No Escape from the Western District of Texas

Guest post by Paul Gugliuzza and Jonas Anderson. Paul Gugliuzza is Professor of Law at Temple University Beasley School of Law. Jonas Anderson is Associate Dean for Scholarship and Professor of Law at American University Washington College of Law.

We’ve discussed in this space a few times the remarkable lengths Judge Alan Albright has gone to to attract patent cases to his Waco, Texas courtroom. Judge Albright’s efforts have succeeded in large part because his court, the U.S. District Court for the Western District of Texas, assigns cases to judges in a way that allows plaintiffs to know, with absolute certainty, that their case will be assigned to Judge Albright and not one of the fifteen other judges in the district.

Judge Albright’s been back in the news the past couple weeks because he’s granted two motions to transfer cases out of the Western District of Texas—something he’s rarely done in his two-plus years on the bench.

But, at the same time, Judge Albright has been drawing a roadmap for patentees who want to make sure their cases aren’t transferred away from Waco in the future.

The relevant cases all have the same basic facts: the patentee, a North Carolina LLC called Ikorongo Technology, created a Texas LLC and assigned the Texas LLC the right to several patents only in certain counties in Texas, including counties in the Western District. The LLCs jointly filed infringement suits in Waco against Samsung, LG, Lyft, Uber, and Bumble. Each defendant filed a motion to transfer to the Northern District of California.

In a series of orders—including one issued earlier this week—Judge Albright denied the motions. According to Judge Albright, Ikorongo’s assignment to the Texas LLC made transfer out of Texas impossible. Under the transfer of venue statute, the proposed transferee district must be one in which the case “might have been brought.” Because the defendants infringed the Texas LLC’s patent rights only in Texas, Judge Albright reasoned, the case couldn’t have been “brought” anywhere else.

The patentee’s tactic here is a brazen and transparent attempt to manipulate venue. If Judge Albright’s decisions are allowed to stand, patentees will be able to guarantee their cases are never transferred away from the Western District of Texas by simply creating a shell company that has an exclusive license to the patent only in the Western District of Texas. When the companies file suit as co-plaintiffs in Judge Albright’s Waco courtroom, escape will be impossible.

Fortunately, the Federal Circuit has a chance to step in and condemn these machinations in a pair of pending mandamus proceedings challenging orders by Judge Albright denying motions to transfer in cases filed by Ikorongo. [LG Mandamus PetitionSamsung Mandamus Petition].

We’re optimistic the Federal Circuit will grant those petitions. Both the Supreme Court and the Federal Circuit have repeatedly and forcefully condemned the sort of jurisdictional and venue gamesmanship Ikorongo is plainly engaged in. Moreover, there’s a good argument based on the patent venue statute that the question is not whether the plaintiff’s patent rights have been infringed in the proposed transferee district, as Judge Albright ruled, but whether the defendant has committed acts of infringement in the district.

Regardless of what the Federal Circuit rules in these cases, patentees will continue to develop clever strategies to keep their lawsuits in the Western District of Texas. As we discuss in a forthcoming law review article, the stakes surrounding venue choice are just too high and the advantages Judge Albright offers to patentees are just too great. Congress, the Judicial Conference of the United States, or the district courts themselves need to step in and stop the case assignment practices that enable plaintiffs to shop for specific judges, that incentivize judges to favor the parties who choose the forum, and that have repeatedly led to a single judge—whether in the Eastern District of Texas or, now, the Western District of Texas—hearing a quarter or more of all patent cases nationwide.

75 thoughts on “No Escape from the Western District of Texas

  1. 13

    The people that favor Judge Albright keeping every single case filed in Waco in Waco make all sorts of irrelevant policy arguments. The only “policy” that is relevant is the one reflected in 28 USC 1404(a), a statute that Congress wrote and the President passed. And it was based on decades of experience. If the factors that favor transfer under the statute are met, then a court should transfer the case to the more convenient forum. People that don’t like this should take up their beef with Congress.

  2. 12

    It seems as if the plaintiffs have created a dilemma, which may work for this set of facts, but will not work in general. By setting up an exclusive license to Texas alone, they obtain venue in Texas, but they are also limiting damages to Texas. In most scenarios, this will greatly limit the available damages.

    1. 12.1

      Below at 6.1.1, Bob Matthews appears to be attempting to split, extinguish, and then re-combine absent the Texas element.

      I think that your comment falls to a similar error.

      While the Texas ‘portion’ may have limited damages, the other portion (not separated or extinguished) still captures what you imply to be lost.

      The fact pattern here requires each of both parties and remaining in the target location because of one of the two parties.

    2. 12.2

      “By setting up an exclusive license to Texas alone, they obtain venue in Texas, but they are also limiting damages to Texas.”

      This is not correct. The shell company amended their complaint to bring in the parent company with its nationwide rights.

      From the LG petition:

      “The Amended Complaint seeks
      nationwide damages. Appx28 ¶12; Appx38”

    3. 12.3

      I was thinking the same thing, however the real power of WDTX (and its predecessor EDTX) is the fact that Ds effectively have no chance to avoid trial, b/c the judge will never dismiss the case, no matter the merits or lack thereof. Summary Judgment that completely resolves the case is almost unheard of. Also: a VICTORY in WDTX could presumably used in a subsequent case as collateral estoppel/res judicata, making the second trial (filed in CA or wherever) essentially just a trial on damages for a patent that has already been held valid and infringed.

      1. 12.3.1

        the fact that Ds effectively have no chance to avoid trial, b/c the judge will never dismiss the case, no matter the merits or lack thereof. Summary Judgment that completely resolves the case is almost unheard of

        Interesting.

