Last Week in Texas with Michael Smith | Episode 16

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Judges Gilstrap and Albright provide guidance on trial procedures and remote hearings.  And a strong warning against Rule 33(d) games.


Episode Transcript

SPEAKERS

Wayne Stacy, Michael Smith

 

Wayne Stacy  00:00

Welcome, everyone to the Berkeley Center for Law and Technology’s last week in Texas podcast. This is Wayne Stacy from BCLT. And once again, we’re here with Michael Smith, as you know if it happened, he’s the one to tell you about it.

 

Michael Smith  00:15

So certainly try.

 

Wayne Stacy  00:18

Well, except if it’s worth knowing you’re gonna, you’re gonna know about it, Michael. So let’s just kick this off and tell us what happened in Texas last week?

 

Michael Smith  00:28

Well, the the thing I wanted to start with is, we had some analysis out last week on filing trends in 2021. Scott Graham with ALM was analyzing United patents recent report of patent filings and gave us some numbers to kind of see what’s happening numerically with the with the cases, we know that that patent infringement filings were essentially flat last year, at around not quite 3800 cases, the Western District of Texas had 25% of those cases, and Judge Albright had 23%. The other 2% were split between the other judges in the district. For those of y’all that want to know where he was last year, last year, he was at 20%. So clearly, that’s leveling off. But Scott, notice something that wasn’t in the report, but that if you look at the data throughout the year, you can tell by the end of the year, the filings and judge Allbright’s court, were trending down a little bit. And the people he talked to it united said they think that’s due to recent Federal Circuit venue opinions. And I think that’s probably correct. Delaware came in second with 22%. And the Eastern District of Texas was third with 11%. Another trend towards the end of the year is that Judge Gilstrap share in Marshall in the western in the Eastern District was picking up a little bit, he was up to about 8% of all cases, nationally, the Delaware judges have all got four to 5%. So it looks like we’ll know better. In another quarter or two, it looks like some patent plaintiffs are coming back to the Eastern District. Or that might simply be I saw a trend right the the on New Year’s Eve, a plaintiff filed about a dozen cases in Marshall, and then kept filing the beginning of the year. So it may just be one filer. But anyway, that’s what’s happening with filing trends in the state so far.

 

Wayne Stacy  02:20

Well, it’ll be interesting to see what happens long term, but notably, the Northern District of Texas is becoming almost irrelevant. Is that fair?

 

Michael Smith  02:33

Well, they have the problem that without the patent pilot district, you don’t know which judge you’re going to get. And for the last 10 years, the same three judges have handled all the patent cases. So you knew you were going to get judges with expertise, who wanted to hear the cases. Now, if you file a case in the Northern District, you don’t know who you’ll get. And you can’t count on the experience that you could previously. And that seems to be borne out in the filings. There’s just not much movement in the filings. It’s not that they’ve gone down much since the patent pilot program ended. It’s just that they they never went up much to start with. Same thing with the Southern District, there are some cases that that are just going to be filed in Dallas, are going to be filed in Houston. But it’s it’s not going to be statistically a large number.

 

Wayne Stacy  03:25

Well, so all those in California, you know, you file a case out here you go on the wheel and you hold your breath to see what’s going to happen. It’s always always fun in that mad scramble to see to see what set of rules and what courtroom procedures you’re going to get to follow.

 

Michael Smith  03:42

Yeah, yeah, plaintiffs don’t like that kind of fun. So, so they they tend to look for it. Plaintiffs look for certainty, you look for certainty. What procedures are you going to have? Are you going to have a judge that wants to hear your cases. And that’s something that we’re going to start seeing less of in the Western District because judge Albright’s cases that are transferred, that he transfers to Austin now go on the wheel with Austin judges. And that introduces I’m working on a paper with an Austin lawyer right now for a state bar seminar on differences between the Western District and the Eastern District. And one thing that we’re seeing in the Western District is if your case ends up in Austin, you don’t have the same certainty as far as how the judge is going to handle your case and what procedures they’re going to use. So that’s something we’re going to be looking at very closely over the next few months.

