Texas

Courts are writing their own rules about generative AI, and in patent cases those rules differ sharply from judge to judge. This survey, current as of September 8, 2026, catalogs the generative-AI requirements in the venues where most patent infringement suits land: the Eastern and Western Districts of Texas, the Northern and Central Districts of California, the Northern District of Illinois, the District of New Jersey, and the District of Delaware and the U.S. International Trade Commission, where no AI-specific rules were identified. Only the Eastern District of Texas has a court-wide rule, making every litigant responsible for verifying AI-assisted filings. Elsewhere the obligations come from individual judges’ standing orders and vary widely, from restating the existing duty to verify what you sign to requiring a separate certificate naming the AI tool, confirmation that a human checked every citation, records of the prompts used, or disclosure of AI use in billing. Penalties include US$500 per violation and having the filing struck.

Delaware has long been the default jurisdiction of incorporation of high-growth emerging companies due to its advanced, and evolving, body of corporate law, a specialized Court of Chancery, and decades of corporate law cases and precedents. But that default assumption has now come into question.

In recent years, Delaware’s courts have issued a series of decisions that have left some founders of high-growth companies unsettled. See, for instance, the recent Tesla cases, following which Elon Musk publicly blasted Delaware and both Tesla and SpaceX reincorporated in Texas. Musk is not alone in this trend toward “DExit” – TripAdvisor, Dropbox, AMC Networks, and Roblox are among those reincorporating in Nevada, and Dillard’s joined Tesla and SpaceX by reincorporating in Texas. Even Meta publicly announced that it was exploring a move out of Delaware in 2025.

In response, Delaware’s legislature adopted major reforms in 2024 and early 2025 (SB 313 and SB 21) codifying safe harbors for conflicted transactions, narrowing books-and-records access, and strengthening management’s shield against litigation.

More and more founders and GCs of later-stage companies are now wondering if Delaware should still be the default.

So, should you care and, if so, where are companies moving?

“Y’all Street” as an Alternative?

In recent years, Texas lawmakers have aggressively reformed state law to attract corporations. The state’s pitch? A pro-business legal climate, big-market economy, and fewer stockholder hassles. In 2024, Texas launched a new statewide Business Court system modeled on Delaware’s Chancery Court, with specialized judges to handle complex corporate cases. This was quickly followed in May 2025 with sweeping legislated changes (SB 29) to the Texas Business Organizations Code, in a package branded as “Texas: Open for Business." Key provisions include:

Codification of the Business Judgment Rule:

Texas now explicitly codifies the business judgment rule and the high bar to rebut it, giving directors stronger protection when their decisions are challenged.

Limits on Derivative Lawsuits:

Allowing corporations to set a minimum ownership threshold (up to 3%) for stockholder-plaintiffs to bring a derivative suit. This threshold is higher than most states and drastically curbs the ability of small stockholders to sue on behalf of the corporation.

Records and Litigation Procedure:

Limiting what constitutes corporate “books and records” available for stockholder inspection. For instance, emails and electronic communications are excluded. It also allows companies to include provisions in their charters or bylaws waiving the right to jury trials in corporate disputes, meaning cases would be heard solely by judges (as they are in Delaware’s Chancery Court).

In addition to the changes effected by SB 29, Texas later enacted several additional measures to allow certain Texas-listed public companies to adopt higher thresholds for stockholder proposals and to authorize the board of directors to delegate more discretion to the corporation’s executives.

Pros and Cons of the Y’all Street

The Texas proposals seem very attractive, especially to issuers and their insiders, but, in practice, their effectiveness is hard to measure. The new courts lack Delaware’s decades of precedent, making Texas less predictable for companies. So, certainty with respect to a few specific matters is offset by uncertainty with respect to treatment of a myriad of others. Additionally, incorporating in Texas might expose a corporation to Texas venue for certain lawsuits.

Texas has certainly had some luck in attracting private and public companies as of late, and we are working with a number of companies exploring Texas as a potential alternative to Delaware.

The “Silver Sanctuary”?

