Michael C. Smith 2016-12-20 18:04:21
In 2016, four significant developments played out in patent litigation in Texas. Federal courts in the state saw a steep decrease in patent filings—especially those filed by “high-volume” non-practicing entities—similar to a substantial drop-off nationally. Courts continued to dismiss and award attorneys’ fees in larger numbers of cases, while the Federal Circuit began to establish standards for the now popular motions to dismiss for lack of patentable subject matter. Parties and courts began grappling with the requirements of the 2015 amendments to the Federal Rules of Civil Procedure, which eliminated “bare-bones” pleadings in patent cases and narrowed the scope of permissible discovery. And, finally, Congress considered, but failed to pass, additional substantive legislation affecting patent litigation. Decrease in patent filings Filings of patent infringement cases decreased significantly nationwide in 2016, but filings in Texas courts declined even more. In 2015, the U.S. District Court for the Eastern District of Texas received about 43 percent of the nationwide patent filings. In 2016, filings in that court dropped by about 34 percent, with a noteworthy portion of the reduction coming from reduced filings by “high-volume” non-practicing entities. Increased dismissals, sanctions, and transfers A trend first seen in late 2015, increased dismissals, sanctions, and transfers continued through 2016. Texas federal district courts resolved numerous motions asserting lack of patentable subject matter under 35 U.S.C. § 101 under the new test set forth by the U.S. Supreme Court in Alice Corporation Pty. Ltd v. CLS Bank International et al. Texas courts also gave significant awards of attorneys’ fees to prevailing parties in patent infringement litigation under 35 U.S.C. § 285 with the substantially lowered requirements set forth in Octane Fitness, L.L.C. v. ICON Health & Fitness, Inc. Most notably, U.S. District Judge Rodney Gilstrap of Marshall granted the defendants’ motion for fees in the eDekka litigation following a dismissal under § 101 and awarded about $390,000 to the remaining defendants. Finally, grant rates in motions to transfer increased significantly during the year, rising to almost 57 percent in the Eastern District of Texas, even as the numbers of motions filed dropped substantially. New federal pleading and discovery rules Amendments to the Federal Rules of Civil Procedure, effective December 1, 2015, narrowed the scope of discovery by adding the requirement that all discovery sought must be “proportional to the needs of the case.” While caselaw by Texas district courts is scant on the application of the new standards, it does provide a tool to address overbroad discovery requests. The new rules also abrogated the use of the forms that had previously been attached. One of those forms had provided a basis for “bare-bones” pleadings in patent infringement cases, exempting patent cases from application of the plausibility requirements of the Supreme Court’s holdings in Twombly and Iqbal. As a result of the change, plaintiffs have been required to provide more detail in their complaints alleging infringement. Texas district courts have provided a number of decisions defining the new level of detail in specific cases, but often, courts’ requirements that detailed infringement contentions be provided early in the case have rendered disputes over the adequacy of language in pleadings largely moot. Patent reform legislation In Washington, D.C., both the proposed Innovation Act by Rep. Bob Goodlatte of Virginia and the PATENT Act co-sponsored by Texas’ U.S. Sen. John Cornyn were reported by their chambers’ respective judiciary committees but failed to see floor action during the year. Similar legislation is likely to be proposed during the new Congress. MICHAEL C. SMITH is a partner in Siebman, Burg, Phillips & Smith in Marshall, where he focuses on complex commercial patent litigation in federal court. He is a former chair of the Texas Bar Journal Board of Editors, a former chair of the Litigation Section of the State Bar of Texas, and the editor of O’Connor’s Federal Rules * Civil Trials. His Eastern District of Texas Federal Court Practice blog can be found at EDTexweblog.com.
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