The Eastern District of Texas, which hears more patent cases than any other jurisdiction, has ushered in a new approach to case management that could streamline cases and drive down court costs. Some patent experts we spoke to praised the initiative, saying it’s proof that the courts—and not the U.S. Congress—are best-suited to reform patent litigation.
For years now, all the EDTX judges have used essentially the same timetable for patent cases. Under this approach to case management, the crucial issue of damages is dealt with fairly late in the case.
The chief judge of the district, Leonard Davis, wrote in a general order issued on Wednesday that, beginning immediately, judges in the district will be able to use a new timetable in which the litigants turn over information related to damages much earlier on. That new timetable will be referred to as Track B. The old approach to case management will still be used, to be known as Track A.
Davis wrote in his order that if the parties agree on Track B, then they’ll get to use it. If they can’t agree, the judge will decide which track to place the case in. Davis wrote that Track A will be the “default,” suggesting that most will follow that approach.
Under Track B, within two weeks of the defendant answering the complaint, the plaintiff has to specify which products have allegedly been infringed and how much other companies have paid to license the patents at issue. A few weeks later the defendant has to reveal how many units it sold of the allegedly infringing product. A few weeks after that, the plaintiff has to reveal a good-faith damages estimate (the order specifies that plaintiffs can be sanctioned if their estimate proves to be inflated). If the parties are far apart on damages, which is usually the case, the judge can determine who is right.
The Track B system is the first of its kind, but it may nonetheless have a familiar ring to it. That’s because early disclosure of information is a key part of the Innovation Act, the patent reform bill currently being mulled over by the U.S. Senate. That pending legislation is widely supported by tech companies eager to reduce the cost of defending against patent suits.
Some defendants, particularly smaller ones trying to avoid high legal bills, will benefit from Track B. Here’s why: It’s not unusual for defendants in patent cases to argue that even if the plaintiff’s infringement theory is valid, very few of the defendant’s products infringe, so damages are low. Under the Track B approach, defendants can get that argument before the judge much earlier. If the judge rules that the dollar value of the case is low, the defendant can settle relatively cheaply and early, or feel more emboldened to go to trial since there’s less risk of getting slapped with a big verdict.
“Track B would seem well-suited for a situation where the technology is not too complex and there are a limited number of patents/claims,” said Erich Spangenberg, the CEO of the patent monetization firm IPNav, in an email.
That said, Track B isn’t exactly a gift to defendants. For big companies, it can be a real headache to produce sales figures and the relevant documentation, especially in complex cases. They may prefer the Track A approach, which gives them more time to figure out what it needs to produce to the plaintiff. “On balance, many defendants will benefit” from Track B, “but some will oppose it because it requires substantial work up front,” said EDTX practitioner Michael Smith of Siebman, Burg, Phillips & Smith.
Kori Anne Bagrowski, a patent attorney at Brinks Gilson & Lione and a former clerk to Davis, commended his order. She said it shows that trial judges are listening to complaints about the patent system, and that they’re best-suited to usher in reforms. “I think the trial courts that see these cases every day are uniquely in touch and in tune to what these cases demand, and to determine what will be helpful and what won’t,” she said.