Tag Archives: Eastern District of Texas

Experts: Void from U.S. patent “train wreck” is being filled by China’s patent system

In a few short years China’s patent system has gone from an IP rights wannabe to one of the most responsive and patent-friendly systems in the world.

Leading U.S. IP experts say that underlying this rapid evolution is a desire for China to become a science and technology powerhouse, with the ability to create new and formidable industries that employ many of its 1.4 billion people.

“China wants to be an innovation leader for multiple reasons,” Irv Rappaport, former Chief Patent Counsel at Apple and National Semiconductor, who served on the Uruguay Round of GATT, told IP CloseUp recently. “It is fascinating to see how the U.S. patent system is imploding, while the Chinese system is exploding with activity and purpose.

“For more than a decade the U.S. has been emasculating its patent system, while the Chinese have been studying it and adopting the benefits of a well-coordinated and fast-moving one. The U.S. has gone from being on the global cutting edge in IP in the 1990s, to becoming a patent backwater, because of a well-heeled, anti-patent faction among technology companies that want to stifle competition.

“Train Wreck”

“China has watched the U.S. train wreck and is moving fast to fill the void,”continues Rappaport. “It wants to become the world’s ‘Eastern District of TX,’ that is, a fair and fast adjudicator of disputes that respects patent holders’ rights. China will soon be the world’s largest economy with the biggest population and a middle class the size of England, France and Germany combined. Their commitment to innovation can not be ignored.”

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Peter Holden, CEO of ipCreate and former managing director with London-based Collar Capital and a founding executive with IP Value, has worked extensively with Asian companies and patents. He has traveled to Korea, China and Japan more than 100 times over the past twenty years. “The Chinese have learned from the U.S. and are sincere about making their IP system the best — one that will encourage innovation and help their nation to become the economic leader. It is not merely a thought. It’s an idea that they are dedicated to.

“China’s attitude towards foreign patent enforcement may not always be as generous as it is currently. It knows that it needs to bend over backwards to be fair if it is to be taken seriously on a global scale. To encourage competition there needs to be a level playing field.”

Counterfeits Still Rule

But China’s record on counterfeits is poor, with everything from luxury goods to pharmaceuticals sold domestically and exported globally. According the U.S. International Trade Commission, Chinese theft of U.S. IP in 2009 alone cost almost one million U.S. jobs and caused $48 billion in U.S. economic losses.

“Counterfeit goods are still an issue for China,” says Erick Robinson, a patent attorney in Beijing and author of Defending a patent case in the brave new world of Chinese patent litigation, in the current issue of IAM magazine. “However, sales of fake goods are no longer openly accepted and the government has been on the war path trying to stop them in different ways. Authorities know that in order to be taken seriously about IP rights, they cannot ignore the problem of counterfeit goods.”

For a prior IP CloseUp post summarizing the Robinson article, go here.

“Go-To” Jurisdiction

China is just beginning to build its giant tech companies. They have succeed with Alibaba and Huawei, and acquired Lenovo from IBM, which is now a $45 billion (USD) business. Their big businesses currently have less to lose from strong patents and quick dispute resolution than those in the U.S. and Europe. To create successful businesses and attract investment, incentives need to be provided, and strong patents and a reliable legal system for adjudicating disputes are great for encouraging that.

Perhaps when China has as many big tech players as the U.S. it will start to think more defensively, but for now it is the perfect setting for encouraging new ideas with strong patents and courts that make it easy to obtain injunctions.

“It’s interesting that the Chinese are encouraging large foreign corporations to sue non-Chinese companies in China,” opines Rappaport. “This suggests that they are looking to become the patent litigation go-to jurisdiction.” As their innovation grows and becomes more complex, I believe they will have less interest in exporting cheap knock-
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offs.  Their IP path is similar to that followed by many of today’s developed economies, such as Japan and South Korea.  You start off copying others and gradually move to internal innovation.”

Despite China’s success in facilitating stronger patents and more decisive courts, a huge question is just how prominent a role will patents play in new companies in a data-driven information age.

“Given the accelerating pace of technology development and nature of discoveries, which are frequently software driven, it’s not clear whether existing patent systems can remain relevant in the longer term,” says Rappaport. ” This effect may partially explain why patents currently seem to be less relevant in the U.S.  It remains to be seen whether this is a longer term development. It is a development that needs to watched.”

