On February 25, 2014, Chief Judge Leonard Davis of the United States District Court for the Eastern District of Texas entered a general order officially launching an alternative case track for patent cases filed in the district. According to the order, the new “Track B” is “meant to compliment the default procedures of [the existing] Track A, by providing a choice.” The order includes a stated expectation that the new track will provide “additional efficiencies and cost savings…through the use of alternative procedures in appropriate cases, while ensuring a full and fair opportunity for the speedy determination of each case on its merits.”
Most would agree that the once speedy Eastern District of Texas has lost some zip in the time it takes patent cases to get to trial. But it is unclear whether this new track will bring about much change.
How does a case get on Track B?
Placement of a case on the new Track B is controlled by an alternative Initial Patent Case Management Order that takes effect in one of two ways: (1) when all parties to the action file a joint notice electing its entry, or (2) upon order of the Court. Parties wishing to be placed on Track B must file such a joint notice “on or before the date by which all defendants have filed an answer or motion pursuant to Fed. R. Civ. P. 12(b).”
Thus, at least initially, placement on Track B will be up to the parties to the litigation. Absent unanimous consent of all parties to the litigation, it is unclear precisely when or if the Court will entertain requests for placement on the alternative track. Given the rather onerous requirements under these rules for both parties, it is unclear, at best, how often parties will join together and unanimously select this alternative.
Further, for defendants who have no knowledge of the patent prior to suit being filed (as is often the case), assessing product sales across multiple divisions, product lines, or revenue streams will likely be difficult in the contemplated deadlines. It is also unclear what circumstances may provoke the Court to sua sponte place a case on Track B, as potentially contemplated by the second option above. And if cases are capable of being sua sponte placed on Track B, could the parties ever comply with the tight deadlines?
Still, a liberal use of this track may have an impact on the speed of cases as well as on decisions to litigate in East Texas, although the support for alternative track amongst Chief Judge Davis’ fellow judges is unknown.
What is Track B?
The requirements of Track B move several of the dates for productions and disclosures found in the current rules. They also introduce several new disclosures to the parties. These requirements and a comparison to current disclosure requirements (Track A) are summarized in the following chart.
Click here to view table.
In addition, Track B contemplates the parties being allowed to conduct limited written discovery prior to the management conference with the Court. Track B allows each side to serve five interrogatories, five requests for production, and five requests for admission, absent leave of court or stipulation of the parties. Ordinarily, discovery would have to await the management conference.
What’s the difference?
These changes place the case firmly in the hands of the parties and ask them to do much of the work of evaluating the case very early in the litigation. These rules force the parties to assess the value of the technology at issue as well as the potential damages exposure.
The intended effect is to force the parties to come to an understanding of the economic impact of their litigation at a very early point in the litigation. This is a means of case evaluation favored by the likes of Judge Rader of the Court of Appeals of the Federal Circuit, Judge Posner of the Seventh Circuit Court of Appeals, and apparently by Chief Judge Davis as well. Under this rationale, and armed with knowledge of what the case may be worth, the parties and, perhaps more importantly, the judge trying the case, can better allocate resources to those cases with greater economic worth. Thus, Track B is designed to give the parties and judges the tools to assess whether a case deserves the full monty of available resources or whether some lesser amount will suffice. It also allows the parties to best allocate their resources on the cases that require the allocation.
Will it work?
While the reasoning may be sound, this new track still has issues. First, Track B fails to adequately contemplate “non-product” accused products. For instance, how does the concept of product sales apply to infringement claims made against a piece of software in a website or phone app? How do product sales relate to patent method claims directed to software? The complexity of patent damages may enable plaintiffs or defendants to hide true numbers and prevent accurate case assessment.
Second, the damage assessments required by Track B are not binding on plaintiffs. There is nothing in the rules to prevent a plaintiff (or a patent troll) from espousing an outrageously high damage assessment at the outset and then reining in that estimate as the case progresses and a lack of evidence becomes clear. Under such circumstances, what price will that plaintiff have to pay?
Third, how would widely disparate assessments from plaintiff and defendant affect this process? If a plaintiff sees the case as worth hundreds of millions of dollars but the defendants see the case as worth tens of thousands, which view controls? How does the Court handle such disparate assessments? What value would such an assessment have to the parties or the Court?
Since the economic valuation necessary for the resource allocation contemplated by this line of reasoning depends largely on an accurate damage assessment, the success of Track B and the impact it will have on litigation in East Texas is therefore likely tied to how the judges of East Texas use this new tool. If they entertain motions to place cases on Track B or liberally move cases to Track B sua sponte, Track B may have a great impact on patent litigation practice in East Texas.
If the judges take advantage of the sanctions provisions in the new Track B rules and hold parties to their early assessments and damages theories, Track B may discourage aggressive patent trolls. But if judges find that Track B cases result in dubious valuations or unsubstantial assessments, Track B may simply become a little used alternative with no impact on patent practice in the district.