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13 October 2017Patents

Patent lawsuits flock from Texas to Delaware after TC Heartland

More patent cases were filed in Delaware than in Eastern Texas in the third quarter of 2017, with the US Supreme Court’s TC Heartland ruling appearing to take its toll on the traditionally popular jurisdiction.

Figures from Lex Machina show that the number of cases filed in the US District Court for the Eastern District of Texas has “significantly” declined and it has been overtaken by the US District Court for the District of Delaware.

The US Supreme Court’s decision in May found that a domestic corporation “resides” only in its state of incorporation under the statute governing venue in patent suits.

Yesterday, October 12, Lex Machina released “Patent litigation trends in the three months after  TC Heartland , showing that from Q1 to Q3, the number of cases in the Texas court had fallen from 312 to 139, while the total in Delaware rose from 129 to 212.

Texas accounted for 32% of all district court cases filed in Q1, but now has just a 14% share. Delaware has increased its portion from 13% to 21%. In July, WIPR  reported on similar analysis by Lex Machina, which showed that Texas’s share had fallen to 26% in Q2, but that is now 12% lower in Q3. The Q2 figures also showed that Delaware had 19% of cases, but now the total is 2% higher in Q3.

Lex Machina added that, looking at a 90-day window on either side of TC Heartland, the change is stark: before the ruling, more than twice as many cases were filed in Eastern Texas as in Delaware, but afterwards, the figure is less than half.

The company said the increasing preference for Delaware has been consistent since the ruling and that the number of granted motions to transfer by the Texas court has risen.

According to Lex Machina, the trends have been driven by “high volume plaintiffs”.

Others would describe these plaintiffs as non-practising entities, or “patent trolls”.

In a report a month after the TC Heartland ruling, the Harvard Business Review predicted the Eastern District of Texas’s dominant position as a “patent trolling venue” may soon end.

The publication said the decision would require “trolls” to work out where the defendant’s headquarters or primary operations are based, “and for most firms, that includes Delaware”.

The report said 64% of all publicly traded firms are incorporated in Delaware, and 90% of IPOs take place there.

Brian Howard of Lex Machina told WIPR there are other reasons behind Delaware’s increasing popularity too.

“Delaware has local patent rules that are not unfavourable to plaintiffs and the composition of a likely jury pool in Delaware bears a lot of similarity to one from Eastern Texas in terms of how they might view a typical California programmer witness.”

He also noted that the Delaware court has historically moved cases through its system with efficiency.

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More on this story

Patents
20 July 2017   The US District Court for the Eastern District of Texas’s share of patent suits dropped in the second quarter of 2017, in the aftermath of the US Supreme Court’s decision in TC Heartland v Kraft Foods.
Copyright
17 January 2018   Statistics published by legal analytics company Lex Machina have shown a drop in patent cases to US district courts for Q4 of 2017.