“100% Win Rate”

“Trust the Chinese government to do what is best for the Chinese people,” reminds Beijing-based Robinson. “It’s less about assisting foreign patent holders than establishing a really viable IP system that encourages innovation and growth, and that attracts foreign investment. Forty-percent of the smart phones in India are currently manufactured by Chinese companies. Innovation coupled with enforcement will drive China’s new businesses and help them grow.”

As reported by Robinson in IAM, “foreign plaintiffs notched a 100% win rate [65 – 0] in civil cases heard by the Beijing IP Court last year, according to a judge who has been on its roster since it was established in 2014.”

Wake-Up Call

A decade of weakening has taken its toll on the U.S. patent system and patent holders. It will not be quick to recover unless a concerted effort can be made to take IP rights seriously. Allowing U.S. patent policy to be dictated by those with the greatest financial success and market share may be appealing to shareholders, but it is not necessarily what is needed for the nation to remain competitive in a global economy, and to generate new businesses and jobs.

Hopefully, the wake-up call comes soon for the U.S. and it can retain the title of innovation leader it has held since the 19th Century but is slipping away.

Image source: insideiim.com; chinapatentblog.com; wsj.com

E.D. TX patent suits up 165% in first half; NY and So Cal also gain

After a dip in filings for 2014, Texas is back as the undisputed leader in hearing patent suits filed by plaintiffs for the first half of 2015; New York and California were up, too.

Patent suits filed in the Eastern District of Texas for the first two quarters were up 165.7% over 2014, according to Lex Machina. In the Northern District of Texas, they were up 120.7%. Delaware was down 39.5% over the same period.

Surprisingly, the Southern District of New York was up 68.2% and Southern District of California was up 36.1%.

Lex Machina is reporting 2015 is on track to be a record with more than 6,000 cases filed.

It’s difficult to know why the move back to Texas courts has occurred, but the state has been traditionally patent-friendly, and patent holders today need any edge that they can get with new obstacles like “101” (subject matter) dismissals and the Patent Trial and Appeal Board (PTAB) making it more difficult to succeed. New York has not been known as particularly patent friendly or has Southern California.

For the highest volume plaintiffs, it was definitely Texas or nothing for the first two quarters of 2015 (see second graph below).

 Patent cases filings in H2 2014,  H1 2015, and percentage change

(showing top 10 districts)

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Plaintiffs filing 10 or more cases filed in June of 2015

(Most plaintiffs filed in the Eastern District of Texas, shown in dark blue) 

Top-plaintiffs

 

Image source: lexmachina.com

 

For Samsung charity begins at “home,” Marshall, Texas

Samsung has had to defend itself from dozens of patent suits in the Eastern District of Texas, one of the most popular venues for patent plaintiffs. 

At times it may feel to a defendant like a Texas version of the movie ‘Groundhog Day.’ The company so often finds itself in front of a Marshall, TX jury that you could call this part of the U.S. its home away from home. And, as it’s been said, that’s where charity should begin.

In an apparent effort to make itself more hospitable to Marshall’s denizens, Samsung has been donating cash, monitors and recreational facilities to local charities and schools. (See Samsung sponsored ice skating rink pictured below in front of the Marshall’s historic court house.)

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A well-researched and cited story that ran recently in Ars Technica lists of some of Samsung’s charitable activities, which include a field trip to a local semiconductor plant. The story starts out discussing how a Marshall jury has awarded $15.7 million to Rembrandt, a successful NPE that had sued Samsung over having infringed its bluetooth technology.

“The company also makes a habit of granting scholarships to high school students in Marshall and nearby Tyler,” reported Ars Technica, “giving a total of $50,000 last year. Winners receive photograph-worthy giant checks with a Samsung logo on them, and those images are often published in the local newspaper. The same check was on display in the News-Messenger when Samsung made a donation to Habitat for Humanity.

“No Samsung donation seems to be too small for the company’s public relations team to promote. The Samsung Holiday Celebration Show, an $8,000 donation of monitors to Marshall High School, and a field trip to an Austin semiconductor plant all made the News-Messenger. A 2012 op-ed referred to Samsung as ‘the South Korean company that has fortunately become Marshall’s benefactor.'”

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Joe Mullin, veteran legal and technology reporter and “troll” tracker, provides a good analysis of Samsung’s charitable giving history in and around Marshall, TX.  (Unfortunately, the Marshall News-Messenger seems to have deactivated most of the links.)

