One of the problems that could be addressed by patent reform legislation is venue shopping. In a series of posts we’ll look at a popular litigation destination and why lawyers are taking up residence – or at least office space – there.

Eastern District of Texas: Non-Practicing Entity Haven?

Marshall, Texas, a town of about 25,000 residents and the self-proclaimed Pottery Capital of the World, has another feature you aren’t likely to read about in a Chamber of Commerce brochure. As many of our readers know, Marshall has long been criticized as a patent troll haven – a place where plaintiffs in patent cases often walk away with huge awards in record time.

(As of writing, it is even noted on the town’s Wikipedia page)

Our independent research of reports compiled by the Administrative Office of U.S. Courts supports the notion that the Eastern District of Texas, which includes Marshall, Tyler and Texarkana, has become a haven for patent trolls.  Prior to 2007, the district was not ranked among the top 15 in terms of the most number of intellectual property case filings.  However, by 2007 it rose to ninth, and climbed to fifth in 2008 with a total of 411 case fillings.  According to a prominent Texas attorney, Marshall “has seen an economic boom with a lot of out-of-town lawyers coming to stay in town or to rent office space while a matter is pending.”

This rise is largely due to the increase in recent years in forum shopping by patent trolls, particularly in Texas’ district courts.  In 2005, 2006 and 2008, three of Texas’ four districts ranked among the top 15, and in 2007, all four districts were included in the top 15 districts hearing intellectual property disputes.  This increase has led to a Boston Globe article characterizing the district court at Marshall as “a venue that specializes in patent cases,” even though federal courts are supposed to be equally well equipped to handled all sorts of matters.

The shift in Texas filings from 2008 supports a theory that parties are shifting to concentrate particularly on the Eastern District of Texas.  The three other districts showed marked declines in filings, while the filings in the Eastern District rose by nearly 21 percent over the previous year.

The Eastern District of Texas has shown a steady and significant increase from 2003 (61 cases) to 2008 (411 cases).  No other district has shown such an exponential increase during that period of time.  According to Dennis Crouch at Patently-O, who studied a three-month period in 2007, 15% of new U.S. patent cases were filed in the Eastern District of Texas, beating out each of the 88 other federal district courts by a large margin.  As of early 2008, “about a tenth of the entire nationwide patent docket” was pending in a town with a population substantially smaller than Capitol Hill.

Our next post will look at why so many patent cases end up in Marshall.

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