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Could Track B Scheduling in EDTX Benefit Patent Trolls?

Posted By Scott A. McKeown On 3 March 2014 @ 7:15 In Business Method Patent Challenge, Inter Partes Review, Patent Trial & Appeal Board, Post-Grant Review | Comments Disabled

Texas Track B [1]EDTX Judge Davis Announces New, Faster “Track B” for Patent Cases

Last week, Chief Judge Leonard Davis of the Eastern District of Texas (EDTX) issued an Order (here [2]) creating a second, Track B for patent cases. Track B as the name implies establishes a different, accelerated track as compared to the typical EDTX schedule (Track A). Litigants may opt for Track B by agreement, or be selected for such by the court. Track B is designed to reduce costs by accelerating milestones and limiting certain filing and discovery practices. These same concepts are expressed in many of the proposals of the pending patent reform legislation [3]. The judiciary has been rather vocal on opposing the various proposals floating around Congress on issues of district court case management. While the goal of Track B is to resolve disputes sooner with less cost to litigants, the timing also suggests a deliberate amplification of the judiciary’s position.

To be sure, the proactive efforts of the judiciary to reduce time and expense of litigation are greatly welcomed, and the EDTX effort is to be applauded for taking the lead. Yet, based upon the dynamics of what is going on in the world of patent assertion post America Invents Act (AIA), the EDTX Track B docket could aid certain non-practicing entities that were only recently left for dead.

A clear trend has emerged in patent assertion since the passage of the AIA— suits in the predictable arts are increasingly including larger numbers of patents. Since the enactment of the AIA, it is far more difficult to hold up an entire industry with a single patent. This is because the AIA provides USPTO patent challenge mechanisms such as Inter Partes Review (IPR) and Covered Business Method (CBM) that are faster, more cost effective, and more challenger friendly relative to litigation. [4] As a result of the shift toward larger portfolios (which better insulate from such USPTO challenges due to increased cost, and impact motions to stay [5] the costlier litigation proceeding) smallish trolls are far less attractive to law firms from a contingency investment perspective since such assertions are far less effective post-AIA.

Track B, if not adapted appropriately, may undo the progress of the AIA.

To be clear, I appreciate the initiative and thought leadership of Judge Davis and the EDTX and understand that Track B has only just started and will undoubtedly be adapted if unfairly balanced. What follows is my initial reaction on how the new EDTX docketing option could be beneficial to some NPEs. Track B is targeting smaller damage cases (relative to Track A). While such filtering makes perfect sense for cases including true market competitors, NPE cases have different dynamics. As the EDTX is a favorite haunt of such plaintiffs, such dynamics may quickly lead to abuse of Track B.

As noted above, smallish NPEs seeking 1 million or less from any one of a group of defendants are very vulnerable to AIA challenges (which already provide a faster and more cost effective resolution in many cases). By seeking out the faster Track B docket in the EDTX such trolls may effectively beat the defendant to the punch on a faster resolution for the purpose of insulating themselves from a stay. (The goal of the NPE is to maintain the litigation for settlement purposes). An EDTX judge is less likely to stay a fast track proceeding pending USPTO action. On the other hand, any defendant that fights Track B and opts for the longer, costlier timeline will be seen as a bully. Such a defendant that later argues for a stay pending USPTO review will be accused of gamesmanship.

Generally speaking NPEs favor the high cost and slower discovery timelines for settlement leverage. Likewise, Track B’s early delivery of infringement contentions and the like are not the least bit desirable for most NPEs. Still, smaller NPEs now being shut out from court by the AIA patent challenge mechanisms of the USPTO will be happy to be back in the game. Even with the Track B schedule, the cost of litigating will still far outpace the cost of settlement, which has always been the game for NPEs.


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URL to article: http://www.patentspostgrant.com/lang/en/2014/03/new-track-b-scheduling-in-edtx-to-benefit-trolls

URLs in this post:

[1] Image: http://www.patentspostgrant.com/wp-content/uploads/2014/03/Texas-Track-B.png

[2] here: http://www.patentspostgrant.com/wp-content/uploads/2014/03/GeneralOrderTrackB.pdf

[3] pending patent reform legislation: http://www.patentspostgrant.com/lang/en/2014/02/senate-poised-to-quickly-advance-patent-reform-efforts

[4] faster, more cost effective, and more challenger friendly relative to litigation.: http://www.patentspostgrant.com/lang/en/2013/01/ceos-guide-to-reducing-patent-litigation-costs

[5] motions to stay: http://www.patentspostgrant.com/lang/en/2013/09/ptab-speed-changes-courts-mind-on-previous-motion-to-stay-calculus

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