Month: March 2010
My friend Sawyer is back with another post in his series of talking about software patent issues. As I mentioned before, Sawyer is a real person named after our intrepid friend in LOST (I haven’t seen it this week – no spoilers please) who has agreed to help us navigate the parallel universe known as software patent land. I’m channeling Sawyer’s points of view as a public service announcement since he’s uncomfortable being named publicly – these are his words, not mine. Today’s post is on the famed “Eastern District of Texas” (EDTX), one of the most popular places in the United States for patent litigation.
In the past several years, the Eastern District of Texas (EDTX) has become one of the premier venues for patent litigation, along with NDCAL, CDCAL, DDEL, and WDWIS. Although the dockets are packed now, when the trend first started, plaintiffs could anticipate trials in short order, perhaps 12 to 18 months, and plaintiff-friendly juries. There is also a basic sense of unfairness that defendants, rightly, feel when they have nothing or almost nothing to do with the district and yet get hauled down to court there, but the ability of plaintiffs to do that is a more fundamental flaw in the Supreme Court’s personal jurisdiction jurisprudence that is best left for another discussion.
There are a lot of stories told about EDTX and how it became a big spot for patent litigation. I won’t name any names here because EDTX lawyers have a tendency to sue anyone who says anything that could be portrayed in a negative light (see, e.g., the Troll Tracker defamation suit.) The basic story I’ve heard though, is this: EDTX was well-known as district with plaintiff-friendly juries after a raft of tort litigation where juries handed down large judgments. The judges and practitioners in area, seeing the coming wave of patent litigation, got together and decided to retool the district for being “patent-friendly.” This mainly involved adopting rules to streamline patent cases, similar to NDCAL, so that plaintiffs would get to juries faster. It’s important to note that this isn’t per se a bad or unethical thing – lots of federal districts are known as “rocket dockets” for one kind of case or another because of concerted efforts to attract and streamline litigation of certain types of cases.
The adoption of those patent local rules, along with a general unwillingness of the courts to throw cases out before trial on what’s called “summary judgment,” lead us to where we are today. Another thing to note, which is changing due to recent appellate decisions, is that EDTX courts have been very unwilling to transfer cases out to other venues. The Fifth Circuit and Federal Circuit have issued an unusually high number of reversals of EDTX decisions not to transfer, and the message seems to be taking and moderating both the desire to keep cases and any “pro-plaintiff” bias one could see.
These days, EDTX actually isn’t so bad for defendants. They win a significant number of cases, primarily because defense counsel has figured out how to navigate the courts, how to wear the “white hat” with the judges, and how to appeal to the juries down there. Still, the data show that when plaintiffs win in EDTX, they tend to win bigger than in any other court; and, when certain defendants develop “bad” reputations with the court or with juries, they get hit with big judgments repeatedly.
It’s also appears that EDTX has made a concerted effort to be “patent friendly,” and that the concomitant economic impact on the area, particularly in Tyler and Marshall, Texas, has been significant. From observation, EDTX is also where most of the software NPE/troll cases are filed these days because it’s still the fastest and most friendly docket for those cases.
That said, blaming EDTX won’t solve the underlying problem of patents and the patent system, especially in software. If there was no EDTX, another district would crop up to attract the big-ticket software patent suits, especially the NPE/troll cases. As long as the expected value of an NPE suit is positive, plaintiffs will find friendly places to file, and districts will make themselves friendly to those suits to stay busy, attract the economic windfall, and generally stay relevant. Don’t get me wrong, venue is a significant issue and has a big impact on the outcome of cases, but focusing reform and publicity efforts on grumbling about the courts won’t get us anywhere. The real problems are more fundamental to how people get patents, what is patentable, what the patents themselves look like, and how the legal system allows them to be used; focusing on the mechanics of where suits are filed is a distraction from the real issues that are bleeding our most innovative technology sectors and slowing down technological progress.
Remember rock / paper / scissors? It’s a beautiful kids game that unlike tic-tac-toe regularly results in a winner. Paper always beats rock. Rock always beats scissors. Scissors always beats paper. But what happens when you only have two – say “software” and “network”.
Whenever I’m at a Silicon Flatirons event, I always get into an argument with someone from the telecom world about “what the Internet is.” Most of the time I try to listen patiently for about 30 seconds as the telecom person explains to me how without them there would be no Internet and the applications that exist are merely “traffic” on “their network.” They then try to tell me crazy things like “no one will ever need more than 100 Mbps” and say snarky things like “who knows, maybe Google will spend more on their 1 Gbps buildout then they did on the 700 MHz spectrum.” I try to remind them that when I was 13 someone told me “you’ll never need more than 48k of RAM” and then again when I was 18 someone told me “you’ll never need a hard drive bigger than 10MB".” Oh, the things people say in the throws of competitive pressure. Innovation? Who needs innovation. Let’s take a big helping of regulation instead.
As someone who has been involved in creating software in one form or another for the past 25 years, I know I’m biased. I happily live in my little parallel software universe, generate huge amounts of data that travels over these complex networks, and pay a lot of money each month for the privilege. If you add up all of my bills – Comcast in multiple houses, a Qwest T1 to my house just outside of Boulder (since Comcast doesn’t get there), a Verizon MiFi, AT&T for my iPhone, Tmobile for Amy’s Dash, Verizon for a Droid we don’t use, lots of connectivity to my office, and probably some other stuff I don’t even know about, it’s a big number. Oh, and that doesn’t even count all the connectively that the companies I invest in use. You’d think – for all this – the network would be the driver of my behavior.