        One quick question on this point: is this a de facto violation of any law?

        Or, is it within a recognized power of a member of the judicial branch?

        I inquire in part because if this were indeed an unlawful basis, would not that have been pointed out?

        (it may have been, but I do not recall such a LEGAL focus – contrasted with a focus from us in the peanut gallery)

  3. 11

    Honest question. Is this unique to patent law? Are there other documented examples of creating shell companies in order to secure favorable venue.

    I hypothesize that this is not unique. For instance, one can imagine insurance companies setting up shop in a pro defendant jurisdiction.

    Not trying to minimize the issue, but to put things in perspective, attorneys will always forum-shop.

    Trying to reduce forum shopping to zero may be Quixotic. We now have another “windmill” popping up in WDTX. Same as it ever was…

    1. 11.1

      Insurance companies are almost always defendants, so they typically don’t have a choice re forums (other than to not do business in a particular state).

      The only other big area where these concerns might come into play is “lawfare,” especially coupled with national injunctions. SCOTUS has been trying to reign this practice in a bit, though.

      FWIW, patent cases have long been a large percentage of “civil procedure” cases – going back to the ’60’s and 70’s. The Fed Cir was supposed to reduce this, but the game still remains…and is probably getting worse with 3rd party re-exam vs. infringement lawsuit forum fights.

      1. 11.1.1

        fake edit: class actions used to be another big area, but my general impression is that there has been so much SCOTUS attention that it’s not hot anymore.

  4. 10

    Professors Paul Gugliuzza and Jonas Anderson:
    In view of your apparent interest in Texas Law West Of The Peco’s, how about a report not just about venue issues, but what is actually happening in that now-huge Judge Albright Waco patent suits docket? E.g., how many have actually gone to trial or been otherwise disposed of? Win-loss records? Etc.

  5. 9

    As I wrote elsewhere, there is ALWAYS going to be a most favorable judge/venue (to plaintiffs). Patentees will ALWAYS find identify that judge/venue, and they will try to find ways of getting before that judge and/or into that venue.

    One time it was the EDVa. Things then moved to the EDTex. Now they are moving to the WDTex.

    Each defendant filed a motion to transfer to the Northern District of California.
    Why is that? It is because defendants think they’ll get a better outcome on NDCal. Plaintiffs go where they think they’ll get better outcomes. Defendants go where they think they’ll get better outcomes. Until all judges/venues have the same rules, this will always take place.

    The patentee’s tactic here is a brazen and transparent attempt to manipulate venue.
    Like Apple shutting down its stores in Dallas to avoid EDTex wasn’t the same? There was an Ars Technica article on this dated 02/23/19.

    Then there is the case of In re Google, 949 F.3d 1338 (Fed. Cir 2020). In that situation, Google leases space in a data center (located in EDTex) for its servers, and the Federal Circuit found that this wasn’t enough to establish a regular and established place of business. Was Google trying to game the season by arguing that they had no business in EDTex. Here is a quote from the concurrence:

    Finally, Google was asked “when you gather information, from customers, which is part of your business, you agree. How does that get passed back to Google? It goes through the server?” Id. at 58:59-59:10. Google’s counsel responded stating: “I am not aware. There’s nothing in the record that I’m aware of on that point, your Honor.” Id. at 59:11-59:14.
    Anyone with even a modicum of knowledge about the internet knows that these edge servers (located in EDTex) are being used to pass information from customers yet Google’s counsel shrugs his shoulders and says ‘I don’t know.’
    Seriously, what is up with that?

    1. 9.1

      Bingo:

      Until all judges/venues have the same rules, this will always take place.

      But it is “the bad” when the Efficient Infringer mantra might see a little rain….

    2. 9.2

      Wow. That is incredible that Google could get away with that exchange. I remember thinking that if servers of Google aren’t doing business in a district then nothing is for an internet company.

      The CAFC is a national disgrace.

      1. 9.2.1

        Er, do you really want it to be the U.S. law that the locus of infringement for a computer implemented method is wherever the server is physically located? If that were the rule, then Google (etc) could move all of their servers to Canada and Mexico and they would be outside the jurisdictional reach of the U.S. patent system. Honestly, the CAFC is doing us all a favor by not treating the location of the servers as the locus of infringement. Google (etc) would be delighted with the rule that you evidently think that the CAFC should have imposed.

        1. 9.2.1.1

          You missed the point — it was less the “server,” and more the location of business processing in order to “purposefully avail” the profits from within the State.

        2. 9.2.1.2

          Greg DeLassus’s comment that “Google (etc) could move all of their servers to Canada and Mexico” is mistaken. This isn’t an in-person option like Apple Store. “Edge” server tech helps web service (reduces latency, etc.) by locally caching and serving customers’ web traffic. If these servers are not locally located, they aren’t edge servers anymore. Whatever the answer should be to the legal question at issue, that fact is wrong.

        3. 9.2.1.3

          If that were the rule, then Google (etc) could move all of their servers to Canada and Mexico and they would be outside the jurisdictional reach of the U.S. patent system.
          Google still has corporate headquarters in the US. Regardless, there are business/technical reasons why Google has edge servers physically close to their clients. Google will NOT move their servers outside of the US for these reasons alone.

          For you to suggest that Google might even consider moving their servers outside of the US reflects your lack of knowledge regarding this particular technology. I suggest you look at the wiki entry for ‘edge computing’ to get a better idea as to why Google would not be moving their servers out of the US.

          1. 9.2.1.3.1

            [Y]ou… lack… knowledge regarding this particular technology.

            That is fair enough. I doubt that anyone is ever like to mistake me for a subject matter expert in this tech space.

