Illustration: Shaye Anderson

The Small Town Judge Who Sees a Quarter of the Nation’s Patent Cases

Texas Judge Rodney Gilstrap didn’t design this system, but he’s been a willful participant in it.

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May 5 2016, 1:00pm

Illustration: Shaye Anderson

The first thing people tell you about Judge Rodney Gilstrap is that he's not from Marshall. In the small Texas city (population 24,000) east of Dallas where he presides as a US district court judge, where you're from matters, and the 59-year-old Gilstrap was actually born in Pensacola, Florida. But because he earned both his BA and his law degree at Baylor University (three hours away in Waco, Texas), has practiced law in Marshall since the 80s, and married a local girl whose family owns the town funeral home, most folks forgive Gilstrap this blight.

They also probably cut him some slack because of how he's run his court for the last five years.

Since taking the bench in 2011—moving literally across the street from his law office into the district courthouse—Gilstrap has become one of the most influential patent litigation judges in the country. In 2015, there were 5,819 new patent cases filed in the US; 1,686 of those ended up in front of Judge Gilstrap. That's more than a quarter of all cases in the country; twice as many as the next most active patent judge.

These include some of the most contentious and headline-grabbing patent disputes in the US. There's the 2013 case where a jury awarded a patent troll $2.3 million, a decision Gilstrap later overturned. There was also the $533 million patent troll win in a case against Apple, a decision Gilstrap has now stayed to allow for appeal.

This busy patent docket didn't blossom overnight, and it's not some strange coincidence. Due to some unique rules around intellectual property filings, patent holders can often file their lawsuits at any district court in the country, even if neither the plaintiff nor the defendant is based there. By introducing a list of standing court orders and local regulations, the Eastern District of Texas (and, in particular, Gilstrap's division of Marshall) has become the court of choice for many plaintiffs, especially non-practicing entities, or NPEs.

"There's not a jail here. Less than 10 percent of the cases in Marshall are criminal cases, which is very unusual for a district court."

NPEs, better known as patent trolls, don't produce anything. Rather, they buy up patents for the sole purpose of suing other companies for infringement. In the 80s and 90s, as computer technology rapidly developed, the US Patent and Trademark Office became inundated with requests for software patents, which it overwhelmingly approved, even though many of these were broad and vague.

By the 2000s, NPEs were regularly scooping up old, fuzzy patents for things like "methods and systems for gathering information from units of a commodity across a network," and launching multiple lawsuits against every digital company under the sun that could maybe, sort of fall under the category of their vague patent.

These lawsuits waste time, cost billions, and hurt innovation. It's estimated that patent troll suits alone cost American companies $29 billion a year (that's based on a figure from 2011, so it's likely higher than that now). The whole point of the patent system is to protect ideas and encourage innovation, not to provide an industry where shell companies that do nothing are able to extort millions from companies that actually create things, provide jobs, and add (some kind of) value to society.

But that's exactly what patent trolls do. And they overwhelmingly choose to do it in the Eastern District of Texas.

The district courthouse in Marshall, Texas. Image: WikiMedia Commons

Some of the proverbial scaffolding propping up this troll-luring system was inherited by Judge Gilstrap, while some of it was his design, and he's been happily maintaining this unintentional specialized court for half a decade. It's a boon to the town, where visiting litigators bring in money and perks, from lawyers ordering catered lunches at the local restaurant, to Samsung sponsoring an outdoor skating rink downtown.

But as the number of patent cases continues to grow, scrutiny over the way the system is currently set up grows along with it. Politicians, law experts, and advocacy groups like the Electronic Frontier Foundation have been highly critical of the fact that patent holders get to choose their court and often, by extension, their judge. There are multiple legislative proposals to reform the way patent cases are filed in the US and, if passed, they would effectively end Marshall's heyday as a hotspot for IP trials.

In the meantime, the Eastern District of Texas remains the most active patent court system in the country, and Gilstrap is its poster boy.

