Guest Post by Christian E. Mammen. Dr. Mammen is a litigation partner in the San Francisco office of Hogan Lovells.
The recently-introduced PATENT Act (S. 1137) tracks, in substantial part, many of the reforms proposed in the House’s Innovation Act (H.R. 9). However, the PATENT Act differs in several ways from the Innovation Act. Many of the differences between the two bills have been discussed elsewhere at length. This article focuses on just one feature of the PATENT Act, which has some potentially far-reaching implications for patent litigation in the Eastern District of Texas, the nation’s most popular patent litigation forum.
Discovery is one of the most costly and time-consuming phases of patent litigation. In patent litigation brought by NPEs, the burdens of discovery are asymmetrical, with the burden falling more heavily on the accused infringer. Particularly where the NPE-plaintiff acquired the patent on the secondary market, it will have few or no documents to produce relating to the invention process, patent-related products, or the like. The cost of discovery, which falls disproportionately on accused infringers, can motivate those accused infringers to settle patent litigation for valuations based on the cost of avoiding further litigation, rather than on the value of the patented technology.
To address this issue, the Innovation Act initially proposed that discovery be stayed until the court issues a claim construction ruling. However, this proposal was in tension with widely accepted practices concerning discovery prior to claim construction. For example, a 2008 Federal Judicial Center report indicated that most courts surveyed held claim construction after at least some fact discovery, and Berkeley Law Professor Peter Menell’s Patent Case Management Judicial Guide (2d ed. 2012), explains, “it is only by knowing the details of the accused product and the relevant prior art that the parties are able to determine which claim terms need construction.” Further, many courts have now adopted Patent Local Rules that require early production of infringement contentions and related documents, and invalidity contentions and related documents, and it is not clear whether those disclosures would also be stayed under the Innovation Act.
Presumably in order to balance these competing concerns, the PATENT Act also includes the idea of a discovery stay in early phases of patent cases, but changes the triggering event. Rather than staying discovery until claim construction, the PATENT Act would stay discovery only while any one of three pre-answer motions is pending: (1) motions to dismiss, (2) motions to transfer venue, or (3) motions to sever accused infringers.
At first glance, this proposed scheme is a bit puzzling, since all three types of motions are typically filed – and resolved – early in the case, generally before discovery even starts. Under the Federal Rules of Civil Procedure, discovery is stayed until the parties have held an initial conference concerning case management under Fed. R. Civ. P. 26(f). The Rule 26(f) conference generally happens about 3-4 months after the case is filed.
However, on closer examination, the PATENT Act’s proposed discovery stay has the potential to disrupt the status quo in one important circumstance. While there is a general preference that motions to transfer venue be brought as quickly as possible (generally before the answer is filed—indeed, the PATENT Act would only stay discovery when such motions are “filed prior to the first responsive pleading”), some courts delay resolution of these motions, and the PATENT Act’s stay of discovery would remain in place until the court rules on the motion. Furthermore, if the motion to transfer venue were filed sequentially after a motion to dismiss—a not implausible scenario under plausible readings of the PATENT Act—the filing date of the venue transfer motion could approach the date of the Rule 26(f) conference, thus extending the discovery stay well into the case’s discovery period. And if the court delays ruling on the motion, the commencement of discovery could be significantly delayed as well.
Famously, the Eastern District of Texas has gained a reputation for deferring rulings on venue transfer motions until the case is substantially advanced. As the Federal Circuit observed in one recent case challenging the Eastern District of Texas’ ruling on a transfer motion, “This case is a prime example of the importance of addressing motions to transfer at the outset of litigation … Congress’ intent to prevent the waste of time, energy and money and to protect litigants, witnesses and the public against unnecessary inconvenience and expense may be thwarted where, as here, defendants must partake in years of litigation prior to a determination on a transfer motion.” In re EMC Corp., 501 Fed. Appx. 973, 975-976 (Fed. Cir. 2013) (citations omitted).
Data recently obtained from Lex Machina indicates that, on average, when motions to transfer cases out of the Eastern District of Texas are granted, the ruling comes in 143 days, or about 4½ months. But when such motions are denied (meaning the case remains in the Eastern District of Texas), the ruling languishes for an average of 225 days, or 7½ months. According to Lex Machina, there were 33 cases in the Eastern District of Texas between January 1, 2010 and May 1, 2015 in which a venue transfer motion was pending for over a year before being ruled on – and only five of those longest-pending motions were ultimately granted in whole or in part. 
Particularly for Eastern District of Texas cases in which transfer is denied, the PATENT Act’s proposed discovery stay would prevent the start of discovery for up to 7-10 months from filing. This could have several effects. Without any other changes to the status quo, it could significantly clog the docket with discovery-stayed cases. Additionally, it will provide defendants with a strong incentive to file venue transfer motions, probably as late as possible before the start of discovery, in order to maximize the discovery-stay effect. Alternatively, the court could respond by substantially speeding up its rulings on venue transfer motions.
It is difficult at this time to say whether the drafters of the PATENT Act intended this particular scenario. But if they did, it is very clever indeed, and it will be interesting to watch it play out.
UPDATE: On June 10, Rep. Goodlatte introduced a Manager’s Amendment to the Innovation Act that scales back its proposed discovery stay. Like the PATENT Act, it would stay discovery during the pendency of pre-answer motions to transfer venue or to sever claims or dismiss parties (but it does not provide for a stay pending motions to dismiss). Additionally, the Manager’s Amendment would require the court to rule on any such motion before the court issues a case management order under Federal Rule of Civil Procedure 16. In view of the deadlines specified in the Federal Rules of Civil Procedure, the discovery stay in the Manager’s Amendment would normally only last for a maximum of three to four weeks (from the Rule 26(f) conference until the case management order issues). But it would also (albeit in a roundabout way) require courts to provide timely rulings on venue motions.
 In 2014, an estimated 32% of all patent infringement cases, and 48% of all NPE patent cases, were filed in the Eastern District of Texas.
 The Innovation Act is silent on whether early Patent Local Rule disclosures would be blocked by such a stay. However, the PATENT Act explicitly exempts from its proposed discovery stay early exchanges of infringement and invalidity contentions (whether by local rule or interrogatory).
 “Motions to dismiss” presumably refers primarily to pre-answer motions brought pursuant to Rule 12(b) of the Federal Rules of Civil Procedure, including motions based on lack of jurisdiction, failure to state a claim, improper venue or improper service. Such motions must be brought within 21 days of service of the summons and complaint, and are frequently resolved substantially before the Rule 26(f) conference. Actually, though, “motion to dismiss” is ambiguous, and could also refer to other procedures, such as a motion to dismiss brought by a plaintiff pursuant to Rule 41(a)(2). It is not immediately clear, however, what purpose would be served by staying discovery pending a plaintiff’s Rule 41 motion to dismiss.
“Motions to sever accused infringers” evidently refers to motions to sever a claim or drop a party for misjoinder under Rule 21. While such motions should ordinarily be brought as soon as practicable, on its face, Rule 21 motion permits the court to provide such remedies “at any time, on just terms.” Although not fully analyzed here, motions to sever could potentially provide leeway for the same kind of procedural gamesmanship described in this article in relation to venue transfer motions.
 Complete data on file with the author.
 During the committee markup on June 11, the committee approved a further amendment, permitting stays to be triggered by such motions if they are filed “within 90 days of service of the complaint” rather than “before a responsive pleading is due.”
 The Manager’s Amendment remains silent on the status of early disclosures under Patent Local Rules.