Patent Trolls' Secret Star Chamber

Patent Trolls' Secret Star Chamber

Imagine the following scenario: Someone files a lawsuit against you, claiming you stole something of theirs. At this stage of the process, they are not required to offer much in the way of evidence for their claim — but they proceed to use the discovery process to demand that you send them an exhaustive record of everything you did. Then, once you've met their demands, they whisk you off to a court in a place where neither of you even lives, where the judge sets rules hamstringing your ability to defend yourself as they attack you before the jury. You are, of course, found guilty, and want to appeal, but the judge refuses to set aside the verdict or finalize it, meaning you're stuck with a guilty verdict looming over your head and no way to plead for redress.

This is precisely the dystopian nightmare that a company called Newegg has found itself in thanks to the efforts of both patent trolls and one East Texas judge.

A little background: According to Techdirt, Newegg was found guilty in 2013 of infringing on a patent that was so vague that it covered basically any and all encryption technology. It was held by an infamous patent troll (who, to his credit, has since left the business).

Newegg was sued in a federal district court in East Texas that has a reputation for selecting juries that rule in favor of patent trolls, and whose presiding judge, Rodney Gilstrap, follows practices that make defending oneself against frivolous patent suits far more difficult than it usually is. This court, in other words, is a secret weapon for the troll business, and the guilty verdict was predictable.

But what makes Newegg's case unusual is the judge's refusal to finalize the verdict — over $2 million. Until Gilstrap enters a judgment, an appeal is impossible, because there's nothing to appeal yet. Instead, Newegg has begged an appeals court to force Gilstrap to actually do his job.

This kind of practice by any American court should shock the conscience. But while the opportunism of the trolls and the behavior of Gilstrap are both deplorable, they are mere symptoms of a larger problem. The trolls are responding rationally, if abusively, to incentives created by the legal system, and because of their gamesmanship in selecting a venue, Gilstrap has far more work in this one area than any district judge could reasonably be expected to handle. The actual legal system that permits this needs to be reformed.

Right now, venue restrictions for patent lawsuit are few and far between, permitting trolls and other abusive litigators to basically shop around until they find a district court with a predisposition to rule in their favor. This kind of thing needs to be stopped, and restrictions on venue shopping are a key feature of Rep. Bob Goodlatte's Innovation Act.

Good for Goodlatte, and good for his bill. There are areas of the current patent regime where reasonable people can disagree, but permitting the existence of legal-limbo nightmarescapes should not be one of them. It is time for the trolls to stop hiding under their proverbial bridge in a single East Texas district court, and face the horns of justice.

Mytheos Holt is a senior fellow in freedom to innovate at the Institute for Liberty.

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