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The Eastern District of Texas wasn't always a magnet for patent cases. Spanning 44 counties along the northeast corner of the state, the district was historically a pretty sleepy jurisdiction. But throughout the 90s and early 2000s, a series of events created a perfect storm to transform parts of the district like Marshall into a hive of IP litigation.

It all started with Texas Instruments, which you might remember as the company that made your high school graphing calculator. By the late 80s, making school supplies, processors, and data converters was becoming a less lucrative business, so TI started to leverage the stack of patent rights it held, padding its bottom line with settlements from suing other companies for infringement. Since the company headquarters are in Dallas, it naturally filed its cases there.

The Eastern District of Texas. Image: usmarshals.gov

But here's another weird thing about patent cases: they can get bumped. In the court system, criminal cases take priority, and with a major city like Dallas, TI's cases kept getting knocked down the list. So the company went poking around in nearby districts to see if there was a quieter docket.

"Marshall doesn't have a criminal docket to speak of," said Michael Smith, an attorney in Marshall who runs a blog about the district court. "Because it's a rural division, there's not a US attorney's office here. There's not a jail here. Less than 10 percent of the cases in Marshall are criminal cases, which is very unusual for a district court, and that is why the patent docket started here 23 years ago."

TI soon started filing its cases in Marshall and some of the surrounding divisions. By 1999, when Judge T. John Ward—who was replaced by Gilstrap upon retirement—took the bench, the patent cases were starting to pile up and they were immediately all transferred to Ward's docket. Before his first case, Judge Ward spent hours preparing to debate terms that were in dispute, only to have both the plaintiff and defendant quickly come to agreement once in the courthouse, Ward told me. It turned out the parties hadn't even discussed the items beforehand. Frustrated at having wasted so much time, Ward looked for ways to more efficiently deal with the patent cases.

As it so happens, one year before he took the bench, Ward had served as a local counsel on a TI patent case, according to a column he penned for a magazine distributed by the State Bar of Texas. His co-counsels from San Francisco frequently lamented the fact that the Eastern District of Texas didn't have the same court rules they enjoyed back in California, Ward wrote. So he read up on the Northern District of California's patent rules, made some adjustments, and adopted them in his court. He hoped it would allow for the patent cases to be settled more quickly so they would be less of a burden, he said.

In reality, these changes had the opposite effect. In California, the rules help busy courts tread water. In sleepy Marshall, the efficient rules, which require filing documents under a certain timetable and limiting the number of document pages, meant cases could be settled in less than two years, garnering it the nickname "the rocket docket."

It was catnip for patent holders.

"I did not anticipate, in any way, that it would create such a large attraction," Ward told me over the phone. "I adopted those rules for one purpose and one unexpected consequence was 18 months from filing to trial was very attractive to a lot of people. I did not anticipate that."

As more cases streamed in, the entire district soon adopted the same rules to try to stay on top of them. By the time Judge Ward decided to retire from the bench (he now works in private practice and focuses on IP cases) in 2011, the Eastern District of Texas was regularly the most popular venue for patent cases, competing only with Delaware. These days, there's no competition.

New patent cases filed in 2015, by district. Image: Lex Machina

But while the early attraction may not have been intentional, the Eastern District didn't become a patent troll haven by accident.

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You might expect the Eastern District of Texas to be the fastest patent court in the country, but that's no longer the case. Its median time to trial is now 2.3 years, making the Eastern District just the 11th-fastest among districts with significant patent dockets, according to a study published in the Southern California Law Review. Yet patent holders still consistently prefer the Eastern District of Texas for filing cases. In 2015, 2,540 new patent cases were filed there, according to Lex Machina, a legal analytics firm. That's 44 percent of the cases in the US. By comparison, the District of Delaware, which has the second highest number of patent litigation, saw only 545 new cases.

As patent cases piled up in the Eastern District, a handful of judges, including Gilstrap, started to adopt their own specific courtroom rules. This had two effects: It made it a little easier for judges to juggle a lengthy patent docket, and it made the court even more appealing to patent holders.