 

Wayne Stacy  04:37

Well, and we got to continue this theme of causing yourself unnecessary stress. It appears that couple couple parties got pretty crossways with Judge Gilstrap on a settlement agreement.

 

Michael Smith  04:50

Yeah, I was sitting in a mediation last week in Dallas with Judge Folsom when I heard when I heard about this case that had just come out. The parties got judged guilty. strapped to take their case off the January docket because they said we’ve had a settlement. They then wrote back and said, we we can’t, we can’t finalize the settlement voyage. So we want 10 more days to go back in front of Judge Folsom, who was mediating that case as well. And try one more time. And Judge Gilstrap said, Okay, well, here’s the show cause order, show up and tell me why you shouldn’t be sanctioned for apparent misrepresentations made to the court. And he denied the motion to stay. But here’s the part you you’ll appreciate, as I did, the parties wanted 10 days to mediate. Again, the judge denied the motion. But he set the hearing for 10 days later. So they’re going back in front of Folsom, but they’re going back with this very calculated pressure from the trial court to get get your case worked out. I’ve been in this situation, it seems like almost every settlement, you run into this situation. And sometimes you really do need a nudge from the trial court to tell the backsliding parties or client representatives. No, I’m sorry, this is what a settlement means. You don’t get to write your own terms. After the settlement, you needed to do that during the settlement. But it was a very interesting case.

 

Wayne Stacy  06:10

Well, let’s I was thinking about how do you even defend yourself, you’ve got the show cause order on one side, and then you’ve got the confidentiality agreement with the mediator on the other side. It’s just a good place to be yelled at.

 

Michael Smith  06:23

It’s a good place to work out a settlement.

 

Wayne Stacy  06:27

So my God, I’ve seen several mediators out here that use a special clause in there that says, you know, here are the key terms. And I’ll give you two weeks to work out the secondary terms. And if you can’t work them out, I do baseball arbitration on those terms, and you’re agreeing to it now.

 

Michael Smith  06:47

Absolutely love it. Absolutely. And I’ve done that with with several mediators recently. And that is a great way to resolve this. So that you have the ability to say, Well, if we can’t reach resolution, the mediator can handle that. And it it in my mind, it helps the parties because it keeps you both of you from getting too greedy, and gives you somebody else to resolve that issue. I think that’s a great idea.

 

Wayne Stacy  07:11

Well, Michael, and maybe more importantly, it helps the lawyers manage clients. Yes. So not the clients ever need managing. So our next interesting piece coming out of the Texas courts was a trial continuance due to COVID and a trial denial of continuance due to COVID. So

 

Michael Smith  07:34

this is what I like to see, we got we got bracketing orders from from Judge Gilstrap one, two parties came in and said, we’ve got a witness that’s come down with COVID. And we’re set for trial in January, we’d like a continuous one Gotha continuance, and one didn’t. And you can tell why. The first case the court granted the continuance and in that case, the defendant said our technical expert who covers infringement and invalidity has tested positive. And Judge Gilstrp said, All right, well, that’s an important witness. And that witness has to be in the courtroom when the plaintiff is putting on their case so that they can hear what’s said, and they can respond to it in front of the jury. So he said, that’s a good reason to push it off. So he pushed the trial off to February, another party came in and said, Okay, we’re defendant, we’ve got a witness that’s tested positive, we want to continue it’s to and Judge Gilstrap said no. In this case, it wasn’t a critical witness for the defendant. It wasn’t an expert, it was a may call fact witness. So what Judge Gilstrap points out is this witness is not going to testify until the defendants case, which is several days off, and they may test negative by then. And their attendance during the plaintiff’s case in chief isn’t necessary. And although the judge doesn’t say it in order, as we know, there’s a rule that prohibits fact witnesses from being in the courtroom before their time to testify, so they don’t hear the testimony of other witnesses. So this witness couldn’t have been in the courtroom anyway, in most cases. The court also said you you also have the ability to call the witness by deposition or remotely. So So under these circumstances, the court said this isn’t a sufficient reason to delay the trial because of this one fact witness. So it’s a great pair of cases you can look at and tell clients, okay, if this is the fact situation, we’re not going to be able to get a continuance in all likelihood. But if you’ve got these facts, we probably can.

