Earlier this week, Texas Governor Abbott signed SB29. Law firms have begun pushing out their client alerts and summaries of the legislation. Here are some the materials out already in no particular order:
There will undoubtedly be more materials to come on this. Most of these client alerts are likely penned by the corporate group alone. Ultimately, full-service firms giving advice should pull in their intellectual property teams to advise about Texas as well. When companies take intellectual property risks into account, it will be interesting to see whether this will lure a mass of public companies to Texas or just ones that already have substantial Texas operations.
Firms focused solely on corporate governance provisions might not immediately consider other possible risks with a Texas charter. One of the major risks companies should also consider, is what impact would a Texas corporate charter have on their ability to potentially escape intellectual property litigation in Texas? Law firms have long warned about the risks of Texas exposure because of its intellectual property litigation hubs. For example, King and Spaulding warned that:
Jurors in the [Eastern District of Texas] tend to respect the patent(s). They also award large damage amounts. The Judge is unlikely to overturn a jury verdict so the possibility of post-trial relief is remote. About 5% of patent cases filed in Marshall go to trial and the plaintiff wins in about 78% of them.
Incorporating in Texas caries a unique risk because it makes venue proper in Texas for intellectual property litigation. In 2017, the Supreme Court decided TC Heartland, and held “that a domestic corporation ‘resides’ only in its State of incorporation for purposes of the patent venue statute.” This led to a decline in Texas intellectual property litigation and an increase in Delaware’s intellectual property litigation. As so many companies are incorporate in Delaware, it makes venue proper there for those companies.
Decisions about where to incorporate have to consider a broad range of factors. What incorporating in a state means for venue in other kinds of litigation should go on that list.