Successful defense strategies for Taiwanese businesses.
Over the past two years, many technology companies have become patent infringement defendants in the US District Court for the Western District of Texas (the "Western District"). This includes many corporations with operations in and around Austin, Texas, a growing US technology hub.
Importantly, many Taiwanese technology companies maintain operations within the Western District.
Patent litigation moves rapidly in this jurisdiction, compared to other US venues, making it the latest US patent "rocket docket." Defending against patent infringement charges in the Western District creates two major concerns for technology companies. First, fast-paced adversarial proceedings create pressure to respond and adapt quickly. Second, most companies historically have found it difficult to transfer their cases to another venue.
We recommend that a technology company sued in the Western District seek to avoid litigation in this venue and follow a well-planned strategy to improve the chances of obtaining a successful outcome on the merits. Here is an overview of what you could face:
The rise of the Western District as a new patent rocket docket
Patent lawsuits in the US have increased in the past year for multiple reasons, including financial pressure to monetize patents, recent bankruptcies (where companies liquidate patents) and the continuing rise of litigation funding. Finally, the technology sector has generally remained strong amid the COVID-19 pandemic, thus posing a target for potential plaintiffs.
Amid these trends, the Western District is quickly becoming an important patent litigation venue in the US. Technology companies that maintain offices in the Austin area will likely face more patent infringement lawsuits amid the overall increase in patent disputes and related litigation funding. This has happened for several reasons.
First, the rules for venue in patent litigation have become more restrictive. A 2017 US Supreme Court ruling held that patent lawsuits can occur only where a defendant has a "regular and established place of business."3 A number of technology giants maintain offices in Austin, which falls within the Western District. As a result, by 2019, the Western District counted the fourth-highest total load of new patent cases in the US, with one particular judge—Judge Alan Albright—overseeing the vast majority of these new patent filings.4
Since patent litigation in the Western District will likely accelerate, many technology corporations may find themselves forced to litigate before Judge Albright in Waco, Texas.
Strategies for accused infringers
Two general approaches when sued in the Western District include (1) finding ways to remove your case from this venue and (2) maximizing the chances of achieving the best possible outcome there.
Consider moving your case
First, a company can try to change venue, primarily by seeking transfer for convenience under 28 U.S.C. § 1404(a). Defendants can request dismissal or transfer, and then petition the US Court of Appeals for the Federal Circuit for a writ of mandamus to change venue. While Judge Albright has denied most transfer requests, the Federal Circuit recently ordered transfer in one of his cases,5and he then granted transfer in another patent case.6
When seeking a transfer, try to highlight that:
- Your business is located elsewhere (preferably in your destination venue)
- Key third-party witnesses and evidence for your case are located outside Texas
- Employees in your Texas operations lack connections to any accused product
- The plaintiff's evidence or witnesses are located outside Texas
As an alternative, an intra-district transfer (such as to Austin) could be significantly more convenient for company witnesses and may change jury atmospherics. Even when refusing transfer to another district, Judge Albright has generally allowed transfers to the Austin division while keeping jurisdiction himself.
Another strategy to control your venue, if there are sufficient threats of litigation, is to sue first for a declaratory judgment against the potential plaintiff in a more defendant-favorable jurisdiction—such as the Northern District of California—before the plaintiff can sue in the Western District. For example, if a patent owner sends your business letters threatening litigation, then you could sue first in another district for a declaration of non-infringement. If the patentee is a practicing entity, then accused infringers can also consider filing countersuits in other venues, or even in the Western District itself.
A third valuable strategy can be challenging the validity of the asserted patents at the PTAB through inter partes review (IPR), post-grant review (PGR), or ex parte re-examination. The PTAB has specialist judges who resolve patent validity, with almost no discovery other than testimony from expert witnesses. The PTAB typically provides a final written decision within 18 months. Although Judge Albright does not grant stays for a case pending IPR, and he has even accelerated case schedules after defendants file IPRs, an early IPR could still invalidate key patent claims and force the plaintiff to take inconsistent positions.
Tips for patent litigation in the Western District
Finally, several techniques can maximize your chances of success in the Western District:
- Choose expert witnesses who speak effectively to a Texas jury: Witnesses with local connections or prior experience before Judge Albright can be helpful, and prior experience testifying in the Western District can be as important as technical expertise
- Coordinate with other defendants in a joint defense group: Joint defendants can share costs—such as for invalidity and non-infringement analyses—although coordination can also sometimes reduce efficiency and create conflicting positions
- Pursue countersuits in other venues: If the plaintiff is an operating company, you might be able to increase your leverage by suing them on other patents in other jurisdictions, such as before the US International Trade Commission (where a case can finish in 14 to 16 months) or in Europe (where there generally is more limited discovery and invalidity defenses)
- Consider involving your suppliers or customers: If your suppliers are contractually obligated to indemnify you and defend you against lawsuits, make sure to send them any indemnification demands early to minimize your costs
- Claim a customer suit exception: US courts sometimes allow a case against a manufacturer to proceed before a case against customers. However, in a recent ruling, the Federal Circuit did not order Judge Albright to apply the customer suit exception to delay a case pending another lawsuit in Delaware7
As always, technology companies must remain vigilant about understanding popular venues for US patent litigation and the strategies for winning there. With the prevalence of litigation in the Western District, those strategies have become especially important.
3 TC Heartland LLC v. Kraft Foods Grp. Brands LLC, 137 S. Ct. 1514 (2017)
4 Lex Machina
5 In re Adobe, No. 2020-126 (Fed. Cir.)
6 Parus Holdings Inc. v. LG Elecs. Inc., No. 6:19-CV-00432
7 In re: Sprouts Farmers Market, Inc., No. 2020-116