 

Wayne Stacy  09:34

So Michael, there’s a piece I’d love to get your opinion on here. I mean, we all know that calling a witness by deposition that you never intended to call by deposition is a disaster. You never set up the the questions during the deposition to be played to a jury. Now, this, it seems that the judge recognize that in through in this or remotely as a as an option to really learn The playing field. But I haven’t seen that procedure used before. 

 

Michael Smith  10:04

Yeah, you’re absolutely right. Judge Gilstrap had a remote witness from Belgium in a case. In 2020, I think it was, and it did not go well. On the other hand, Judge Albright is fine with people testifying remotely, it doesn’t bother him. But in martial, they found that to be a very unattractive way of handling it. So I was, candidly, I was very surprised to see that language from John Gilstrap that or remotely was a possibility, because my understanding was that they didn’t allow you to do that. But what he may he, he may be referring to here that the witness was, I mean, you’re right, you may have taken a deposition that you could play. If you didn’t, maybe the party could come in and say, Okay, let’s take a trial deposition, three days before trial, which I know was happening all last week, in the Waco case, I was I was observing. Maybe he was referring to somebody doing a trial deposition. But since this person was a may call anyway, I’d be willing to bet that person was not actually going to be called somebody just seized on this would be a great way to get a continuance. And maybe, maybe the judge saw that or thought he saw that. And that was another reason why why he said, you know, there are other ways you can do this. And it the bottom line is it didn’t justify the enormous inconvenience and expense of pushing the entire trial off.

 

Wayne Stacy  11:37

Well, moving from from Gilstraps court, Judge Payne had a, I think, a really interesting set of motions to compel that was accompanied by a fee award. Uh, I don’t know, it didn’t seem like it was egregious, but something that that Judge Payne may be going forward will always consider on how to handle fees for discovery request.

 

Michael Smith  12:02

Well, you’re right to pick up on that, because that is the significant thing here. What you have here is six motions to compel by the plaintiff, two from the defendant. And the court is clearly unhappy with the defendants use of 33 D, especially since what happened here was the plaintiff asked for a monthly company wide total of something from Walmart and Walmart said, Okay, well, here’s the ticker for every sale at every store that we have for the time period, which amounted to 10s of 1000s of whatever the judge was not happy with that. But the important thing is, so the judge says, Okay, you win this one, you win this one, you win this one, you win this one. And then in the end, when Judge Payne first came to the Eastern District, 11 years ago, 10 years ago, actually, he brought with him an understanding of rural 37, a five A, which is that whoever loses a discovery fight, pays fees, it’s not sanctions, it doesn’t require egregious conduct. That’s just routine. And everyone lost their mind when we started getting. We kept calling it sanctioned. And he kept explaining, it’s not a sanction, you lost a discovery motion, your position wasn’t substantially justified. So pay $2,000. He kind of stopped doing that after two or three years. But I think this case is a reminder that his view of the rule is that if your position wasn’t substantially justified, then you ought to be paying fees. $25,000 is a lot of money for a discovery phase, given the usual size of what comes up in that court. So that’s a substantial amount of money. But you’re correct, that it is a it is a significant development, that he’s reminding people that if you’re not substantially justified, you have to be worried about an award of fees, and that I’m not considering it as sanction. It’s simply this is what the Court tells me out to be doing. So word to the wise.

 

Wayne Stacy  14:05

Well, and, Michael, I think this is a great case for a lot of people to go look at 33 D, you know, both sides abuse, abuse, 33 D and a lot of litigations. But you can see here, somebody was probably chuckling like, Oh, let their experts deal with this massive amount of data, when it seems likely that somebody on their side probably could have done some sorting, and then made that happen.

