' The Rise and Fall of a Patent Boomtown | MTTLR

The Rise and Fall of a Patent Boomtown

Plano, Texas used to be home to the third oldest Apple store ever built. This Dallas suburb’s median household income of $92,121 is 55% above the national average. The eventual construction of Apple’s 500 locations worldwide was in some ways a result of its early success in Plano.


However, in February of 2019, Apple decided to close not only its Plano store but also a location in the neighboring town of Frisco. While a couple retail stores closing may be a common occurrence, the reason these two stores closed is quite unusual.


The City of Marshall, Litigation Empire


It may be surprising to hear that 44% of the country’s patent cases were litigated in the Eastern District of Texas. This figure is mostly thanks to the small town of Marshall, Texas. Despite having a small population of 25,000 people, 25% of the entire country’s patent litigation was once filed in this unlikely destination.


The reason for this magnitude of cases was largely due to a single person: Judge T. John Ward. Judge Ward served as a United States District Court Judge in the Eastern District of Texas from 1999 to 2011, and patent cases were his specialty. Judge Ward was shocked by the length and complexity of patent cases, so he focused on “speeding up the process;” Judge Ward set page limits on the motions in his patent cases, punished lawyers who he thought “abuse(d) the discovery proceedings,” and even resorted to “using a chess clock to keep strict time limits” on lawyers’ speaking time.


As time went on, Judge Ward’s courtroom became known as the “rocket docket,” and the Eastern District of Texas went from having only 14 patent cases filed in 1999 to a whopping 2,540 in 2015.


However, there was an unintended effect to these rules. Though Judge Ward’s process made these cases quicker and cheaper, some began to characterize the town as a “plaintiff’s playground.” Eventually, Marshall was the “preferred venue for patent trolls,” companies that buy patents they don’t use for the purpose of litigation. In 2006, Marshall jurors found for plaintiffs 78% of the time in patent cases, compared to 59% in the rest of the country. This discrepancy was seen by many as disproportionate and put the town in an unwanted spotlight.


2017: The High Watermark of Marshall


Even though the Eastern District of Texas may have been the top destination for patent cases, these cases could only be heard in the Eastern District of Texas so long as the district was an appropriate venue.


In 2017, the United States Supreme Court ruled in TC Heartland v. Kraft Food Brands Group that the provision for determining the appropriate venue for a patent case would be 28 U.S.C. §1400(b), rather than the much broader 28 U.S.C. §1391(c). Under §1400(b), civil suits for patent infringement could only “be brought in the judicial district where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business.”


After TC Heartland, it became significantly more difficult for plaintiffs to file cases in the Eastern District of Texas; in the year following TC Heartland, the number of patent infringement cases filed in the Eastern District of Texas declined by 65% compared to 2016, and by 74% compared to 2015. Though Marshall still heard a great many patent cases, it was a far cry from its prior height.


The Eastern District of Texas Today


Even after TC Heartland, there are still plenty of ways patent plaintiffs appear in front of their favorite court. Plaintiffs who wanted to sue Apple could still easily end up in the Eastern District of Texas due to the Frisco and Plano Apple stores. These two stores constituted an “established place of business” under §1400(b), and landed Apple in Marshall’s judicial district.


One plaintiff which continuously sued Apple is VirnetX, a company that is commonly identified by detractors as a “patent troll.” Apple was ordered by juries in the Eastern District of Texas to pay VirtnetX $368 million in 2013, $625 million in 2016, and $502 million in 2019. Though each one of these awards was eventually thrown out on appeal (2013, 2016, and 2019), they still presented a challenge to Apple’s bottom line. So long as Apple maintained its Frisco and Plano locations, the company was exposed to more suits through the plaintiff-friendly Eastern District of Texas. As a result, Apple decided to close the stores.


Even though Apple eventually pulled its brick and mortar locations out of the judicial district, it remains to be seen if other tech companies will follow suit. The town of Plano alone maintains offices for companies such as Dell, Toyota, and Hewlett Packard. While most of these companies don’t appear to be going anywhere, that is liable to change so long as firms remain concerned about avoiding potentially costly litigation.


* Gregory Fantin is an Associate Editor on the Michigan Technology Law Review.

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