Take summary judgements, for example. After discovery—the part in a court case where the lawyers do research, exchange all the necessary documents, and conduct depositions—the defendant has the option to request a summary judgement, which is basically asking the judge to rule on the case rather than going to trial.

In patent cases, statistically, summary judgements tend to favor the defendant, while trials tend to favor the plaintiff, according to the Law Review study. As a whole, the US district courts system grants summary judgements in patent cases at a rate of 3.7 percent. In the Eastern District of Texas, they're granted at a rate of 0.8 percent. And there's an added quirk unique to Judge Gilstrap's court: He requires defendants to file a request before they can even ask for a summary judgement.

They have to ask if they can ask, in other words.

"That helps manage the workload because it's much easier to rule on a three page or five page letter asking permission to file—or just not rule and not give permission—than it is to hold a summary judgement hearing, write an opinion, all of that," said Greg Reilly, an assistant professor of law at the California Western School of Law and co-author of the study.

Gilstrap declined multiple requests for an interview. His clerk responded to a request and told me the judge is very busy and is therefore picky about what interviews he grants.

"That's not at all how our judicial system is meant to work."

The whole issue with summary judgements is just one of a litany of local rules and standing orders that makes the Eastern District of Texas appealing to patent holders. These rules all but ensure a case will go to trial, which is already slightly more favorable to patent plaintiffs but also comes with the added likelihood of settling out of court. If you're facing a multimillion dollar trial and the patent troll suing you offers to settle for $100,000, you're likely going to take the deal and get the hell out of dodge (or, Marshall, rather). Since the patent holder gets to decide where to file the suit, suddenly the massive influx of patent cases in Marshall starts to make sense: The court is friendly to patentees.

"The way to attract patentees is not simply to be more expert than other courts, it's to be more patentee-friendly than other courts," Reilly said. "And that's what we've seen in the Eastern District of Texas."

Having a lot of patent cases isn't inherently bad, and those in Marshall's law community argue the patentees are more enticed by the expertise in the area than better odds of settling. But it's difficult to imagine why so many patent holders would flock to this obscure, rural jurisdiction, which is no longer the fastest in the country, if there wasn't at least the idea of a benefit. And therein lies the main criticism.

"That's not at all how our judicial system is meant to work," said Julie Samuels, an attorney and the executive director of Tech:NYC, who has long advocated for patent law reform. "None of the businesses are based here. It's done solely because it's a plaintiff-friendly district."

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It seems obvious why patent holders would want to file in the Eastern District of Texas. But why does the Eastern District of Texas want them there?

"Tyler wants you!" reads the website for the Tyler4Tech campaign created by local businesses to attract tech companies to the area.

"Enjoy true southern hospitality where no one is a stranger," the site boasts.

"Plaintiff-friendly local rules," it adds.

Screengrab from the Tyler4Tech campaign site. Image: Tyler4Tech.com

In the US district court system, local judges sometimes preside over cases in more than one division. Marshall is both the name of Gilstrap's hometown and the six-county, 14-city division over which he presides. Next door to Marshall is the division of Tyler: home to 10 counties, the city of Tyler, and the headquarters of the Eastern District of Texas. It sees a hefty share of patent cases, some of which are dropped onto Gilstrap's docket.

It's also a community that would like you to host your tech company, according to the Tyler4Tech campaign. Among the list of qualities making the town attractive to tech startups, the website boasts that the Eastern District of Texas is "IP Friendly."

It even goes on to list cases in which patent holders were awarded significant wins, such as a 2010 jury ruling that ordered Microsoft to pay patent troll VirnetX $105.8 million.

And make no mistake, there's value in being home to the most active patent court in the country. Though plaintiffs don't have to be located in the district to file there, patent trolls often rent out unused office space to protect their cases against requests to switch venues. Legal teams from out of town bring in money spent on food and accommodations. And local lawyers have become veritable experts in IP cases, particularly trials, and often get called on as local counsel for both sides of cases.

Then there are the gifts, like Samsung's skating rink, which it sponsored for several years for an annual winter fair (the rink is now sponsored by a local Ford dealership), and the scholarships the tech giant regularly dishes out to Marshall high school students. Samsung is frequently either the defendant or plaintiff in patent cases filed in the district.