But notice the different providers above. Comcast. Verizon, AT&T, and Tmobile. I know my friends at Sprint must feel left out – I’ll have to figure how to get something on the Now Network. Oh yeah, I’ve got DirectTV in one location (the one with the T1) because of – er – no Comcast to my house. These companies are all household names for me because they spend ridiculous amounts of money on advertising – not because I love them. Do you love any of them?
I had an interesting experience in New Orleans over the weekend. After a day, I turned to Amy and said “have you noticed that almost everyone is walking around with an iPhone?” I was amazed by the incredible the penetration of the iPhone. I followed this up with “I wonder what they are all doing since I can’t get a signal on this thing worth a shit.” Then, during the marathon on Sunday, I noticed that the vast majority of runners who had a device had one of three devices: (1) A Garmin GPS watch, (2) an iPhone, or (3) an iPod. That was it. Every now and then someone had a different phone. But the number of runners with iPhone’s was remarkable.
I can assure you there weren’t using the phone for the network. It’s pretty funny to watch someone at mile 15 of a marathon on the phone saying “Hello – can you hear me? Damnit – fucking AT&T.” Yes – I heard that once. During mile 15.
I predict all those iPhones were out there because of the software, not the network.
As of today’s announcement that Ted Wang at Fenwick & West has collaborated with a group of bay area early stage VC’s and angel investors to create the Series Seed Documents we now have – at my count – four different standardized seed financing documents floating around the industry.
- TechStars Model Seed Funding Documents (by Cooley)
- Y Combinator Series AA Equity Financing Documents (by WSGR)
- Founders Institute Plain Preferred Term Sheet (by WSGR)
- Series Seed Financing Documents (by Fenwick & West)
Many smart and capable people have either worked on these various docs on signed on as supporters. However, until there is one standardized set of documents that everyone – especially the various law firms agree on – I don’t expect there to really be a standardized set of seed financing documents. I wrote about this in my post The Challenge of The Ideal First Round Term Sheet.
Rather than whine about it, after reading the PEHub article Marc Andreessen on “Series Seed Documents,” and Why VCs Should Start Using Them I’ve decided to try to get a handful of lawyers in a room and try to come out with one set of documents. This might be a futile effort, which will prove the point that it’s impossible to create one standard set of documents. But – I’m an optimist, so I’m going to plan for a good outcome.
I’ll proactively reaching out to the appropriate folks at Cooley, WSGR, and Fenwick & West to organize a one day session, with laptops, somewhere in the bay area. I’ll include a handful of early stage investors (both VCs and angels) in this effort. My goal will be to finish the day with a truly standardized set of seed documents that all of the firms agree to use. Then we’ll open source these and evangelize them across the startup world, at least in the US.
If you are an attorney at a major national or regional law firm that works with startup companies, please email me if you are interested in participating. If you are a VC or angel investor that supports this effort – same drill (email me). Let’s end this madness (which I’ve been dealing with for 16 years and an angel and VC investor) once and for all – the entrepreneurs who we work with deserve better from us.
Marathon #15 is in the bag – I finished the New Orleans Rock ‘n’ Roll Mardi Gras Marathon in a time of 05:15:05 yesterday. Here’s a video of me crossing the finishing line.
It was a beautiful day for a marathon – the temperature was 50 degrees and the sky was clear. There were about 18,000 runners (most for the half marathon) and like most Rock ‘n’ Roll races it was extremely well organized.
This was the inaugural Rock ‘n’ Roll marathon in New Orleans. The course was great – it was flat, covered a lot of the city, and had some nice long stretches around City Park. The only downer was there were very few spectators on the course. Even with all the well known New Orleans spirit they haven’t figured out how to show up in force for an early Sunday morning marathon.
I was happy with my performance, especially given the symmetry of my finishing time (#15: 05:15:05). I was a little undertrained and, since this was my first marathon in a year, I didn’t expect to break five hours. I used an 8:2 run:walk pattern (eight minutes running; two minutes walking) as I’ve been training that way to build up strength in the second half of the marathon. It definitely paid off as I felt fine through 22 miles. I never really hit the wall, but I did run out of gas at about 22 and shifted into “one foot in front of the other” mode.
My only scary moment was a fall at about mile 16. I was stuck with a group of noisy people including a guy wearing headphones that would shouted random things every few minutes. He graciously thanked every policeman on the course and would follow it up with things like “wake up New Orleans” or “hey hey runners”. At some point a woman wearing a see through shirt fell in with him and he was screaming and pointing at her, which was a rallying cry for the few male spectators on the side of the course. I was thinking "all types show up for these things” when I tripped over something and hit the deck. Quick system check – burning hands and a little blood but no issues on my legs or back. I got up and put in a quick ten minute mile to put some distance between me and the chaos. I fortunately never saw them again on the run.
I had three fun company moments (for companies I’m an investor in) during the weekend: Impinj, Zynga, and Lijit. The race system used Impinj RFID chips, I saw Mark Pincus, the CEO of Zynga interviewed on Bloomberg yesterday, and this morning I noticed that Lijit is the search engine for the marathon site.