 

Michael Smith  14:31

And that’s exactly what the court said is somebody on your side could have done this sorting and and could have made this happen. And what you produced is certainly not what your people look at for this. So that that’s the sort of thing somebody should have checked in. And I feel confident that Judge Payne is sending a signal here. Was that substantially justified? I mean, you can’t walk in make a ridiculous argument in this context and not expect to get dinged is I think the it’s certainly the message I’m taking away from it. Just because I can make an argument doesn’t. What was it Star Trek six, where the president of the Federation said that just because you can do a thing doesn’t mean you should do a thing. So Well, again, the wise,

 

Wayne Stacy  15:18

my dad wasn’t a sci fi fan, he had a much simpler rule. Don’t be a jerk.

 

Michael Smith  15:24

We’re lawyers, we don’t we don’t think we pay attention to that as much as we should.

 

Wayne Stacy  15:30

Well, surprising case and I gotta tell you, when you first raised this I, I thought, Oh, he must have he must have misstated what was going on here. But there was a summary judgment on damages from Judge Albright in the Northern District of Texas.

 

Michael Smith  15:45

That’s correct. Judge Albright. When he first started on the bench. He was moonlighting in the Dallas division with patent cases. And let me that this is a summary judgment opinion from Judge Albright. We grants partial summary judgment on damages, the defendant sought several things and I’ll get to that in a minute. But why is Judge Albright hearing in Dallas case? Well, way back in January of 2019, Judge Albright only had one patent case. And Judge Kincaid in Dallas had a patent case that was about to go to trial. And I personally think that this was a practical joke, the judge Kinkaid called judge Albright and said, Hey, you want to hear patent cases? I’ve got one, it’s ready to go to trial. It’s all set to go to trial in February. So let me hand this to you. So judge Judge Albright takes the case. And the reason I know the timing is that back, when I was looking at judge all brights first cases that were filed in 2017, and 2018. I was numbering the cases like they were works by Mozart. So there was a oh one and a row two. And this case was a 002. This was Judge Albright second assigned patent case, or second oldest patent case. So judge Albright gets the case, they reset it for trial in April of 2020, so that they can do some more work and then COVID hits. So we can’t try the case. Well, of course Judge Albright has been trying cases throughout COVID. So what was the deal here to deal here was this is a Dallas case. And Judge Chief Judge Lynn from the Northern District of Dallas, explained that; Unlike Waco, and Marshall and Sherman, where the district judges are operating in courthouses that don’t have other entities in them. The Dallas courts operate in a federal building that has multiple federal agencies in it and everybody uses the same elevators. So she can’t protect an isolate, and segregate a jury the way that they can and smaller courthouses. So she has had quite a time trying to get back to trying cases. So judge Albright hasn’t been able to try that case there either. So the case was reset several times. And the parties are even resetting as recently as last week, they were filing notices that they’re going to push back the date to report back to the court on settlement discussions. So this order is something that came out to deal with a pending summary judgment motion on some damages issues.

 

Wayne Stacy  18:14

Well, the order itself, I think, seems to be an early an important one for Judge Albright on some of his damage analysis. We don’t we haven’t seen a lot of them gets this far and in as much detail.

 

Michael Smith  18:27

That’s correct. If you sit in his courtroom in a pre trial conference, you’ll see a lot of analysis in detail from the court about damages issues, but we don’t see a lot of it in opinions. But that was one thing I noticed last week a party tried to get up and argue for limiting plaintiffs damages opinions. And the judge didn’t just ask questions. He gave the defendants lawyer, a treatise on here’s what the plaintiff is arguing. Here’s why what the plaintiff is saying is sufficient. Here’s how why it’s correctly proportion. He Judge Albrights background includes some cases working on damages in California. So he’s very able to deal with these issues on the fly. But in this case, we’re we’re getting some written analysis. It talks about marking it talks about actual notices actual notice you’ve got Octocat analyzed, and then you’ve got analysis of whether a lost profits claim is appropriate to be presented to the jury and like Judge Gilstrap in his November trial. Judge Albright found that the the analysis that was presented on loss profits, well knows the other way around Judge Gilstrap excluded reasonable royalty and loud loss profits here Judge Albright excluded evidence of loss profits. So it’s a very useful case on damages on those points.