"There's a whole cottage industry around this litigation and it's not just the courts and the lawyers," Samuels said. "It's the hotels and the restaurants. This is big business in Marshall and Tyler, which creates totally perverse incentives."

The county courthouse in Marshall. Image: jqpubliq/Flickr

If Gilstrap didn't design this system, he's been a willful participant in it. In media interviews, he's said that trials are the fairest method of settling an IP dispute, and a system that prioritizes trials attracts litigants who want a fair shake.

"I try to make sure both sides get a fair trial," Gilstrap told Law360 last year. "I don't have a client in the case, other than seeing that rules are applied equally and fairly and you'll get a fair trial. That's what I strive to do."

Gilstrap has drawn criticism for toeing the line of the Eastern District's legacy as a plaintiff-friendly venue, even as patent reform starts to trickle through the system. Alice v. CLS Bank, a landmark Supreme Court ruling in 2014, convinced many that changes would be coming. The Alice ruling cut a hole in the strategy of a lot of software patent trolls. It ruled that flaky patents that basically just added "on a computer" to an existing idea or technology ought to be thrown out. Because of this precedent, many defendants now request an "Alice ruling" early in the case.

But Judge Gilstrap never saw the decision as particularly monumental.

"I don't think it's changed the internal dynamics of what judges like me or my colleagues would be convinced is exceptional, but made it clear we have that option at our disposal," he told Law360.

Indeed, Gilstrap has not thrown out as many Alice cases as some of his peers. But there are signs he is starting to crack down on patent trolls. At the end of last year, after tossing out a suite of filings by eDekka—one of the most active patent trolls in the US—Gilstrap for the first time ordered the troll to pay the legal fees of the defendants.

"eDekka repeatedly offered insupportable arguments on behalf of an obviously weak patent," Gilstrap's ruling read. "eDekka's litigation history in this District—which includes filing strikingly similar lawsuits against over 200 defendants—reflects an aggressive strategy that avoids testing its case on the merits and instead aims for early settlements falling at or below the cost of defense."

Illustration: Shaye Anderson

The decision was noteworthy for Gilstrap, and seems to be a sign of shifting winds. So far in 2016, according to Smith's blog, there have been 10 patent rulings in the Eastern District of Texas—five in favor of the plaintiff and five in favor of the defendant. In the past, patent holders won jury rulings as much as 78 percent of the time in the Eastern District. For some reason or another, the Eastern District has started to look less and less plaintiff-friendly in recent months.

Still, for real change to take place, we're most likely going to have to rely on Congress. The PATENT Act would introduce stricter requirements for patent holders when filing a case and eliminate a lot of the vague, wishy-washy language of patent troll cases. There's also the Innovation Act, which would address a lot of the same issues, requiring patent holders to be very specific when filing suits and to pay legal fees when their cases don't hold water. Both bills have been introduced (the former in the Senate, the latter in the House) but not yet progressed.

Perhaps more importantly, both of these acts would restrict where cases can be filed, to keep patent litigation spread out and in districts where at least one of the parties involved actually operates. Another bill, the VENUE Act, specifically addresses this problem. Any of these would mean the end of the Eastern District's patent party.

The thing is, Judge Gilstrap already has the power to put the kibosh on the steady stream of patent filings, if he really wanted to, by changing those standing rules that attracted trolls in the first place.

"It's great to see Judge Gilstrap shutting down a single troll, but that is a drop in the bucket," Samuels told me. "These district court judges have a huge amount of discretion over what happens in their courtrooms."

But he's not doing any of that, and maybe it's because the docket is not the only thing that would change in the wake of reform. A town like Marshall, which has embraced the perks of thousands of yearly patent cases, would look very different if the laws suddenly shifted.

Clarification: An earlier version of this story indicated Samsung continues to sponsor the annual winter ice rink, but in recent years a local Ford dealership has sponsored the rink. This story has been updated to reflect the clarification.