            I suggest you look at the wiki entry for ‘edge computing’…

            Why bother? I have no intention of setting myself up as some sort of hardware engineer, such that tech knowledge might be of any practical use. Meanwhile, the present discussion turns on points of law, not technology, so the details that you are urging are all quite beside the point.

            You say that it will not serve for Google to install its servers outside the U.S. borders. Maybe, maybe not. Google has many clever engineers, and it might surprise you—or even the authors of a Wikipedia page!—to discover what they are capable of making work if the law were such that it becomes financially worth their while to make it work.

            However, they do not actually even need to strain that far. Once again, if the rule were that the locus of infringement lies in the place where the servers are housed, there are simpler mean of putting the servers outside the territorial jurisdiction of the U.S. patent system. There are many small, poor countries who would be willing to lease out space in their consulates for the right price—and Google could afford to make that price fairly generous if the law were such that U.S. patent law could be sidestepped by locating all servers only on non-U.S. territory.

            Once again, be glad that the rule of law that presently prevails is not “the locus of infringement is wherever the servers are located.” You would not actually like what follows from such a rule.

            1. 9.2.1.3.1.1

              Greg just doubles down on asserting a technical item (as having a “purely legal effect”)…

              Greg does not know enough to know that he does not know enough…

              Meanwhile, the present discussion turns on points of law, not technology, so the details that you are urging are all quite beside the point.

              Except for the fact that that are not, Greg might have a clue.

              As it is, well, no, Greg has no clue.

              But he never let’s that stop him.

            2. 9.2.1.3.1.2

              Why bother? I have no intention of setting myself up as some sort of hardware engineer, such that tech knowledge might be of any practical use.
              Why bother? I don’t know — maybe to expand your knowledge about things you are opining about. The problem with shooting from the hip is that everybody knows it, and it isn’t a good look for you.

              Meanwhile, the present discussion turns on points of law, not technology, so the details that you are urging are all quite beside the point.
              I addressed your particular suggestion — which has everything to do with the technology.

              You say that it will not serve for Google to install its servers outside the U.S. borders. Maybe, maybe not.
              When you say “maybe not,” you are waving a big flag saying … “I have no idea what I’m talking about here.” Seriously, is that what you want to do? Personally, I’m not going to opine on matters regarding biotech but that is not what I do. If one doesn’t understand the facts, it is difficult to apply the law to the facts.

              Google has many clever engineers, and it might surprise you
              How many times are you going to wave that flag?

              There are many small, poor countries who would be willing to lease out space in their consulates for the right price
              Now you are waving that flag and shooting fireworks at the same time. You really have no idea about the level of security that surrounds data centers, do? You really have no idea about the amount of power required to run a data center, do you? You really have no idea about the level of disaster preparedness goes into running a data center. Here is a little tidbit I found about Google’s data centers:
              Physical access to Google’s data centers is severely limited, so only a tiny fraction of employees ever set foot on the premises. Layered protection includes biometric identification, metal detection, vehicle barriers and laser-based intrusion detection systems. Within the data center, Google deploys its own custom-designed security chips to identify and authenticate Google servers and peripherals to minimize the chance that unauthorized hardware can go online without detection.
              And you suggest that Google would put their data centers in some third-world country’s embassy compound. Mind you, this information is 5 years old, but Google has dozens of data centers around the world. The one they opened in 2016 in Oregon cost $1.2B and had 352,000ft2 of space. In 2016, Google spent $10.2B on capital expenditures (which is basically just data centers). And you think they are going to move all their US data centers to avoid patent infringement lawsuits? BTW, in 2021, Google is probably going to be spending around $20B on capital expenditures.

              Please, for you own reputation’s sake, avoid making additional suggestions.

              Once again, be glad that the rule of law that presently prevails is not “the locus of infringement is wherever the servers are located.” You would not actually like what follows from such a rule.
              SMH. Please stick to biotech.

              1. 9.2.1.3.1.2.1

                +10 to Wandering.

                Greg–seriously? You say it is a legal and not a technical point and then you make a technical assumption? Seriously?

              2. 9.2.1.3.1.2.2

                Wt

                Greg just does not care.

                everybody knows it, and it isn’t a good look for you.

                One can be ‘polite’ about it (as you continue to try to do), or one can have fun with it (as I often do).

                What’s the real difference between Greg being inte11ectually dishonest and ignoring those attempting to be ‘polite,’ and Greg “blocking out anon because anon has hurt Greg’s feelings”…?

                Not a damm thing — on Greg’s side.

                On my side, I get to have some jollies at Greg’s expense.

                In both avenues, it is up to him to choose to engage in a meaningful way.

                He just invites the John Maynard Keynes treatment onto himself.

        4. 9.2.1.4

          Put the server farms in low Earth orbit powered by solar panels.

          The latency will be low and they get the Sun 24/7 (maybe with a very few exceptions) for the solar panels.

          They wouldn’t need ground gateways. Subscribers would have their own $50 sat terminals. They could also use it for VOIP and video.

          Elon Musk could do it with Starlink.

          Which court would have jurisdiction?

          1. 9.2.1.4.1

            Put the server farms in low Earth orbit powered by solar panels.
            Servers run hot and they consume LOTS of power. Another problem with low Earth orbit is heat dissipation.

            To give you an idea, the ISS uses about 80 kilowatts in a day and can produce up to around 125 kilowatts. A data center can use a 100 megawatts. Also, who is going to fix anything that needs to get fixed.

            Also, servers are also interconnected with ultra-high speed connections. There are good changes that the satellite over your head isn’t going to have the data you want cached on it. This means the server might have to get it elsewhere.

            As for jurisdiction, navigable airspace is under Federal jurisdiction. I’m sure there is a statute that applies.