The discussion of charitable giving comes at the end of the bluetooth litigation story. It does not speculate whether it may have influenced the amount of the damages awarded in the case, which are relatively low for a jury award in a patent case against a company of this size. To be fair, Samsung was on the hook for only $15.7M, and the award could be the result of any number of factors, not just the mood of the jury.

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What’s next for defendants in patent cases? Maybe Apple will erect a dream stadium for high school football in Tyler, TX, another popular patent venue — They could call it Apple Field: If you build it a jury will come give you a break.

 

Image source: arstechnica.com; graciousparadise.org

More Than a Fast Track for Patent Disputes

Texas is a Growing Hub of IP Activity

Texas courts becoming less favorable than they once were for parties filing patent suits has not stopped the Lone Star state from becoming home to a wide range of IP owners and advisers.

The state may play second fiddle to the SF Bay Area as IP king, but it manages to be home to as many Fortune 500 companies as California (57), innovative SMEs, law firms and patent licensing businesses and analysts.

A lot has been written about the patent friendly courts in ED-TX, such as Marshall, Texarkana and Tyler.

With cases now taking 18 months or longer to be heard, three longtime judges retiring, and recent favorable decisions for patent defendants, Texas may not be somewhat less attractive to plaintiffs. But this evolution  has not stopping a broad range of IP-centric businesses from making the state their home.

Conditions unique to Texas include leading universities and medical research centers, NASA, a central location between the Silicon Valley and the Northeast, mild winters, and, let us not forget, no state income taxes. (Texas is one of seven states.)

Texas IP players include (in no particular order):

Houston:

Johnson Space Center, NASA

Texas Medical Center, largest medical complex in the world

Prof. Paul Janicke, U. of Houston, patent dispute research

Personalized Media Communications (inventor-owned licensing business), Gerald Holtzman and Boyd Lemna are in Sugar Land

Pluritas, IP transactions firm with Partner Craig Carothers in Pearland

Patent valuation experts include Walt Bratic (formerly PwC) and Jim Woods (UHY Advisors), Chris Bakewell (Duff & Phelps),  Alan Ratliff (Stoneturn), James Nawrocki, (IPC Group)

Joby Hughes, co-founder Altitude Capital Partners

Dallas-Fort Worth-Plano  (“Silicon Prairie”):

AT&T (top 25 in U.S. patents)

Kimberly-Clark (more than 10,000 patents)

Texas Instruments (semiconductor and other patents)

Celanese (specialty chemicals)

Acacia Research Group NASDAQ: ACTG (licensing business), Dooyong Lee

IP Navigation Group, Dallas, Erich Spangenberg (successful NPE)

Keith Ugone, Analysis Group

Lockheed Martin

Perot Systems

Austin (“Silicon Hills”):

Dell (patents and trademarks)

Patent Calls (patent analysis, Dr. Jose Melendez)

Gametime IP (leading patent blog from Patrick Anderson)

Innography (patent analysis software)

South by Southwest (music, film and emerging technology conferences)

Freescale Semiconductor (patents/licensing)

Marshall:

Lodsys Group (licensing company, sometimes associated with Intellectual Ventures)

Tyler:

Eolas (Internet technology provider; successfully sue Microsoft for $521M )

Law Firms with significant IP practices for plaintiffs and defendants include – Sidley & Austin, Fish & Richardson, Baker Botts, Fulbright Jaworski, McKool Smith, Susman Godfrey. (Susman Godfrey, and the firm of Heim, Payne Chorush was one of the first boutique firms to focus almost exclusively on plaintiff-centric contingency patent litigation.)

Universities – Texas is home to three universities that have received the tier-one designation: The University of Texas at Austin, Texas A&M University (College Station (60 miles north of Houston) and the private Rice University (Houston).

As of 2010 it shares the top of the list of the most Fortune 500 companies with California at 57. With a growing base of industry, the state leads in many industries, including agriculture, petrochemicals, energy, computers and electronics, aerospace, and biomedical sciences. It leads the nation in export revenue since 2002 and has the second-highest gross state product.

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My apologies to those that may have been left off of the list. It was not intentional. The point of this is that when it comes to innovation and IP rights Texas is cookin’, and not just in the in the Eastern District. The state represents a unique blend of patent-centric businesses and innovation in a good position to grow.

Only a handful are there for the courts. None that I am aware of are planning to relocate to Delaware anytime soon.

Image source: elseyequinelaw.com


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