TEXAS: An Introduction to Intellectual Property
2022 Texas IP Overview Writeup
By Alden Harris
Partner at Heim, Payne & Chorush
US patent litigation in 2021 kept pace with 2020, leveling off after substantial growth over 2019. Patent owners were served a buffet of uncertainty, ranging from concerns about Covid delaying trials to the increasing popularity of venue transfer motions. Yet 2021 continued the positive trends we discussed in this article last year — IPR institution rates rose only slightly from their record low in 2020 (from 56% to 59%), the PTAB continued to apply the Phillips claim construction standard and the Fintiv discretionary denial standard, and Texas Federal Courts continued to hold trials and move patent cases forward at a pre-Covid pace. With a new PTO Director awaiting confirmation, we’re hopeful that the Biden administration will continue to strike a healthy balance on IP policy, encouraging growth and innovation during otherwise uncertain economic times.
Texas federal courts remained popular patent litigation venues, receiving 1,533 of the United States’ 4,076 new patent cases in 2021. The Western District of Texas was again the busiest district in the nation with 964 new cases, continuing to outpace other heavyweight patent districts like Delaware (889), the Eastern District of Texas (449), and the Northern District of California (185). At the same time, more Texas patent cases than ever were subject to motions seeking to transfer the case to a more "convenient” litigation venue, often the Northern District of California. Last year, 143 Texas patent cases had venue transfer motions filed, up from 110 the previous year. And a record 29 venue transfer mandamus decisions were handed down by the Federal Circuit last year, many of which ordered Texas federal courts to transfer cases out of state. Given the Circuit’s unprecedented level of involvement, transfer motions are likely to remain a major feature of Texas patent litigation in 2022.
At this point the reader may have a reasonable question in mind: why are parties in Texas patent suits filing more convenience transfer motions than ever? Has the inconvenience of transporting witnesses and documents to Texas increased? Surely not. More than ever, litigation is happening remotely over streaming services like Zoom, eliminating situations where parties would have incurred travel or shipping costs in the past. Has Texas become a less convenient location for major industry players? On the whole, no. Tech companies are flooding into Texas. Apple’s second Austin campus opens this year, a $1 billion complex that includes a 75,500-square-foot hotel. Tesla officially moved its headquarters to Austin last October and began manufacturing vehicles at its $1.1 billion Austin facility, dubbed 'Gigafactory Texas,' in late 2021. Oracle also moved headquarters to Austin, and Samsung announced plans for a $17 billion semiconductor fab in Taylor, Texas. More people moved from the Bay Area to Austin than from any other region outside Texas. If convenience isn’t the actual issue, one might guess movants are seeking a more favorable judge or jury pool in the transferee forum. But this explanation is also suspect. In Texas patent trials since 2018, the plaintiff win rate was 59%. In the same time period, the Northern District of California had a 100% plaintiff win rate at trial and Delaware had a 75% plaintiff win rate.
What is it, then, that patent owners see in Texas federal courts, and what is it that many accused infringers want to get away from? The simplest explanation is that Texas courts are open for business and holding patent trials on schedule. In cases filed since 2018, Texas courts have held 43 patent trials, with 26 of those trials occurring before Judge Gilstrap in Marshall, and 12 before Judge Albright in Waco. By comparison, the Northern District of California (a district with ten full-time active judges) held three patent trials. This disparity has only been worsened by Covid. Texas federal courts largely maintained their normal trial schedules during the pandemic, while California courts have been slowed by more restrictive policies. Unfortunately, all signs point to a mounting backlog in California — Northern California has historically taken roughly seven to 12 months longer to bring patent cases to trial than Texas courts, but the average age of pending cases in NDCA now exceeds WDTX by 14 months, suggesting this disparity will continue to climb. As a consequence, Texas Federal Courts remain attractive venues for patent owners who hope to get their day in court without excessive costs and delays.
The new executive branch seems poised to continue the even-handed approach to patent policy we lauded in previous years’ articles. Interim Director Hirshfeld has been a stabilizing presence at the PTO, largely maintaining existing policies. Patent applications rose modestly in 2021 and patent grants were down slightly. While IPR rates of institution and findings of invalidity rose somewhat this year, they remained close to the numbers we observed last year.
Since IPRs were first introduced in the America Invents Act, there has been an active debate about their role. Should IPR proceedings be thought of as an alternative to validity litigation in district court, or as an addition to parallel district court validity litigation? The framers of the AIA thought of IPRs as an alternative. Senator Schumer remarked on the Senate floor that the AIA “streamlines review of patents to ensure that the poor-quality patents can be weeded out through administrative review rather than costly litigation.” Senator Kyl also expressed his hope that “extending could-have-raised estoppel to privies will help ensure that if an inter partes review is instituted while litigation is pending, that review will completely substitute for at least the patents-and-printed publications portion of the civil litigation.”
Defying congressional expectations, IPRs have historically been parallel litigation battlegrounds rather than alternatives. But, as we discussed in last year's article, this began to shift in 2020. The PTAB’s adoption of the Phillips standard brought consistency between IPR and district court claim constructions, and the PTAB’s Fintiv decision allowed the Board to consider pending litigation when deciding whether to institute an IPR. This year, another change came in the Federal Circuit’s Caltech decision, which held that IPR “estoppel applies not just to claims and grounds asserted in the petition and instituted for consideration by the Board, but to all grounds not stated in the petition but which reasonably could have been asserted against the claims included in the petition.” This new holding expands IPR estoppel and may cut down on parallel validity litigation, allowing IPRs to increasingly serve their legislatively intended purpose as a cost-saving "substitute".
The administration’s nominee for PTO Director, Kathi Vidal, testified before the Senate Judiciary Committee on December 1, 2021, and submitted written answers to senators’ questions. The Committee approved her nomination in January, and she is likely destined for confirmation by the full Senate. Ms Vidal is a promising choice with real qualifications: an electrical engineering degree, a Federal Circuit clerkship, and a significant patent litigation career representing both plaintiffs and defendants. Her answers to senators’ questions prioritize themes of innovation and economic growth, including the potential costs of PTAB proceedings for small or underserved minority inventors and the importance of reconciling IPRs with parallel district court litigation. She also signaled interest in a bipartisan Senate proposal that the PTO investigate ways to streamline and simplify examination of section 101 issues.