Like Texas, Nevada’s appeal lies in providing certainty to companies and their insiders with respect to certain specific common transactions. It automatically offers directors and officers strong protections. Key features of Nevada’s corporate environment include:

Robust Liability Shields

Nevada law automatically exculpates directors and officers from personal liability for breaches of fiduciary duty (except in cases of intentional misconduct, fraud, or knowing law violations). In Delaware, by contrast, corporations must opt in to exculpation (and even then, it covers only duty of care, not loyalty, and only recently were officers allowed similar protection). Nevada’s default rule thus gives executives peace of mind that honest mistakes won’t easily lead to personal liability. Likewise, Nevada statutes make it easier to indemnify and protect managers, which can reduce D&O insurance costs.

Consideration of Other Interests

Nevada explicitly permits boards to consider long-term corporate interests and the impacts on employees, customers, the community, etc., when making decisions. Directors are not strictly bound to maximize immediate stockholder value at all costs. This allows directors to justify decisions that favor sustainable growth or other constituencies, without breaching their duty to stockholders. This contrasts with states like Texas or Delaware, where directors must generally act in the best interests of the corporation and its stockholders, with true stakeholder balancing available only if the corporation opts into a Public Benefit Corporation framework.

No Franchise Tax

From a financial perspective, Nevada imposes no corporate franchise tax and so may prove cheaper to operate in, especially for early-stage companies.

Pros and Cons of the Silver Sanctuary

Nevada offers what Nevada usually offers: more freedom to operate at the expense of less predictability. Nevada’s business courts were established in 2001, but those courts have not published nearly as many written opinions, or as routinely, as Delaware’s Court of Chancery. The law, while more insider-friendly, is also less modernized in other areas.

So, in the end, what should you do?

The answer is not clear-cut. For now, there is no mass flight out of Delaware, but certainly lots of discussions are taking place. No clear winner has emerged for the alternatives, but it does appear that more public companies are leaning towards Texas while more private companies are considering Nevada. But the vast majority of new incorporations are still taking place in Delaware.

It all comes down to perception, expectation, and, perhaps in the future, actual experience. To help your thinking, a chart summarizing some, but certainly not all, of the key features of the three regimes may be found here:

In June 2025, the U.S. Supreme Court upheld a Texas law requiring websites where more than one-third of content is sexually explicit to verify users’ ages before granting access. The critical legal question was which First Amendment standard to apply. The Court chose the more lenient intermediate scrutiny rather than the strict scrutiny used to strike down similar federal laws in the early 2000s, reasoning that the law targets distribution of obscene content to minors and only incidentally burdens adults’ access to protected speech. The three-justice dissent argued strict scrutiny should apply and warned of a chilling effect on lawful speech. The ruling’s reach extends beyond traditional adult content sites to any platform (including social media) if one-third or more of the platform’s content could be deemed harmful to minors. With nearly half of U.S. states having already enacted similar laws, the decision is expected to accelerate that legislative trend. Privacy advocates have separately warned that mandatory age verification forces users to submit sensitive personal identification, raising data breach risks and potentially threatening the First Amendment right to browse the internet anonymously.

Texas overhauled its business organizations code last year through Senate Bill 29, part of a broader effort to make the state a more attractive home for companies looking beyond Delaware. One of the changes lets certain corporations, including publicly traded ones and other opt-in companies with more than 500 shareholders, adopt a bylaw requiring a shareholder to hold at least 3% of the company’s stock before bringing a lawsuit on the company’s behalf against its own directors or officers.

A federal court has now applied that provision, dismissing a derivative case against Southwest Airlines’ board because the plaintiff held far too little stock to clear the company’s 3% bylaw. The court also rejected the argument that a pre-suit demand letter sent before the new rules took effect counted as starting the proceeding. For companies weighing where to incorporate, the case is an early signal that Texas courts are giving the state’s new corporate litigation protections real effect.

