East Texas Stays in First Place as Delaware Disclosure Drama Continues

The Eastern District of Texas was the top district for all patent litigation and for NPE litigation in the third quarter after vaulting into first place in Q2. Holding onto second place in both categories was the Western District of Texas, knocked out of the top spot due to last year’s changes targeting Judge Albright. The District of Delaware was the most popular venue for operating company litigation but maintained a distant third place for both all litigation (for which it held the top spot in Q1) and NPE litigation.

Delaware’s fall in the rankings is likely the result of a battle over the stringent disclosure rules that Chief Judge Colm F. Connolly imposed in his courtroom in April 2022. Since this past winter, several entities affiliated with Texas monetization firm IP Edge LLC have been embroiled in a heated back-and-forth with Judge Connolly over their initial failure to make sufficient disclosures under those new rules, leading him to order them to produce reams of information about their ownership and legal representation. Those orders were prompted by Judge Connolly’s concerns over IP Edge’s historical business model: It has frequently hired individuals with no prior connection to patent monetization as the owners/managers of its litigating LLCs in exchange for the promise of passive income from its litigation proceeds. That practice, per Judge Connolly, raised concerns that by assigning patents to those LLCs without disclosing connections to IP Edge and a related firm, MAVEXAR LLC, those two entities had perpetrated a fraud on the USPTO and/or the district court. As those inquiries ramped up late last year, IP Edge’s Delaware filings fell by the end of Q3 2022, with the firm bringing no new cases in the district after the end of September (pausing its filings altogether by the close of November). As IP Edge accounted for the bulk of Delaware’s NPE activity, the district’s numbers tumbled as a result, and they have not rebounded since.

Though most of the aforementioned IP Edge-linked plaintiffs have since provided the materials ordered by Judge Connolly after a lengthy battle, two remained locked in conflict with him as of the end of the third quarter. One was Backertop Licensing LLC, which attracted the court’s scrutiny after both of its attorneys tried to withdraw from representation, citing an apparent breakdown in the relationship with their client. Judge Connolly then ordered its sole owner, Texas paralegal Lori LaPray, to appear in person to answer questions about the unusual situation, but she refused to do so multiple times in a contentious, drawn-out fight—ultimately leading the court to impose a $200-per-day fine for contempt after she failed to appear at an August 1 hearing. On October 3, Judge Connolly refused to stay the fines against Ms. LaPray, holding that she was unlikely to succeed in her pending appeal and that to conclude otherwise would undermine the court’s authority. He further noted that in any event, simply complying with the court’s order would eliminate the fines altogether and observed that neither Ms. LaPray nor Backertop had provided any evidence of her alleged financial hardship. Also failing to appear was Jacob LaPray, the owner of the other aforementioned IP Edge NPE, Creekview IP LLC, whose failure to appear at that same hearing has not yet led to a contempt order.

See RPX’s third-quarter review for more on this and other trends impacting patent litigation in Q3 and 2023 so far.