Patent Trolls Find Fertile Ground in Texas

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Posted in the Southeast Texas Record

By Roger Borgelt

Texas once was the Wild West of lawsuit abuse. Over time, it transformed into a beacon of reform, ending many of the most egregious examples of lawsuit abuse.

But the bad guys have a way of resurfacing, and sure enough, new villains are here, right in our backyard: patent trolls. In recent years, these patent trolls and their army of high-powered lawyers have descended upon Waco, Texas.

Why Waco? It’s where they’ve found a welcoming federal court and judge.

In the internet sense, trolling involves harassment with an intent to harm. In the case of patent trolls, it’s legal harassment and meritless lawsuits that come with the threat of billions in phony damages for false charges of patent infringement.

Patent trolls threaten the real Texas and American job creators and innovators, and it’s not the first time they’ve tried to capitalize on a friendly judge and courtroom in Texas. The Eastern District of Texas was once their preferred venue, landing Texas on the American Tort Reform Association’s Judicial Hellholes list in 2016, noting that 40% of all patent troll cases that year were filed in the Eastern District.

Patent trolls do not research, develop, make, or sell anything related to the patents they argue have been infringed. They are created to file lawsuit after lawsuit, claiming to represent the little guy while they work to line the pockets of some lawyers, hedge funds, and big foreign corporations.

Many trolls are nothing more than shell companies, funded and created by hedge funds or foreign companies. Patent trolls are filing hundreds of cases, creating a spike in courts across Texas, but nothing like the staggering case numbers in the Waco courtroom of Judge Alan Albright, who has rolled out the welcome mat for patent and intellectual property lawsuits.

In 2020, the district saw a tidal wave of new patent infringement cases, a jump of 350 percent over the previous year, according to reporting by Texas Lawbook. Waco is now the go-to court in the U.S. to litigate these patent troll disputes.

These suits squeeze technology companies for big payouts, threatening them with costly, often prolonged lawsuits and awards that are wildly out of line with their claims.

Meritless patent troll lawsuits exact high costs on America’s job creators and true tech innovators. Patent troll lawsuits reduce R&D investment by U.S. companies, slowing innovation and undermining U.S. leadership in technology. But it’s not just the most prominent technology firms under attack. An estimated 60% of patent litigation filed by patent trolls targets businesses with less than $100 million in annual revenues.

These cases are lawsuit abuse to an extreme, hitting some of Texas’ and America’s real innovators and biggest job creators. And they are doing actual harm to our state’s business climate. A study found that these lawsuits were associated with half a trillion dollars of losses to companies targeted from 1990-2010. The median damages awarded in patent litigation have climbed from $1.9 million in 2010 to $10.2 million in 2017.

Patent trolls most recently exploited the pandemic to line their pockets. Patent troll abuse extended into critical healthcare technologies, including ventilators and Covid-19 tests.

We should be finding ways to stop these frivolous patent lawsuits while ensuring legitimate claims still get their day in court.

It’s time for Texans to call out these patent trolls for their destructive and unscrupulous ways. It’s time for increased scrutiny as to why Waco is so friendly to these patent trolls and their lawyers.

As we work to recover our businesses and our economy from this pandemic, we don’t need patent trolls wreaking havoc on our state’s reputation as wide open for business. It’s time to ensure courts like Waco and others are used for justice, not greed.

Roger Borgelt is an attorney and Board Member of Citizens Against Lawsuit Abuse of Central Texas.