            1. 9.2.1.4.1.1

              Yes anyone that knows the slightest thing about computers knows that servers are power hungry beasts that need massive HVAC systems and massive power.

              It is interesting that we get the science/engineering/innovation illiterate not even think about power for information processing.

              Because they don’t get that information processing is a physical process. They still think like Stevens that thinking is carried out in the ether by angels.

    3. 9.3

      Each defendant filed a motion to transfer to the Northern District of California… because defendants think they’ll get a better outcome on NDCal.

      Maybe. You actually have to a little more work than this to do to establish your thesis here. It is perfectly plausible that a defendant whose offices are in San Francisco could simultaneously (1) believe that a jury in (e.g.) EDNY would be more defendant-friendly and (2) still prefer ND Cal. simply because that venue will require less travel and hassle. You cannot actually infer that they expect a more favorable outcome merely from the fact that they want the trial to take place in a more logistically convenient jurisdiction.

      One can, of course, draw such an inference about the plaintiff expecting more favorable treatment from a specific venue because they are actually choosing a jurisdiction that is not especially convenient (e.g., the recent thread where the plaintiff was in D.C. but rented empty office space that he never visited for the expedient of being able, thereby, to assert a connection to WD Tex). This folderol of office space is evidence that the plaintiff considers there to be an advantage of the WD Tex venue that justifies the inconvenience of paying rent on unused office space. There is no such evidence of ulterior motive, however, when a defendant who is headquartered in the Bay Area seeks to move the trial to the Bay Area.

      Until all judges/venues have the same rules, this will always take place.

      Right, and that is why the Supreme Court had long emphasized that the circuit courts and district courts are supposed to lean against such variegation and the corresponding forum shopping that results. I gather that this is exactly what the author (quite plausibly) will happen here.

      1. 9.3.1

        It is perfectly plausible that a defendant whose offices are in San Francisco could simultaneously (1) believe that a jury in (e.g.) EDNY would be more defendant-friendly and (2) still prefer ND Cal. simply because that venue will require less travel and hassle.
        Have you engaged in any litigation whatsoever? The travel/hassle is a mere pittance compared to the potential damages. A better court (for defendant) means that the judge will be more likely to dismiss the suit before trial — resulting in substantial cost savings. This is a simple cost/benefit analysis.

        Right, and that is why the Supreme Court had long emphasized that the circuit courts and district courts are supposed to lean against such variegation and the corresponding forum shopping that results.
        How so?

        1. 9.3.1.1

          Wat,

          I invite you to do more than merely wander through – and take note of the regulars here.

          It will save you time.

          For example, Greg is a Big Pharma type who is pretty much anti-patent except Big Pharma items.

      2. 9.3.2

        >It is perfectly plausible that a defendant whose offices are in San Francisco could simultaneously (1) believe that a jury in (e.g.) EDNY would be more defendant-friendly and (2) still prefer ND Cal. simply because that venue will require less travel and hassle.

        “Plausible” LOL.

        Having worked in a tech company, I’m not even sure I’d buy “possible.” Particularly for a big money lawsuit.

  6. 8

    The complaint in the Ikorongo denial about having to take seriously the defendant’s fiction regarding where documents are located is just embarrassing. Defendant shell games bad, plantiff shell games good.

  7. 7

    What happens in Texas . . . should stay in Texas.

    But seriously, the best solution to Judge Albright handling so many patent cases (to those who find this “unfair” or “unseemly” or worse) is a simple one:

    For America’s other courts to treat patent owners as fairly as Judge Albright does.

    1. 7.1

      The obvious implication of a quite clear: any non-Efficient Infringer leaning position “MUST BE” de facto “bad.”

      1. 7.1.1

        … to think that a (patent) plaintiff would succeed in (gasp) their — fully legal — choice of forum, is just one of those ‘MUST BE bad’ situations.

  8. 6

    The exclusive licensee’s creative ploy would not have worked if the accused infringer was incorporated in the state where it was headquartered and wanted the case transferred to. (Although Judge Allbright also ruled that the convenience factors did not favor transfer, so he still would not have transferred the case.)

    This case may shed some dubious light on the now black letter law that a corporation only “resides” for purposes of patent venue in the state of its incorporation, even though it may have its physical headquarters and “nerve center” in a different state.

    One possible work around to this tactic, if a court were inclined to transfer, is to consider whether the law would permit severing the exclusive license’s infringement claim, which has to be limited to the geographic scope of its license, from the infringement claim brought by its parent company/patent holder, who had joined in the suit, and to then transfer the parent’s portion of the infringement case, while staying the exclusive licensee’s claim.

    1. 6.1

      One possible work around to this tactic,… is to consider… severing the exclusive license’s infringement claim… from the infringement claim brought by its parent company/patent holder…

      That strikes me as remarkably far fetched. Hard to imagine even your mine run judge doing that, to say nothing of the judge in question here. That “solution” depends on totally ignoring considerations of judicial economy.

      1. 6.1.1

        The suggested solution appears to have legal plausibility and the concerns regarding judicial economy should be sufficiently addressed by applying issue preclusion.

        Severance appears to be a permitted option. While patent infringement may be characterized as “continuing tort,” Pall Corp. v. Micron Separations, Inc., 66 F.3d 1211, 1221 (Fed. Cir. 1995), the law has long held that “each act of patent infringement gives rise to a separate cause of action.” Hazelquist v. Guchi Moochie Tackle Co., 437 F.3d 1178, 1180 (Fed. Cir. 2006).

