It’s reassuring to know that we’re not alone in sounding the alarm bells over a growing problem in our federal courts in Texas: patent trolls.
Patent trolls buy up patents only to file lawsuit after lawsuit, looking for big payouts, attacking small businesses and larger corporations alike. It is a classic case of greed, not justice.
At Texans Against Lawsuit Abuse, we have kept our eye on this issue in recent years and share former Congressman Dick Armey’s concerns about patent trolls’ impact on job creation and innovations for Texas and U.S. companies.
The number of shell companies and foreign entities that file these frivolous lawsuits is concerning. Requiring greater transparency around who is financing these patent lawsuits is a critical reform that deserves bipartisan support.
Stop patent trolls
Texas forum shopping weakens justice system for all of us
By Dick Armey
Our leadership in Texas is doing all it can to keep this state’s economy the envy of the nation.
While ordinary Americans are still struggling with rampant inflation, unaffordable housing and new national business-killing regulations, Texas is seeing incredible amounts of inbound investment in everything from leading-edge manufacturing to rocket ships. If Texas is going to maintain its economic advantage, now is the time to tear down artificial barriers to accelerated growth.
Right now, our state is facing an enormous challenge to continue attracting business investment, as “patent trolls” try to turn our justice system on its head and manipulate our federal courts at the expense of Texas’ innovative companies.
Patent trolls are shell companies that go out and buy dormant patent portfolios – not so they can develop new products, but so they can use these patents to file flimsy lawsuits against companies that are actually designing new products and creating jobs. In recent years, they’ve flocked to the Eastern and Western Districts of Texas where they believe courtrooms are more receptive to their claims and march toward verdicts that can reach into the billions of dollars.
In 2023, patent trolls filed 522 of the 613 (85%) patent infringement cases brought in the Eastern District of Texas, according to a recent analysis by Unified Patents. In the Western District, we see the same story, with 467 out of 519 (90%) patent cases coming from trolls. Not only that, but the 989 cases filed in just those two judicial districts account for nearly 60% of all the patent troll cases that were brought anywhere in the country last year.
This practice of “forum shopping” may benefit the trolls, but it’s making a mockery of our justice system and posing real threats for both the Texas business community and for America’s national security. At the end of 2021, in his end-of-year message, Supreme Court Chief Justice John Roberts even weighed in, urging that the courts and Congress work together to address it.
No company wants to find themselves on the receiving end of a patent infringement claim that has no basis in fact and is only intended to harass them into a settlement. The sad reality is that the prevalence of these cases in Texas courtrooms makes our state a less attractive place to start or grow a business. Unless we act, fewer companies will choose to move their operations here and more companies will choose to relocate to states where they don’t have to keep looking over their shoulder for a patent troll to take them to court.
Although these patent troll accusations are often meritless, defending against them can run into the hundreds of thousands and millions of dollars, and impose onerous discovery burdens. Small and medium-sized employers can’t afford to bear the brunt of those legal expenses and will often choose to settle outside of court rather than take their chances with a jury. That stifles innovation and growth, forcing innovative startups to spend money on a settlement that could have gone towards research and development, job creation or opening new facilities.
We also must be clear-eyed about the threat that patent trolls pose to our national security, by allowing lawsuits to be a vehicle for America’s adversaries to successfully target critical industries. Patent trolls are often funded by third parties, like overseas hedge funds and sovereign wealth funds. Adversaries might be enticed to use Texas courts against us — enriching themselves while harming some of the companies most important to our way of life.
The problem is that outside of a few venues, patent trolls, or any other plaintiff for that matter, are not required to disclose outside funding sources. In U.S. District Court in Delaware, where the chief judge does require disclosure, we recently learned that a China-based investment entity is doing exactly what we feared the most: filing patent infringement claims against U.S. manufacturers.
But because disclosure is not required in Texas, where patent trolls come most often, we don’t yet know the full extent of this investment-backed activity.
That needs to change. Anyone filing suit in Texas should have to disclose if America’s adversaries are bankrolling their effort.
This is more than legal curiosity. It poses a real threat to the Texas companies that power our state and create economic opportunity for the folks that live here.
As technology continues to advance, it is critical that policymakers address the threats that the combination of judge-shopping for certain venues and anonymous lawsuit funding pose. If we do nothing, patent trolls will remain a serious economic and national security concern.
Dick Armey represented Texas’ 26th Congressional District in the U.S. House from 1995 until his retirement in 2003.
Reprinted from The Dallas Morning News
