE or do you look solely at the substantive issues?

Davis: For the most part, I don’t look at it [the negotiating posture] unless the parties bring it to my attention. I can think of one case in particular where both sides said, “Judge, we’d like to get focused on damages early on.” The plaintiff said, “If the defendants will give me some technical information, I’ll refine my infringement contentions; if the defendants will give me computer code, I’ll narrow my infringement contentions further; and if the defendants will give me some sales information, then I’ll go to an early mediation.” The nearly 100 defendants were agreeable, and within six months, the vast majority of them settled. So if the parties bring the issue to my attention, I’ll try to accommodate either side, whether by agreement or by a court ruling, to try to get the damage aspects teed up earlier in the case.

Gerardi: I noticed that the Eastern District of Texas tends to consolidate cases with many defendants for pretrial purposes. Other courts don’t do that. Why does yours?

Davis: I’ve spoken with judges in other districts who say they are heading in that direction. It makes sense from a case management standpoint. While the AIA specifies that each defendant may be entitled to a separate trial, that doesn’t mean you need separate discovery tracks, discovery disputes or Markman1 hearings. Consolidating these processes is much more efficient. It also helps when a case is transferred to another district court. There’s no reason why two judges and two law clerks should have to go through the same briefing — coming to, perhaps, inconsistent conclusions — when this can be done more productively by one judge.

Gerardi: You’ve signed a number of orders that have improved efficiency and reduced costs. Other districts across the country watch what you are doing closely. Is there anything that can be done early on to focus the discussion on damages?

Davis: Right now, our patent rules primarily are set up for the big case going through to trial — meritorious patents, big damages — and it’s a very expensive process. One thing I am considering is the idea of having a track A and a track B. Track B could be geared toward early resolution, lower damage-type cases. It might include opportunities for earlier focused mini-Markmans and a summary judgment briefing. Or it might entail earlier disclosure of sales information so the damage aspects of the case can be evaluated by the parties, which might lead to an early mediation process to see if both sides can make this case go away. That would avoid expending the money that the full-blown Track A process requires.

Gerardi: At the October Texas Bench Bar meeting, Chief Judge of the U.S. Court of Appeals for the Federal Circuit Randall Rader talked about the use of summary judgment and fee shifting2 that judges can use to curb litigation abuse. Are judges employing that authority enough?

Davis: There is no law on the books that allows fee shifting. We’ve got Rule 11 and Section 285, which require that fraud, willfulness or subjective bad faith be demonstrated — a pretty high bar for a judge to impose, based on the law that Congress has passed. But if Congress wants to change the law, that might clear the way for more fee shifting.

With regard to a more aggressive use of summary judgments, I have a somewhat different view. In trying to minimize the perceived problem of too much patent litigation, we judges need to be careful that we don’t start infringing on the province of the jury by deciding fact issues under the guise of a summary judgment motion. I am afraid some courts have become summary judgment courts where they are deciding questions of fact that should be decided by a jury. Where I grew up — in the South, attending Baylor Law School — we have a very high regard for the jury system. Unless it is clear as a matter of law or if there is no genuine issue of fact, the case will go to a jury. I think that’s why you see more cases tried in the Eastern District of Texas. I’ll grant summary judgment if an issue of fact is clear, but I can’t lower the summary judgment standard mandated by the law just because there are too many cases out there.

Gerardi: Let’s spend a little time talking about the Eastern District. It’s been one of the most active patent districts in the country for many years. Some parties want to be in your jurisdiction at all costs; others want to avoid it at all costs. Why?

Davis: If I could sum it up in one word, I would say predictability. Lawyers know that when they file in the Eastern District, they are dealing with a fairly small universe of experienced patent law judges, and the attorneys know who they’re going to be getting — and that’s comforting. We also have patent rules that move our cases along promptly. We don’t tolerate discovery abuse so there is no game playing, and we have a no-nonsense approach to getting a case ready and trying it. So there is predictability.

