Patent Rant

A few of you asked what I would say if I were to rant about the current state of affairs of patent law in the United States.  The patent litigation systems is screwed up beyond belief.  Thank your local congressman (probably a former plaintiff attorney) and the state of Texas.  Here are some sobering statistics.

– Most cases are brought in the Eastern District of Texas these days, regardless of where the companies in question are located;

– The Eastern District of Texas likes this “cottage industry” and therefore the courts never (to my knowledge) allow folks to transfer out of the E.D. of Texas;

– The advantage for plaintiffs to file in Texas is that the courts never (to my knowledge) invalidate a plaintiff’s patent during the course of events. In all other jurisdictions, when a plaintiff sues a defendant for infringement, there is always a chance the plaintiff loses its patent on a counterclaim – not here;

– According to my friends at Cooley Godward Kronish, the plaintiff wins 92% of the time in E.D. of Texas for cases that go to the jury; and

– Costs are completely out of control to defend these types of cases.

The following data is from the 2005 Report from the American Intellectual Property Law Association Economic Survey.

For controversies involving counsel from any major metropolitan city, the 75th percentile number below is the price tag you should be looking at. Bottom line, these are expensive, expensive propositions.

Litigation costs of controversies where $25M or less in damages is concerned:

Through close of discovery (pre trial)

75th percentile: $2M

Median: $1.25M

25th percentile: $600k

Through trial and appeal

75th: $3.5M

Median: $2M

25th: $1.2M

Litigation costs where the controversy is over $25M in damages:

Through close of discovery (pre trial)

75th percentile: $4M

Median: $3M

25th percentile: $1.4M

Through trial and appeal

75th: $6M

Median: $4.5M

25th: $2.5M

Do I even have to rant?  Isn’t it obvious what’s going on here?  The E.D. of Texas has decided that it wants to be the forum of choice for plaintiffs and patent trolls.  It’s completely stacked the deck in favor of one side. The federal government (run by a bunch of former plaintiff attorneys) turns a blind eye to the constitutional issues. 

It doesn’t matter who is right and who is wrong, defendants must settle of incur crushing legal costs.  

Brad thinks that software patents should be abolished.  I used to think he was crazy and mumble something about protecting our rights in Asia and elsewhere.  Maybe he’s right.  This is a total resource suck, business tax and reallocation of wealth. 

What really burns me is that all of this seems completely unconstitutional, but I’ll admit that I didn’t attend that class in law school as diligently as I could have. 

Before I get 100 comments on “What about the company who has a valid complaint?”  I’ll tell you two things about my experiences:  1.  “real” patent cases don’t get litigated in the E.D. of Texas and 2. the vast majority of patent cases I’ve seen in the past decade were all “shakedowns” to me.

Rant over.

  • I assume Jason wrote this. I don’t disagree with the ED of Texas stuff. I think you are wrong about plaintiff lawyers though. I think when you mention plaintiff lawyers as lawmakers, you are referring more to “trial lawyers” and personal injury/malpractice attorneys. The little guys making it easier to sue the big guys and insurance companies. In this case patent plaintiffs are usually the big companies upholding their patents. Texas a very unfriendly trial lawyers of America state (it is the home of W) is much more friendly to large company lawyers who are by and large the plaintiffs in patent cases.

  • As one lawyer once said to me, software patents are a sword and not a shield. If you are an innovative company, your 500K is likely better spent innovating rather than swinging your sword around.
    That being said, we are going to be filing at least a few patents. Why?
    The way we look at it is kinda like being Aikido patent masters. As opposed to meeting your aggressive enemy with force, you redirect their energy with a few body throws of your own. Because whether you like it or not, if you get successful, you will get sued.