Texas Governor Abbott signed House Bill 40, significantly expanding and refining the Texas Business Court just two years after its creation. Key changes include lowering the amount-in-controversy threshold from US$10 million to US$5 million across all case types, expanding substantive jurisdiction to cover intellectual property, trade secrets, and arbitration enforcement cases, clarifying that only business, commercial, or investment contracts may elect business court jurisdiction by agreement, authorizing transfer of pre-September 2024 cases by agreed motion, and tasking the Texas Supreme Court with establishing a jurisdictional framework and rulemaking procedures. The legislature also eliminated the sunset provision for unfunded court divisions, signaling the business court is a permanent fixture in the Texas legal system.

Texas Governor Greg Abbott signed Senate Bill 29, a sweeping overhaul of the Texas Business Organizations Code aimed at making Texas the “corporate law capital of America.” Key changes include codifying the business judgment rule for publicly traded corporations, creating a statutory framework for controlling shareholder transactions with special committee pre-approval procedures, allowing entities to waive jury trials in governing documents, narrowing books and records demands to exclude emails and text messages, imposing up to 3% ownership thresholds for derivative suits, eliminating mootness fees for disclosure-only supplements, and permitting alternative entities to fully eliminate fiduciary duties in their governing agreements.

Following an industry challenge to Texas Senate Bill 140’s new text marketing registration requirements, the Texas Attorney General submitted a detailed interpretation of the law agreeing that the registration requirements were not intended to apply to businesses that obtain prior consumer consent before sending marketing text messages. As part of a subsequent settlement, the Texas Secretary of State posted guidance on its website confirming that consent-based text senders are not required to complete the telemarketing registration process and agreed to formally request a published AG opinion reinforcing this interpretation. While this clarification significantly reduces the registration risk for businesses with proper consent practices, some litigation risk remains.  Plaintiffs’ attorneys may still attempt to assert the law’s private right of action and other requirements of the law will continue to apply, such as quiet hours restrictions.

Texas amended its telephone solicitation and telemarketing law (known as the “mini-TCPA”) through Senate Bill 140, effective September 1, 2025, to require businesses sending marketing text messages to Texans to annually register with the Secretary of State, pay a registration fee, post a $10,000 security deposit, and make detailed disclosures about their business and planned solicitations. The law expands the definition of “telephone solicitation” to include text messages and creates de facto violations of the Texas Deceptive Trade Practices Act (which carries significant penalties including treble damages and a private right of action) for violations of existing text messaging consent and no-call list requirements. Several exemptions may limit applicability for established businesses, including carveouts for publicly traded companies, supervised financial institutions, nonprofits, and entities that have operated under the same name for at least two years and are messaging current or former customers, though the scope of the customer exemption is somewhat ambiguous.

Texas has rapidly emerged as one of the nation’s most aggressive data privacy regulators, surpassing California and New York in the breadth and enforcement intensity of its privacy regime. Over the past two years, the state has enacted a comprehensive suite of laws covering consumer and children’s data privacy, artificial intelligence, and data brokers, and its attorney general has secured multi-billion-dollar settlements against major technology companies for alleged violations. While the federal government and many other states have taken a lighter touch on privacy and AI regulation, Texas is leading the charge with active enforcement that companies operating in the state or collecting data from Texas residents cannot afford to ignore.

Under Texas law, informal fiduciary relationships (which can theoretically arise from any personal or business relationship of special trust and confidence) are frequently claimed in litigation but almost never succeed. Two recent decisions illustrate the doctrine’s narrowing scope: in Pitts v. Rivas, the Texas Supreme Court rejected an informal fiduciary claim despite a decade-long personal friendship between an accountant and client, with a notable concurrence from Justice Huddle (joined by three justices) formally calling for the doctrine to be abandoned altogether. The Texas Business Court reached a similar conclusion in Tall v. Vanderhoef, dismissing an LLC minority member’s informal fiduciary claim because no special relationship of trust existed prior to and apart from the parties’ governing agreements. While the doctrine technically remains good law in Texas, courts continue to apply it with significant skepticism and practitioners should treat informal fiduciary claims as a high-risk, rarely successful avenue in business disputes