        Rule 21 allows a court to “sever any claim against a party.” Reid v. Gen. Motors Corp., 240 F.R.D. 260, 263 (E.D. Tex. Jan. 16, 2007) (“Rule 21 allows ‘[a]ny claim against a party [to] be severed and proceeded with separately.’”) (severing a patent infringement claim where multiple accused infringer were sued in the same suit) See e.g., Kraft Foods Holdings, Inc. v. Proctor & Gamble Co., 2008 WL 4559703, *2-*3 (W.D. Wis. Jan. 24, 2008) (granting patentee plaintiff’s motion to sever and transfer defendant’s patent infringement counterclaim).

        Accordingly, in the scenario, a district court could treat the infringement claims before it as two distinct groups of tort claims even though the asserted patent, accused infringer and accused product/service are the same. The first group of claims being the acts of infringement committed within the geographic scope of the exclusive license, and for which both the patentee and the exclusive license are the parties bringing that subset of infringement claims. (hereinafter the Group A claims) The second group would be the remaining claims that are only asserted by the patentee. (hereinafter the Group B claims) These claims do not involve any infringing acts done in the forum. Presumably, in this contemplated scenario, the bulk of the infringing conduct occurred in the Group B claims, i.e., outside the geographic scope of the exclusive license.

        In the factual circumstances of the WD Texas case (accused infringer residing outside of the forum and having developed the accused product outside of the forum), there would be zero connection with the forum for the Group B subset of the claims; thus making transfer plausible, and perhaps preferable if the creation of the shell company and granting it a geographically limited exclusive license is viewed as being a tactic of improper forum shopping. Moreover, due to the limited scope of license, the exclusive licensee has no standing to join in the Group B claims. Thus, concerns about having to join the exclusive licensee as an indispensable party are not triggered. Separated in this fashion, the Group B claims have no connection to the forum, and could be severed and then transferred to the forum of the “center of gravity” of the infringing activity.

        After transfer, the Group A claims could be stayed until the Group B claims are adjudicated. Issue preclusion should alleviate any concerns of judicial economy. Should the accused infringer be found not to infringe, or the claims found invalid or unenforceable in the Group B suit, issue preclusion would apply to that finding against that patentee as plaintiff of the Group A claims. Issue preclusion would also apply against the exclusive licensee since it is in privity with the patentee, its parent company, as the patentee’s interest in proving infringement and upholding the patent in the Group B suit would be “so closely aligned with [the exclusive licensee’s] interests as to be [the licensee’s] virtual representative.” XP Innovations Inc. v. Black Rapid, Inc., 2013 WL 6230368, *2-*3 (S.D. Tex. Dec. 2, 2013) (“The Fifth Circuit has held that privity exists when the non-party’s interests were adequately represented by a party to the original suit. Courts treat adequate representation as synonymous with virtual representation. … A party may be bound by a judgment even though not a party to the judgment ‘if one of the parties to the suit is so closely aligned with his interests as to be his virtual representative.’ A party may be found in ‘privity’ for res judicata purposes if ‘the relationship between the one who is a party on the record and the non-party is sufficiently close to afford application of the principle of preclusion.’”). Accord Transclean Corp. v. Jiffy Lube Int’l, Inc., 474 F.3d 1298, 1306, 81 USPQ2d 1400, 1404-05 (Fed. Cir. 2007) (“privity exists when the parties are ‘so closely related’ and their interests are ‘so nearly identical’ that ‘it is fair to treat them as the same parties for purposes of determining the preclusive effect’ of the first judgment.”). Cf Int’l Nutrition Co. v. Horphag Research, Ltd., 220 F.3d 1325, 1329 (Fed. Cir. 2000) (“One situation in which parties have frequently been held to be in privity is when they hold successive interests in the same property. See, e.g., Litchfield v. Crane, 123 U.S. 549, 551 (1887) (defining privity to include a “mutual or successive relationship to the same rights of property”))
        Should the patentee prevail on the Group B claims, issue preclusion would apply against the accused infringer. The court for the Group A claim would only need to try damages. If in the Group B claim, the jury determines a reasonable royalty rate (as the patentee and licensee in the scenario are only patent-holding companies, the damage award would be limited a reasonable royalty), issue preclusion arguably would bar the accused infringer from arguing that a different damages determination should apply to the Group A infringement. Whether issue preclusion of the royalty rate would apply against the exclusive licensee raises a more complex question.

        From a procedural theory point, the option of severing, transferring and staying, seems plausible and legally supportable.

        1. 6.1.1.1

          That you think that “sever/shop a different forum/force a rejoin” is “ok” is more than a little telling.

  9. 5

    I have to hand it to the plaintiff’s lawyers here, who are clearly earning their fees by being more clever than average in the service of their clients. Still and all, preserving a WD Tex venue on account of this arrangement runs counter to the policy purposes that Congress expressed in the venue statute. For this reason, I doubt that an appeals court will let this stand (nice try, however).

  10. 4

    This trick to avoid the venue statue runs afoul of the fact that a co-owned patent cannot be enforced by any individual owner, since all co-owners must join in bringing any suit for infringement. Waterman v. MacKenzie, 138 US 252 (1891), and other subsequent cases cited in Sec. 21.03[3][d] of “Chisum on Patents”. All the co-owners are indispensable parties. Likewise a suit by a mere partial exclusive licensee of less than all enforcement rights in the patent.

    1. 4.1

      The LG petition explains that the shell company sued in the WDoT, and subsequently amended the complaint to include the parent company, and that both the shell company and the parent company have some regional rights in the WDoT.

    2. 4.2

      This was the primary thing that struck me when I first saw Judge Albright’s orders. It’s not even clear to me that the WD Tex company is actually one with standing to sue because the geographic limitation seems to me to make them a non-exclusive licensee. A geographic carve-out strikes me as not that different from a field of use carve-out, and the latter typically eliminates standing.