I also think there’s a perception (and, perhaps, rightfully so) that in this jurisdiction, there’s a much better chance of letting a jury decide your case than would be likely in other districts. We have firm trial settings. I seldom grant a motion for continuance, thus one will get a fairly quick trial. So I think we have an efficient process. There are districts around the country that have similar processes; Delaware is one, which, likewise, attracts a lot of patent litigation.

Gerardi: Can you address the perception that Texas is overwhelmingly pro-plaintiff?

Davis: Initially, we were seen that way because, early on, plaintiffs had some remarkable success. But that perception is changing. I ran some statistics the other day, and for 2013, we took 15 patent cases to a jury, and 11 of those had a defense verdict. I think the Defense Bar is doing a much better job of trying cases now than in the past. A decade ago, plaintiffs would employ trial lawyers, and the defense would employ patent lawyers. Today, the most successful defendants are using trial lawyers as well, with excellent patent lawyers backing them up. And the national firms are relying on and using local counsel much more effectively.

Also, people underestimate jurors and assume they are uneducated. But in my discussions with East Texas jurors after a trial — whether they found for the plaintiff or for the defendant — I’ve learned that they really tried to get it right. They understand the issues involved. If you explain your case to jurors correctly, I think you have an excellent chance of winning.

Gerardi: Do jurors ever wish for anything that would make their job easier?

Davis: After one of my panels suggested it, I began allowing jurors to ask questions. You would be surprised at how probative and pointed these questions can be. Jurors may not understand all the nuances, but they do recognize the critical issues.

It’s a myth that trials need to be long and complicated. I give attorneys strict time limits. Each side normally is allowed about 30 minutes for voir dire, 45 minutes for the opening statement, anywhere from 11 to 18 hours for direct and cross, and usually 45 minutes to an hour for the closing argument, which adds up to a five or six-day trial.

I have asked jurors whether this allotment was enough because I want to gauge whether I am short-circuiting the lawyers with these time limits. Invariably, jurors say, “No, we heard all we needed to hear.” The other question typically asked is, “Do the lawyers have to tell us everything five or six times? Do they think we’re stupid?” Jurors hear the evidence, they know what the issue is and they’re ready to decide it.

Gerardi: Are there any other misconceptions about patent trials, juries, the bench or the Eastern District that you’d like to clear up?

Davis: I would like to say that we have some hard-working judges and jurors, and we want to provide a fair, even playing field for plaintiffs and defendants to get their disputes resolved in the most efficient way possible. We’re a small court so we can be innovative. We can react fairly quickly, and we’re willing to try new things such as the plan A and plan B tracks that I’m contemplating doing under our patent rules. Some districts spend four or five years arguing over what the patent rules should be because those districts have so many judges and a lot of different people to satisfy, which makes it harder to get consensus. I just pick up the phone and call a couple of people. We usually agree, saying, “Sure, let’s try that and see how it works.”

Gerardi: Last question: Given your workload, what do you do in your time off?

Davis: When I’m not in court, I’m at our ranch. Rhonda and I live only 12 miles from the courthouse on our 340-acre cattle ranch. I love to work there on the weekends and relax on my tractor. It’s therapeutic. I’m also an avid duck hunter, and I’ve developed some excellent duck habitat at the ranch. Many times during duck season when I have a Markman hearing at, say, 9:30 a.m., I know the attorneys think I’ve been poring over their briefs all morning. Actually, by 9:00, I’m back from duck hunting, showered and changed and ready for court already having taken my frustration out on the ducks!

Gerardi: Judge, thank you for your time.

1 — The Markman process leaves it up to a judge, not a jury, to determine the meaning of language in a patent dispute. This often is a quick route to an early settlement.

2 — Fee shifting means that the loser pays the winner’s legal costs. It’s thought to discourage NPEs. It’s also been argued that fee shifting could have a chilling effect on a plaintiff’s right to his day in court.

© Copyright 2014. The views expressed in this article are those of the authors and not necessarily those of FTI Consulting, Inc., or its other professionals.


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Key Contacts

Christopher P. Gerardi

Senior Managing Director, Co-Leader of Dispute Advisory Services

Chief Judge Leonard Davis

Chief District Judge United States District Court Eastern District of Texas