 

Wayne Stacy  19:53

Michael, I was looking to skip forward to another Western District of Texas or another judge Albright case. but this one in the Western District of Texas, about his courtroom procedures.

 

Michael Smith  20:05

Right. This is the case that settled Monday morning, but it had three hearings last week. And during the course of the week, Judge Albright put out a, a his standard order on courtroom procedures, it’s standard for him to issue the order. But the language changes, it changes as the court as the COVID protocols change, it changes as he sees other things to tell parties. So I thought it was interesting to see what he put in his procedures case for a couple of reasons. First of all, there’s a statement in there that says that there will be no bench conferences in the presence of the jury during trial. And I know that was the courts practice earlier in the year. But having sat in on the pre trial conferences, he expressly tells the parties to approach on certain things. So when you’re reading that order, understand that the court may have made exceptions to it, that you wouldn’t be aware of if you didn’t see what was actually happening. In the case, it’s also got the procedures for public access. If he sets a hearing that’s on a public zoom call, and anybody can dial in and watch the hearing, not the trial, the trial, you can only watch an audio, unless you’re a participant in the trial, in order to keep the number of people down, he makes the video feed available to members of the trial team. But I have to caution people, the court can see who’s dialed in and if they see somebody who’s not on their list that they know it’s not an expert in the case, it’s not a lawyer in the case, who’s simply working outside the courtroom so that the courtroom isn’t overcrowded, they will call you down and they will cut you off of the feed. But it’s it gives people the ability to hear trials and watch hearings. But the other interesting thing it’s got is he’s got to express instructions for remote decorum. Here’s what you’re supposed to do. If you’re just watching a trial. Or if you’re watching, you’re not playing a role. You turn things off, if you don’t use multiple devices, things like that. It also talks about decorum. It tells people something that that judges are telling us a lot of lawyers need to be told, treat remote proceedings as if you’re in the courtroom, dress as if you’re in the courtroom act as in your as if you’re in the courtroom, make sure your background is not distracting. We hear a number of judges that are just frankly very frustrated that lawyers seem to think that a remote proceeding shouldn’t be treated the same way. I mean, everybody understands if you’re having to do it in a spare bedroom, because you’re quarantining, that’s not the issue. The issue is don’t show up in a T shirt and a baseball cap. Make your bed behind you or fuzz out the background. So so it’s a useful order along those lines as well.

 

Wayne Stacy  22:58

Probably pretty good guidelines for most business meetings. 

 

Michael Smith  23:01

Oh, I think so always all heard the saying one time dress for the job that you want, not the job that you’ve got. So

 

Wayne Stacy  23:12

well, there’s another issue that that you flagged, that’s really interesting, and it doesn’t get a lot of press coverage. And maybe it gets some actual, wrong coverage. And that’s about stays, you ask the typical person about a stay in Waco. And the rule is going to be, oh, there’s never state Texas never stays anything. But that’s not the case. 

 

Michael Smith  23:36

No, I was looking at orders coming out last week. And there were three stays in one day, all for different grounds. And one case lifting and stayed there was a stay, because the judge was staying the case until he ruled on the motion transfer. There was another case that was stayed because the plaintiff came in and said another court has invalidated the patent. So the judge stayed that. In another case, the judge stayed the case pending IPR review. But he noted I may rule on the motion to transfer on the venue motion, despite the stay, which we’ll get to in a minute, he did that. And then finally on the last one, he had stayed a case waiting to see what the Federal Circuit was going to do a mandamus. They denied the mandamus. So he lifted the state and went forward so stays and stays are issued and stays are lifted on a pretty regular basis. They just they happen so routinely, they’d seem to kind of stay under the radar in terms of the national media.

 

Wayne Stacy  24:35

Well, it seems that the lesson to take away from this is the courts being thoughtful and considered about parties time and court time.