      It’s hard to understate just the extent of the gamesmanship here by the Plaintiffs and how dubious it is under current standing precedent.

      1. 4.2.1

        That is an interesting point.

  11. 3

    and the advantages Judge Albright offers to patentees are just too great

    Is there anything PER SE illegal about these advantages?

  12. 2

    What’s wrong with Texas?

    1. 2.1

      Depends. Are the relevant witnesses, documents, etc. mostly in Tex? If so, then there is nothing wrong with Tex. On the other hand, if most of the relevant witnesses, documents, etc. are located in (e.g.) Calif., then what wrong with Tex. is that it is not the properly convenient forum for the lawsuit.

      1. 2.1.1

        Documents? You mean paper documents? Only a few witnesses might have to hop on a 3 hour flight if it goes to trial. Perhaps another forum would be more convenient. Is that all? Seems like an awful lot of fuss about a few hours and a few hundred dollars. Something else is going on here. Could it be that infringers don’t like any venue where the rights owner might enjoy the 7th amendment?

        1. 2.1.1.1

          “Could it be that infringers don’t like any venue where the rights owner might enjoy the 7th amendment?”

          We don’t need no stinking 7th amendment.

          — Google
          — Facebook
          — Apple
          — Amazon
          — Netflix
          — Unified Patents

  13. 1

    How much did Google pay you to write this article. Seriously, though, are either of you being compensated, in any way, by big tech or any corporation?

    1. 1.1

      We do a conflict of interest check with all of our guest authors. Professors Gugliuzza and Anderson report no conflicts of interest. They have not received any outside compensation for their work on this project and are not representing any clients in Judge Albright’s courtroom.

      1. 1.1.1

        Thank you Dennis. Readers should be made aware of any potential or real conflicts.

        1. 1.1.1.1

          Do we know if the university that hired him received money from SV to hire an anti-patent judicial activist?

          1. 1.1.1.1.1

            One should not underestimate the power of Dark Money (on the Right as well as on the Left).

    2. 1.2

      Paul Gugliuzza received a BA in Economics and BBA in Finance in 2003 from the University of Oklahoma. He received a JD from Tulane in 2006. He clerked with Judge Gould (Ninth Circuit Court of Appeals) from 2006-2007. He was an associate at Jones Day in their Appeal practice from 2007-2010. In academia ever since.

      Needless to say, he has never practiced before the USPTO because he isn’t qualified. It is unlikely that he ever met, in a professional capacity, with inventors/business owners trying to obtain intellectual property protection for their inventors. Yet in 2019, he appeared by the US Senate subcommittee on Intellectual Property discussing patent eligibility regarding business methods, computer software, biotechnology, etc. This is a person who is testifying before the Senate that certain patent claims “were often broad and vague” despite probably never drafting a patent claim in his entire life. Reading the characterizations of certain patents from his testimony, I believe he either misled the Senate or he doesn’t know what those claims covered. People who don’t understand what a patent claim covers, IMHO, shouldn’t be opining about patent law — at least not before the US Senate.

      I’ve scanned through some of his scholarship and the tone is (unfortunately) a quite common one in academia: patents are evil; patent trolls are everywhere; courts need to be allowed to more easily/quickly invalidate patents. With all of this in mind, am I surprised that he has an anti-plaintiff bent? Absolutely not. His scholarship reeks of it.

      Mr. Gugliuzza does not have to be paid by big-tech — he already is a true believer. Although he may not have any real conflicts of interest, that doesn’t mean he doesn’t have any biases. That’s OK, as I have my own biases. For example, I believe that the patent system should be a system that realistically works for all parties, big and small. On the other hand, Mr. Gugliuzza apparently thinks that the patent system should kowtow to the big-tech oligopolies, who are the driving forces for IPRs, reduced patent eligibility, and being subjected to limited jurisdiction (despite having nationwide reach). Someone has to stick up for the big guy.

      1. 1.2.1

        As I was closing the window from Mr. Gugliuzza’s testimony before the Senate subcommittee, my eye was draw to this statement from page 4:
        But the primary benefit of an invigorated eligibility doctrine, in my view, is not that it gives courts a basis to invalidate patents that are not sufficiently innovative to warrant twenty years of exclusive rights.
        Warrant twenty years of exclusive rights? When has a U.S. Patent ever had twenty years of exclusive rights? Patents don’t issue on the same day they are filed. Because of the many hoops patentees have to go through at the USPTA, many issued patents don’t even get the 17 years they once had.

        This was his written statement (i.e., something he should have reviewed extensively beforehand — at least I would if I submitted something to the US Senate) and yet he messed up on a straight-forward, fundamental aspect of patent law. If you cannot get the simple stuff correct, what does it say about your ability to get the complicated stuff right?

        1. 1.2.1.1

          Thanks for the deep dive Wandering.

          Who needs to be paid by Big Tech . . . when you’re already in bed with them.

        2. 1.2.1.2

          Yes, 20 years of fully enforceable [issued] patent rights is rare indeed. [Maybe a few with extensions for FDA delay?]
          But it leads me to ask if anyone on this blog has ever heard of anyone successfully using the 35 USC 154(d) “Provisional Rights” actual notice provision to be able to collect infringement damages from in between the application publication date and the issue date? [I wonder if many patent attorneys even know about it, or would fear it’s triggering oppositions?]

