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.

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.