Delaware Disclosure Debacle Depressed District’s NPE Filings in 2024

The Eastern District of Texas was the top patent district for overall litigation (i.e., with no filter for plaintiff type) and NPE litigation in 2024, also holding the fourth spot for operating company litigation. In second for overall litigation was the District of Delaware, which was also the third most popular venue for NPEs but the number-one district for operating company litigation. Meanwhile, the Western District of Texas was in third place for overall litigation, second for NPE litigation, and fifth for operating company litigation.

The Eastern District of Texas, long a patent hotspot prior to the Supreme Court’s 2017 TC Heartland venue decision, has held onto first place ever since Q2 2023, after separate developments triggered a downturn in NPE filings in both Delaware and West Texas.

For the former, the triggering event was a pair of standing orders that Delaware Chief Judge Colm F. Connolly issued in April 2022 that imposed heightened requirements for the disclosure of information on corporate control and receipt of certain funding by the parties in cases before him.

Later that year, patent monetization firm IP Edge LLC found itself in Judge Connolly’s crosshairs after it came to light that several plaintiffs under its control had failed to comply with those standing orders. A resulting battle over transparency ensued as Judge Connolly probed into the business model of IP Edge and its consulting arm MAVEXAR LLC, which in part involved the hiring of individuals not otherwise linked to patent monetization as the nominal managers of its litigating plaintiffs. This pressured IP Edge—once the top patent litigant by volume by a wide margin—to halt its litigation altogether later that year. Other NPEs have apparently followed its lead.

In the meantime, in December 2023, Judge Connolly’s investigation led him to find wide-ranging fraud and ethical violations by those involved. The fallout from that debacle continued well into 2024: In late September, one of the individuals hired to manage an IP Edge plaintiff, a Texas paralegal, failed in her attempt to avoid a $53K contempt fine for her refusal to testify in person before Judge Connolly, who also continued to dole out additional referrals to disciplinary bodies for the attorneys involved in the IP Edge/MAVEXAR scheme.

This past quarter, Judge Connolly’s disclosure rules—and others like them—were also at the center of another dispute in the campaign waged by VLSI Technology LLC, a Fortress Investment Group LLC plaintiff. In July 2024, VLSI found itself before Judge Connolly a second time, and its compliance with his standing orders once again under question, through a declaratory judgment action filed by Intel, the sole defendant in its litigation campaign, which here seeks a judgment that it holds a license to VLSI’s portfolio as the result of Fortress’s acquisition of Finjan, Inc. In October, Intel filed a motion to show cause why VLSI had not violated Judge Connolly’s standing orders through inadequate disclosures, but in December the parties agreed to stay the case after Western District of Texas Judge Alan. D. Albright scheduled a trial on that license defense, in a parallel case, for May 2025.

Meanwhile, another court recently took the relatively rare step of, like Judge Connolly, actually enforcing rules establishing strict disclosure requirements. In a related lawsuit, filed by VLSI against third-party PTAB challenger Patent Quality Assurance (PQA) in Virginia state court and removed to the Eastern District of Virginia, District Judge M. Hannah Lauck ordered PQA to fully comply with a rule requiring LLCs to disclose their “owners or members” after PQA made a filing that fell far short of that requirement. PQA did so under seal, asking the court to bar not only the public but also VLSI from viewing the full list of its members—citing the possibility of “unjust harm” to those members, including “defamatory statements”, “unjust negative press”, and “economic and reputational harm”. VLSI subsequently fired back, arguing that PQA had failed to overcome the presumption of public access—and that PQA, as the party that removed the case to this district, could not then complain about being subject to its disclosure rules.

However, Judge Lauck has since granted VLSI’s motion to remand the case back to the state court, mooting various pending motions—among them, VLSI’s opposition to PQA’s motion to seal its disclosures. Further details about the preceding disclosure dispute can be found here, with additional information on the court’s remand order available here.

See RPX’s fourth-quarter review for more on venue and other trends that shaped patent litigation in Q4 and 2024.