Text 9544, 171 rader
Skriven 2006-02-05 10:08:14 av Rich Gauszka (1:379/45)
Ärende: Marshall, Texas - Haven for Patent Pirates?
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From: "Rich Gauszka" <gauszka@hotmail.com>

http://www.technologyreview.com/InfoTech-Software/wtr_16280,300,p1.html?PM=GO
A Haven for Patent Pirates
In one federal court in East Texas, plaintiffs have such an easy time winning
patent-infringement lawsuits against big-tech companies that defendants often
choose to settle rather than fight.

By Sam Williams

East Texas lawyer Michael C. Smith calls it the "rattlesnake speech." It
generally occurs in the early stages of a patent trial in the Marshall, TX,
courtroom of Judge T. John Ward, when some attorney has failed to read up on
the rules specific to litigation in the U.S. District Court for the Eastern
District of Texas.


Like a scene out of the comedy movie "My Cousin Vinny," the speech starts with
a polite invitation to approach the bench -- and ends with a stern warning to
pick up the pace or else.


"He gives you a real talking to," says Smith, a partner with the Roth Law Firm
in Marshall and chairman of the Eastern District's rule committee, a group of
local attorneys that works with Judge Ward to set the guidelines for basic
pre-trial and trial procedure. "He won't bite you that first time, but if you
don't get the message, you'll wish you did."


Judge Ward's toughness is a big reason that Marshall, a city of fewer than
20,000 residents, located 150 miles east of Dallas, has become a destination
for patent attorneys around the world.


In the rough calculus of intellectual property litigation, tough judges equate
with speedy cases -- and that's exactly what you want if you're a plaintiff
with limited cash, but potentially big-time settlement payments or damages from
a company you claim is infringing on your patent.


As an example, attorney Smith cites the ongoing case of Laser Dynamics Inc. v.
BenQ. It pits a Japanese plaintiff with a patent relating to optical disk drive
recognition against a billion-dollar Taiwanese device maker. When defense
counsel for BenQ failed to cough up a set of relevant e-mails in the pre-trial
discovery phase, Ward, a jurist who has heard more than 160 patent cases in the
seven years since his appointment to the federal bench by President Clinton,
decided to make an example of the company: BenQ would have to pay a $500,000
fine and forfeit a third of its courtroom time in the upcoming case.


"Attorneys in California, they're raised to keep pressing a judge until he says
'If you open your mouth one more time,'" says firm founder Carl Roth. "Here,
it's done a little differently. Judges expect you to back off and let the case
move forward."


Throw in an all-digital filing system, to cut down on paperwork, and
Proposition 12, a 2003 Texas law that put a cap on pain-and-suffering damages
in medical malpractice suits -- thereby encouraging the state's personal injury
lawyers to migrate to the greener pastures of intellectual property -- and you
have a cottage industry. Patent infringement suits that once loaded down
tech-heavy dockets in the Eastern District of Virginia or the Northern District
of California now gravitate to a city with more pottery manufacturers than
software companies.


"It kind of has a legend to it," says Craig Tyler, a partner in the Austin, TX,
office of the widely known intellectual property law firm Wilson Sonsini
Goodrich and a member of the defense team in the Laser Dynamics case. "When you
say 'Marshall, Texas' to your Pacific Rim clients...they know what you're
talking about." And their response is rarely a happy one, he adds.



Although Tyler credits Ward and other Marshall judges with a solid knowledge of
patent law and an extreme devotion to efficiency, he believes Marshall's
reputation as a "rocket docket" for patent cases only expands the advantage
most plaintiffs already enjoy in such suits. Indeed, patent plaintiffs whose
cases go to trial in Marshall win 88 percent of the time, according to research
firm Legalmetric, compared with 68 percent nationwide.


The general rule in patent law is that defendants can't file a motion to
dismiss until a "Markman hearing," a post-dotcom procedure during which a
plaintiff finally reveals to a judge the exact nature of the infringed claim.


Local rules in Marshall, meanwhile, ensure a brisk pre-trial process, meaning
that in the 30 to 60 days it takes to reach the Markman milestone, plaintiff's
attorneys have ample time to comb through a defendant's paperwork, e-mail, and
source code, and turn the broadly written language of a U.S. Patent Office
filing into the scalpel-sharp language a jury will understand.


The final result is a high-stakes version of some gambling card game: Given a
choice between a $200,000 settlement and a $2.8 million trial -- which is the
mean cost to a defendant of litigating patent cases in Texas involving between
$1 million and $25 million in damages, according the American Intellectual
Property Law Association -- most defendants choose to fold early and cut their
losses.


"Once you're named as a patent infringer, you're there until you settle, get a
summary judgment, or go to trial," says Tyler. "If you combine that with an
accelerated docket, it just raises the pressure on defendants."


Such pressure leads to a new class of plaintiffs that Tyler and other attorneys
label "patent pirates." Essentially shell companies, they do little more than
purchase patents with the purpose of squeezing quick settlements out of major
technology companies whose technologies may overlap with the patented feature.




Not only do such suits drive up legal costs across the industry, but they also
disturb the equilibrium of a system in which technology companies such as
Microsoft and Nokia hold off on exercising their patent rights, to avoid the
resulting battles that can undermine fast-emerging technology platforms and the
lucrative markets that build up around them.


"Anyone in the patent business knows that a patent-infringement suit against
these well-protected larger companies will bring a massive infringement
counterclaim," Tyler wrote in a 2004 article for Texas Lawyer. "But this tactic
is useless against the patent pirate, who typically has no products at all, so
there is nothing against which to make an infringement counterclaim."


In another illustrative case, American Video Graphics, a limited partnership,
purchased a set of video-game patents once owned by Tektronix of Beaverton, OR.
Tyler calls them a "litigation machine." Among their patented technologies is a
software method to simulate spherical panning, that is, the sort of roving,
three-dimensional player's-eye-view common in many modern video games.


Tektronix's patent (number 4,734,690) was first filed in 1984 and granted in
1988. In August, 2004, nearly two decades after that first filing, American
Video Graphics filed a trio of complaints against Sony, LucasArts, Nintendo,
and a dozen other gamemakers and device manufacturers.


But visit the American Video Graphics corporate website and you'll get a
"coming soon" message and a phone number shared by a Marshall resident. A call
to that resident was quickly referred to AVG's legal counsel, the Dallas law
firm of McKool Smith, which declined to be interviewed for this article.


Gil Gillam, a Marshall attorney who represented Intel in an American Video
Graphics suit, says his client ultimately chose to settle the case rather than
fight it. "I think the legal team at Intel would have jumped to try that case,
but it just made better business sense to get out of that case at the price
they got out at," Gillam says.


The reason for such a situation comes down to patent law itself. Although the
topics are generally technical, the legal theory is modeled on the common law
tradition of land title and civil trespass. Assuming that a claim has
well-marked boundaries, government recognition, and a clear chain of ownership,
a patent-holder's motives are nobody else's business. Perhaps it's not
surprisingly then, that such a philosophy has played particularly well in a
state where many homes, ranches, and farms still enjoy 19th-century homestead
protection.


"Buying a patent and forcing your rights has become a new kind of
entrepreneurial activity in recent years," says Gillam. "It's also completely
legal."

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