Delaware Trailed in Q1 NPE Rankings as Judge Connolly Signaled Stronger Transparency Rules

The Eastern District of Texas was the top district for overall patent litigation (i.e., for all plaintiff types) and NPE litigation in Q1 2024, a rank it has held since Q2 of last year. In second place, with roughly half as much overall litigation as East Texas, was the District of Delaware, which was the most popular district for operating companies in Q1 but took a distant third place for NPE litigation. The second most popular NPE venue, and the third for overall litigation, was the Western District of Texas, its NPE docket slimmed substantially as a result of a July 2022 case assignment order designed to reduce the concentration of litigation before District Judge Alan D. Albright.

Delaware has slid in the rankings over the past year, after taking first place in Q1 2023, as a result of a prolonged battle over transparency and corporate disclosures in the courtroom of Chief Judge Colm F. Connolly that has led NPEs to dramatically scale back their filings there. In April 2022, Judge Connolly imposed a pair of standing orders that forced litigants in his courtroom to disclose detailed ownership information as well as the presence of certain third-party litigation funding. After Judge Connolly became aware that a group of plaintiffs linked to IP Edge LLC had failed to comply with those orders, his resulting investigations into those entities’ ownership and control shined an uncomfortable spotlight on the underlying monetization model historically followed by IP Edge: to identify passive investors in Texas to form LLCs, receive patents, and assert them in litigation using counsel identified by IP Edge (and/or its “consulting” arm MAVEXAR LLC).

That scrutiny led IP Edge to discontinue filing under this model beginning in December 2022, as well as to multiple referral letters from Judge Connolly, including to the USPTO and the US Department of Justice, over a litany of alleged misconduct from the attorneys involved—both those in control of IP Edge and MAVEXAR, whom he slammed for engaging in the unauthorized practice of law; and some who frequently represented IP Edge plaintiffs, through which activity he found they had committed numerous violations of the ethical rules governing attorneys. Judge Connolly continued to grill two of those attorneys in the first quarter, with an in-person hearing leading him to incredulously question their grasp of basic legal and ethical principles and even the English language itself. One of those attorneys has since sought to seal the materials he has finally produced at the court’s request, arguing that Judge Connolly’s inquiry into his misconduct amounts to an “ethics investigation” that must be conducted confidentially.

As detailed in RPX’s latest quarterly report, recent comments from Judge Connolly indicate that he may soon apply even greater scrutiny to litigants before him. On March 28, speaking at Stanford University, Judge Connolly reportedly stated that he was “going to expand the order”, referring to his April 2022 standing order requiring funding disclosures, during a discussion in which he appeared to criticize IP Edge’s business model and the overall rise of litigation finance—stating, for the latter, that he does not “believe our courts are casinos where people should just go to profit”.

For more on this and other trends impacting patent litigation in Q1 2024, see RPX’s first-quarter review.