 

Michael Smith  24:44

Oh, absolutely. There are there are always situations where as a stay as appropriate. Plaintiffs ask for a stay in a lot of situations. So it is a tool that get that does get used. There’s more flexibility than people are aware of

 

Wayne Stacy  25:00

So another case didn’t get a lot of publicity doesn’t kind of always fit with the narrative that there’s a motion to dismiss or improper venue that’s granted. But it’s not just the motion. It’s the facts of this one that seemed to be starting to establish remote work and Authorized Service Centers. And really how judge Albright feels about what makes a regular place of business.

 

Michael Smith  25:27

That’s right. And when I first saw this case, I thought I had already read it, because the facts were so similar to another case. And this is one of the ones that the judge stayed last week, but then he got an order out, granting the motion to dismiss for improper venue. This is not a convenience case, this is an improper venue case, where the issue is whether the defendants have a regular an established place of business in the Western District. And the plaintiffs argument was, well, you’ve got work at home employees, you’ve got Authorized Service Centers, you’ve got resellers in the district, the sorts of things that we first started looking at in the Cray case back in 2017. Which of these facts when do you have sufficiently when or the work at home employees work? When is there work sufficient that you can charge the defendant is this is really the defendants place of business. When is the service center the defendants place of business, as opposed to someone else’s where you can simply drop products offer returns, or pick up additional products? So in this case, we have more analysis from Judge Albright, explaining this level of activity is insufficient to create venue in the Western District of Texas. So if those are going to be your facts, as a plaintiff, you need to study this case and see if your facts are better than ones that he’s already dismissed twice.

 

Wayne Stacy  26:54

So the final final case for this week, another, I guess, non stereotypical case, motion to dismiss patent infringement granted,

 

Michael Smith  27:06

right. Judge Albright dismissed the plaintiff’s claims of infringement in this clight case, because it was a motion to dismiss, he said the plaintiff had failed to sufficiently plead direct infringement. Well, where have we heard that before? A couple of weeks ago, he granted a motion to dismiss for unpatentable subject matter saying you didn’t sufficiently plead facts from which the court could conclude that it was plausible that there was patentable subject matter. So similar treatment here dismisses the case. Now, again, one of the questions that came up in that case is well, why did he dismiss it with without prejudice? Why didn’t he grant leave to replete? Well, in this case, the court makes a little clearer how that works. He granted the motion to dismiss without prejudice, but with leave to file an amended complaint within 14 days. If the plaintiff doesn’t file an amended complaint in that time, the clerk of court, the court assumes the plaintiff doesn’t want to amend and the clerk of court is directed to close the case. But another pleadings case, where Judge Albright says these the way you’ve got this pleaded, I don’t see a plausible case for infringement. So more. I mean, another another good case the defendant can look to to see do I have sufficient arguments for getting a case dismissed?

 

Wayne Stacy  28:28

When it seems the judge is getting more precise and sophisticated in the exact mechanics of making this all happen, too?

 

Michael Smith  28:36

I think so you’re you’re seeing a lengthy detailed analysis of the content of the pleadings, and then you’re seeing a more transparent explanation of why the ruling is what it is, you’re not wondering, well, why was it a dismissal instead of the motion? Granted, he’s making clear you’ve got 14 days to replayed. But I don’t have to touch it again, if you don’t replayed. But that gives the plaintiff the opportunity to decide do I want to replayed or can I do I already know, I can’t get past that. And if that’s the case, I just won’t replay the case goes away, and then perhaps down the road, I’ll decide that this is something I want to do.

 

Wayne Stacy  29:19

Well, Michael, once again, thank you for walking us through this. We often talk about Judge Albright. So frequently, we forget that he’s fairly new to the bench, and a lot of these cases are first impressions for how he’s going to handle them. So that’s correct.

 

Michael Smith  29:37

And because his case has started out kind of from the beginning again, the one we were joking about Dallas was one, it was a mature case that he was given all the rest started out as new cases. So we’re just now getting a substantial quantity of cases that are hitting the critical point where where orders are coming out. And and he’s got internally developed The the ability to crank out orders in a little more detail than he did early on

 

Wayne Stacy  30:07

Well Michael Thank you and we’ll talk to you next week

 

Michael Smith  30:11

all right talk to you next week