          1. 1.2.1.2.1

            But it leads me to ask if anyone on this blog has ever heard of anyone successfully using the 35 USC 154(d) “Provisional Rights” actual notice provision to be able to collect infringement damages from in between the application publication date and the issue date.
            I’m not aware of anyone, but that doesn’t mean anything. However, two key provisions of 154(d) is “date of publication of the application” and the person (from whom a reasonable royalty is to be obtained) “had actual actual notice of the published patent application.” Additionally, a reasonable royalty can only be obtained if the claims are “substantially identical to the invention as claimed in the published application.” In other words, most claim amendments during prosecution would negate this provision.

            The key point is that this reasonable royalty only takes place upon the application being published. No patent gets published the day it gets filed. No patent gets issued the day it gets filed. Thus, having “twenty years of exclusive rights” is, as far as I know, an impossibility.

            As for the FDA, this is what I found on their website:
            A maximum of 5 years can be restored to the patent. In all cases, the total patent life for the product with the patent extension cannot exceed 14 years from the product’s approval date, or in other words, 14 years of potential marketing time.

          2. 1.2.1.2.2

            For whatever little it is worth, I have prosecuted many patents that granted with a full twenty years of term ahead of them on their grant date.

            This is probably hard to do any more, now that the PTAB is turning appeals around quickly. Once upon a time, however, it used to average 3.5 years for an appeal in the 1600s.

            If you put all of your relevant evidence in and make all your amendments after the first non-final, then you can go to appeal and win at the final. When the B & C PTA time was added back at the end of that process, you usually ended up with something like 20 to 21 years of term remaining on the day of grant.

            1. 1.2.1.2.2.1

              I have prosecuted many patents that granted with a full twenty years of term ahead of them on their grant date.
              Many? That means at least two — that means all you have to do is provide two patent numbers to prove that you are correct.

              When the B & C PTA time was added back at the end of that process, you usually ended up with something like 20 to 21 years of term remaining on the day of grant.
              SMH. I am very, very familiar with PTA. Nothing from B & C delays allows one to get more than 20 years.

              B delays start to accrue after 3 years of pendency (so long as you don’t file a RCE and excluding any applicant delay). In essence, it ensure that you get 17 years from issuance. C delays are mostly for appeals. However, C & B delays cannot overlap. As such, let’s say that your patent issued after 10 years of prosecution and an appeal that took place after the 3 year mark and that appeal took 2 years. You get 7 years of B delay and 2 years of C delay, but because the B and C delay overlapped, you only get 7 years — end up with 10 years (20 years from filing – 10 years of prosecution) + 7 years of PTA.

              If you put all of your relevant evidence in and make all your amendments after the first non-final, then you can go to appeal and win at the final. When the B & C PTA time was added back at the end of that process, you usually ended up with something like 20 to 21 years of term remaining on the day of grant.
              No overlap — see 35 USC 154(b)(2) (“To the extent that periods of delay attributable to grounds specified in paragraph (1) overlap, the period of any adjustment granted under this subsection shall not exceed the actual number of days the issuance of the patent was delay”).

      2. 1.2.2

        You forget the “/S,” but otherwise nailed it.

      3. 1.2.3

        Paul Gugliuzza… was an associate at Jones Day in their Appeal practice from 2007-2010… [H]e has never practiced before the USPTO… Yet in 2019, he appeared by the US Senate subcommittee on Intellectual Property discussing patent eligibility… testifying… that certain patent claims “were often broad and vague” despite probably never drafting a patent claim in his entire life… People who don’t understand what a patent claim covers, IMHO, shouldn’t be opining about patent law — at least not before the US Senate.

        I basically agree with this. If someone shows up in the Senate to suggest that “broad” or “vague” claims constitute a problem best solved by application of §101, one can infer that this person really (1) has no more than a minimal familiarity with the different provisions of Title 35 and (2) is therefore does not really merit a hearing on considerations of substantive patentability.

        That said, I wonder if your argument here does not prove more than you mean to argue. If (as you convincingly contend) a litigator with obvious lack of personal familiarity with the requirements of patentability does not merit a hearing on those points, does it not also follow that prosecutors with obvious lack of familiarity with the finer points of venue do not merit hearing on those points?

        Given that the article above is about venue—not patentability—it seems that you and me and most of the regulars around here should—by your logic—hold our peace on this one.

        1. 1.2.3.1

          Given that the article above is about venue—not patentability—it seems that you and me and most of the regulars around here should—by your logic—hold our peace on this one.
          No. I suspect that most of the regulars here have gone to law school and took one or more classes in civil procedure. In fact (and I just looked this up to confirm), civil procedure is one of the seven topics that are examined in the mutlistate bar exam. As such, I expect all attorneys to have some basic knowledge of venue.

          In law school, I recall being told that an attorney should be able to practice in most areas of law. However, the two exceptions that were commonly mentioned (as being esoteric law regimes that required specialized training) are admiralty law and patent law.

          1. 1.2.3.1.1

            This reads to me as “heads your minimal experience is insufficient to comment, tails my minimal experience is sufficient comment.”

            1. 1.2.3.1.1.1

              Of course it does, Ben – you cannot grasp the nuance.

            2. 1.2.3.1.1.2

              Same here, but chaqu’un à son goût. I infer from the quality of responses at 1.2.3.1 & 9.3.1 that the author is more concerned to make a response than to make a convincing response. If it pleases him so to do, fair enough. Different strokes for different folks, as they say.

              1. 1.2.3.1.1.2.1

                Greg does no one any favors (especially himself and Ben) when he plays ‘polite’ Patty-cake with Ben with the (not so polite) snide comment that Wt is posting just to ‘hear himself.’

                What an arse.

                1. “Mr. Gugliuzza’s experience, then it would be like someone with a finance degree who managed certain aspects of purchasing components for a chemical reactor over a couple of years now teaching a class on chemical engineering.”

