TEXAS: An Introduction to Intellectual Property

2021 Texas IP Overview 

By Chris First
Partner
Heim, Payne & Chorush

Patent litigation in the United States continued its healthy pace through 2020, despite the challenges posed by pandemic-related lockdowns and disruptions. Patent owners will be pleased to see this trend, as patent filings are just coming off several years of sideways movement after a substantial decline from 2014 through 2017. This recent uptick in filing may be attributable to many of the issues we raised in this article last year, suggesting that policies initially derived from anti-patent sentiment are becoming tempered to provide more balanced, reasonable protections to patent owners and targets of patent enforcement alike. Striking that balance allows the United States to remain a significant player in the global technology market via strong intellectual property policies while also providing businesses with protections against frivolous lawsuits rooted in weak patents.

Both in and out of patent litigation, the significant impacts of the COVID-19 pandemic have dominated the narrative for 2020. Yet despite these major challenges, most patent cases still progressed over the last year. Courts have shifted many routine hearings to telephone or video conferencing software, and boutique patent litigation firms led the charge in rapidly developing new strategies to communicate difficult technological concepts remotely. By mid-year 2020, courts were holding remote Markman hearings and dealing with other substantive issues without physical attendance. Similarly, many litigants turned to remote depositions and other measures intended to promote flexibility.

By January 2021, the nation’s first Zoom jury trial began in the Western District of Washington. Despite the rise of remote hearings, many federal courts in Texas have elected for a combination of old and new, in part by endeavoring to make their courtrooms safe enough to allow in-person proceedings when necessary. After previously delaying in-person hearings until February 2021 during the height of the pandemic, the Eastern District of Texas (Marshall Division) resumed jury selections as of March 2021, and aimed to return to normal scheduled hearings for most matters as soon as safety allows. The Western District of Texas is similarly situated, with its first post-COVID patent jury trial (VLSI v. Intel) resulting in a landmark $2.1 billion verdict at the beginning of March.

Much of the recent uptick in patent litigation could be attributed to the fairhanded approach provided by the current administration at the U.S. Patent & Trademark Office, led by Director Andrei Iancu. Under Iancu’s leadership, multiple changes have been made at the PTO to improve the predictability and consistency of both post-grant proceedings as well as the patent application process. Director Iancu’s adoption of the Phillips claim construction standard (the same one used in district court litigation) afforded both challengers and patent owners more certainty and predictability in the examination process in post-grant reviews. With the administration change, Director Iancu resigned at the beginning of the year to allow the appointment of a new director. At press time, the Biden administration had not yet named a replacement.

Another major change in 2020 post-grant practice is the rise of discretionary denials. The Board’s precedential decisions in Apple v. Fintiv (March 20, 2020; designated May 2, 2020) and Advanced Bionics v. MED-EL (Feb. 13, 2020; designated March 24, 2020) appear to have far-reaching effects. The factors considered include (but are not limited to) practical considerations, such as (1) whether the parallel proceeding granted a stay or is likely to grant one; (2) how close the trial date of the parallel proceeding is to the statutory deadline for a written decision; (3) investment in the parallel proceeding by the court and the parties; (4) overlap in issues between the petition and the parallel proceeding; (5) whether the petitioner is a party in the parallel proceeding; and (6) other circumstances, including the merits of the petition. These factors are nonexhaustive, but it has rapidly become commonplace for PTAB petitions to include a section on the “Fintiv factors” for discretionary denial under § 314(a), and a similar section relying on Advanced Bionics for discretionary denial under § 325(d).

In part because of the rise of discretionary denial, the institution rate before the PTAB fell to an all-time low of 56% for the PTAB’s fiscal year 2020 (down from the all-time high of 67% in FY2016 and the recent high-water mark of 63% in FY2019). The institution rates for the close of 2020 were even lower—52% in October, 53% in November. While these lower rates of institution are encouraging for patent owners, the cases that were instituted saw relatively stable outcome rates. Additionally, the PTAB and appellate courts continue to struggle with real-party-in-interest (“RPI”) issues, with some patent owners growing concerned about a rise of “reverse patent troll” entities that aim to allow users of patented technology to avoid estoppel challenges by relying on a middleman to file IPR challenges. Even if not successful, the increased filing of challenges by these third parties threaten to inflate the cost of patent litigation and PTAB proceedings.

In the wake of the TC Heartland decision (limiting patent litigation to jurisdictions in which an alleged infringer has a physical presence or is incorporated), venue issues continue to remain a major point of contention in patent lawsuits. With the anniversary of Judge Alan Albright taking the bench in the Western District of Texas, that district has now outpaced the former busiest patent courts in the nation (formerly the District of Delaware, preceded by the Eastern District of Texas). The Western District received over 900 IP cases in 2020, with the District of Delaware receiving just over 800 and the Eastern District receiving about 450. The continued presence of patent litigation in Texas is ideal for litigants based in Texas, and the willingness of Texas judges to tackle the difficult technology and legal issues presented by patent cases has not waned. Despite this, many companies—even those with massive presences in Texas—continue to contest venue in Texas, driven largely by an environment in other districts (such as those in California) that is believed to favor defendants and large technology companies. The Federal Circuit recently relied on mandamus intervention to transfer several cases away from Judge Albright to California, but the impact of these recent decisions on future motions to transfer remains to be seen. In any event, the patent litigation landscape for Texas and nationwide remains promising.