East Texas Widened Its Lead Last Year as Delaware Disclosure Battle Took Its Toll

The Eastern District of Texas was the top district for overall litigation and NPE litigation in 2023, after vaulting into first place starting with the second quarter this past year. In second for both categories was the Western District of Texas, which was knocked out of its spot atop the venue charts in Q1 2023 due to case assignment changes in Waco last July that were designed to undercut the concentration of patent litigation before District Judge Alan D. Albright (and did so). Delaware held third place for overall litigation and NPE litigation last year, though the district was 2023’s most popular operating company venue, followed by the District of New Jersey.

The story was similar in the fourth quarter, at least at the top of the rankings: East Texas again took a wide lead for both overall litigation and NPE litigation, while Delaware was the most popular destination for operating company litigation. However, though Delaware just barely edged out the Western District of Texas as the number-two venue for overall litigation, it fell to fifth place for NPE litigation.

The likely explanation for Delaware’s waning popularity among NPEs has been an increasingly heated battle over transparency and corporate disclosures in the courtroom of Chief Judge Colm F. Connolly. After multiple litigating plaintiffs linked to IP Edge LLC and a related consulting firm, MAVEXAR LLC, failed to disclose those relationships as required in his courtroom, Judge Connolly began expressing concerns that IP Edge and MAVEXAR had possibly committed fraud on the court and the USPTO by obscuring those connections.

While Judge Connolly had previously stopped short of detailing the possible ramifications of those actions, this changed in dramatic fashion on November 27: In a blistering, 105-page order, Judge Connolly found that IP Edge had been the “de facto” owner of the patents asserted by its litigating affiliates and held that the entity and its principals should face “consequences” for their improper attempt to “use separate LLCs to insulate themselves” from liability: He has now called upon the Department of Justice (DOJ) and the USPTO to potentially investigate these misrepresentations. Judge Connolly has also teed up potential punishment for some of the individuals involved: He has referred certain attorneys employed by IP Edge (which is not a law firm) to a Texas disciplinary body for the unauthorized practice of law and has referred the LLCs’ local and lead counsel to state disciplinary bodies for improperly treating IP Edge as their true client. More detail on this saga can be found on RPX Insight.

IP Edge stopped filing litigation in Delaware as an apparent result of the growing pressure from this “Series of Extraordinary Events”, bringing no new cases there after the end of September 2022 before halting its filings altogether (in every district) after November. Since IP Edge had long accounted for much of Delaware’s NPE caseload, its numbers plummeted due to IP Edge’s pause: The district saw nearly 66% less NPE litigation in 2023 compared to the prior year. (However, as reported by RPX, IP Edge has since ended its litigation pause, launching its first campaign since 2022.)

This saga in Delaware also appears to have had a broader deterrent effect on other NPEs. Excluding IP Edge, NPE litigation was still down in the district by 26%—suggesting that at least some NPE plaintiffs would prefer to avoid the risk of similarly close scrutiny by Judge Connolly.

See RPX’s fourth-quarter review for more on venue and other key patent litigation trends in Q4 and 2023 overall.