                  This is not analogous because according to his resume he has been teaching IP law for years. No reasonable person would totally discount multiple years of experience teaching a subject and producing research regarding that subject.

                  “Civil engineering is just solving for F=0, every engineer should be able to do that. But my field cannot be appreciated by anyone without hands on experience.”

              2. 1.2.3.1.1.2.2

                I infer from the quality of responses at 1.2.3.1 & 9.3.1 that the author is more concerned to make a response than to make a convincing response.
                Let me simplify things for you. You employed the logical fallacy of false equivalence, and I explained why the comparison you were trying to make was inappropriate.

                1. “I explained why the comparison you were trying to make was inappropriate”

                  Your explanation is equivalent to an chemical engineer saying that having taken a statics class qualifies him to comment on civil engineering, but that a civil engineer who has been teaching chemical reactor design for a decade has no right to comment on chemical engineering because he’s never done an energy balance from within a chemical plant. Your suggested standards for qualification to comment are lopsided to the point of silliness, and self-serving.

                2. Your explanation is equivalent to an chemical engineer saying that having taken a statics class qualifies him to comment on civil engineering, but that a civil engineer who has been teaching chemical reactor design for a decade has no right to comment on chemical engineering because he’s never done an energy balance from within a chemical plant. Your suggested standards for qualification to comment are lopsided to the point of silliness, and self-serving.
                  You are an examiner, correct? Non-attorney, correct?

                  Venue is an issue that EVERY attorney should be able to address. EVERY attorney that goes to court MUST be able to handle issues arising regarding venue. Frankly, it isn’t that complicated. Thus, no attorney should feel constrained about commenting about venue as it is issue that we have been trained to deal with and venue itself is not very hard.

                  Mr. Gugliuzza was an associate in an appellate practice for 3 years. Let’s break that down that experience for a moment. Jones Day is a huge law firm. Odds are that any junior associate in litigation practice isn’t going to be tasked with any big issues. Rather, they are going to be researching very narrowly-defined issues. Over the 3 years, maybe they’ll be a part of a dozen, two-dozen, maybe three-dozen appellate briefs?? Given his experience in the Ninth Circuit Court of Appeal (which does NOT handle patent cases), he was probably tasked, while as an associate, with addressing more procedural issues (as opposed to substantive patent law). All told, his experience with patent law is likely much, much less than you would expect for his 3 years as an associate.

                  Someone who does patent prosecution, on the other had, is essentially “first chair” (i.e., they make the decisions and do the vast amount of work). I would expect someone with 6 months of patent prosecution experience to have more experience researching, writing about substantive patent law than someone with 3 years of appellate practice. Moreover, an average patent prosecutor probably sees a greater number of fact patterns over the course of the month than an average associate in an appellate practice sees over 3 years.

                  If you want to analogize Mr. Gugliuzza’s experience, then it would be like someone with a finance degree who managed certain aspects of purchasing components for a chemical reactor over a couple of years now teaching a class on chemical engineering. Mr. Gugliuzza does not have an engineering degree. He never worked as an engineer. Being part of an appellate practice, he would have never drafted a patent claim. He would have never corresponded with an examiner making arguments regarding patentability. Given his junior status, he probably rarely had any meaningful discussions with a client.

                  Not having a technical degree hasn’t stopped others from being an academic in the patent field. Mark Lemley has a degree in Economic and Political Science from Stanford. Like, Mr. Gugliuzza, Lemley also clerked in the Ninth Circuit Court of Appeals and was an IP litigator for a couple of years before going into academia. Lemley, like Gugliuzza, has probably never been tasked with writing a patent claim. Personally, I think Lemley’s writings suffer from a disconnect with how patents are prosecuted. He epitomizes, IMHO, the ivory tower academic who makes pronouncement from up high but really doesn’t understand the reality of what is happening on the ground — simply because he’s never been on the ground to know.

                  This is a quote from the abstract of one of Lemley’s papers dated early 2020:
                  While we confirm some conventional wisdom, we upend other assumptions common in the legal and policy debates over patent eligible subject matter. In particular, we find that once in court, biotech/life science innovations are more likely to survive patentable subject matter challenges than software/IT innovations. Most surprisingly we find that the entities most likely to lose their patents at this stage are not patent trolls but individual inventors and inventor-started companies.

                  Only people sitting in their ivory towers would be surprised that the entities most likely to lose are “individual inventors and inventor-started companies” — not NPEs. The patent system has been scr ewing the little guy for well over a decade now. The patent system is set up to allow the FAANG-like companies to squash the IP of all potential competitors. Injunctions are rarely issued (thanks i4i), patents are deemed obvious for whatever reason (thanks KSR), patents in the most innovative fields are being shot down left and right because of 101 (thanks Mayo/Alice), venue for patent infringement is exceptionally limited (thanks TC Heartland). Also, as Josh Malone can attest, if you have a patent being infringed by a big company, you are going to continually get IPR’d until they find the right panel at the PTAB to invalidate your patent.

                  I’m sure Lemley and Gugliuzza think they are protecting mom and pop shops from being subject to needless patent litigation. However, in reality, what they are doing is making it easy for the large companies of the world to infringe, with impunity, the intellectual property of small-time inventors. Without the protection of IP to differentiate the products/services of the smaller players, the big guys will crush the smaller players on non-IP competitive factors.

                3. Spot on Wandering. Why would these academics be surprised that what inventors who have litigated our patent rights have been saying is true?

      4. 1.2.4

        +10 Wandering regarding Mr. Gugliuzza.

      5. 1.2.5

        Appreciate the excellent (as-usual) info and analysis Wandering.

        Keepin’ it real. Keepin’ ’em honest.

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