For years, the Eastern District of Texas (EDTX) was the hot spot for NPE patent litigation, reaching a peak of 2,411 cases in 2015, or roughly half of all filings, nearly all going to Judge Gilstrap. Since 2015, however, NPE cases have fallen off in that district by almost 93%. Meanwhile, the Western District of Texas (WDTX) has seen a 892% increase in NPE litigation, going from very few cases just a few years ago to being the dominant venue for patent cases nationwide. Most of these cases, brought in the last year and a half, began when Judge Albright was appointed to the bench and implemented new local patent rules. The WDTX has now become the leading patent litigation venue (Figure 1).
Figure 1: Western vs Eastern District of Texas NPE Filings
Part of the rise, anecdotally, seemed tied to frequent filers, co-owned entities, and entities underwritten by private litigation financing. NPE aggregators were defined as NPEs that have more than one affiliated subsidiary also bringing patent litigation. In its prime, the EDTX averaged nearly 89% of all of its NPE cases from NPE aggregators (such as Acacia Research or Intellectual Ventures) (Figure 2).
Figure 2: Eastern District of Texas Aggregators
An annual breakdown (Figure 3) shows NPE filings in the EDTX were filed primarily by Aggregators like IP Edge or Endpoint IP.
Figure 3: Eastern District of Texas Aggregators Year-byYear
Using public resources, Unified then identified which NPEs were third party financed. Not surprisingly, the distribution of Aggregators mirrored the percentage of third-party litigation financed NPEs in the EDTX (Figure 4). In total, half of all NPE cases in EDTX showed evidence of financial backing (Figure 5) though the actual percentage could be much higher.
Figure 4: Eastern District of Texas Financing Year-by-Year
Figure 5: Eastern District of Texas Financing
Wider litigation financing availability, the viral rise in WDTX filings, 314, and Covid-19 have created “a Perfect Storm” for ascendancy of litigation financed Aggregators, the new apex-predator responsible for for large swaths of all patent litigation today. This new species has resulted in WDTX cases almost doubling just in the first half of 2020 (Figure 6).
Figure 6: Western District of Texas NPE Aggregation Year-byYear
This means that almost 68.8% of all NPE cases in the WDTX are brought by an NPE Aggegrator like IP Edge, or one of their many subsidiaries (Figure 7).
Figure 7: Western District of Texas NPE Aggregation
At the same time NPE aggregation has increased and as the economic outlook has darkened, investors have turned to non-cyclical investments like patent litigation. At the same time that pandemic-related economic fallout has taken root, assertions by financed-back NPEs have skyrocketed, both nationally and in particular, in the WDTX. As with NPE aggregation, the first half of 2020 has seen third-party financing for NPEs almost double from 2019 (Figure 8).
Figure 8: Western District of Texas NPE Financing Year-by-Year
The overall amount of NPEs that are backed by third party funding is 46.5% of the cases filed in the WDTX (Figure 9).
Figure 9: Western District of Texas NPE Financing
Obviously, financing and third-party economic backing is shrouded in secrecy, so our numbers likely underestimate the total percentage of cases funded by third parties, whether through private capital groups like Magnetar, Starboard, or Burford Capital, or by private sources unwilling or unable to acknowledge their stake. But what is clear from an honest assessment of the cases filed is that if a case is funded or part of an aggregation scheme, chances are that it will be filed in the WDTX, to the exclusion of plenty of competitor-competitor suits.
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