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Monday, May 1, 2006 - Page updated at 12:00 AM

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Texas district is heaven for patent holders under siege

Bloomberg News

When TiVo won a $74 million infringement case against EchoStar Communications in Marshall, Texas, last month, few patent attorneys were surprised.

Marshall is to patent holders what Hershey, Pa., is to chocolate lovers: the sweetest spot in the nation. Since 1999, the federal district in which Marshall is located has seen a tenfold increase in patent lawsuits, drawn by a fast-moving docket and local rules adopted by U.S. District Judge T. John Ward that seek to streamline even complicated cases. Another attraction: Inventors and other patent owners have won jury verdicts 90 percent of the time since 1994.

"It's the biggest business in Marshall," said Matt Powers, a patent attorney with New York's Weil, Gotshal & Manges who has defended Microsoft, Xilinx and Intel. "Every one of these big tech companies is being sued in Marshall more than anywhere else."

Much of that activity is thanks to Ward. After he was appointed to the bench in 1999, he required plaintiffs and defendants to immediately turn over relevant information, shortening the time period for pre-trial evidence gathering. He also sanctions lawyers who don't move quickly enough to exchange evidence or who withhold information. And he requires both sides to find claim terms they can agree on, leaving fewer to be disputed in court.

"Marshall had one of the fastest dockets going for some period of time," said Steve Akerley of McDermott, Will & Emery in Palo Alto, Calif., who has handled cases in the town.

"We typically advise our clients to file in the Eastern District of Texas," added Max Tribble of Susman Godfrey in Houston. "It's the fastest to trial."

Ward became interested in patent law before he became a judge while representing Hyundai Electronics Industries in a lawsuit filed by Texas Instruments. He lost when a jury awarded $25.2 million to Texas Instruments in 1999.

That was a record for Marshall until the TiVo award over a recording-device patent. Aside from speed, Ward said Marshall offers a jury pool of defenders of property rights, friendly to patent owners' interests.

In 1999, the year the Texas Instruments case was decided, 14 patent suits were filed in the district, according to LegalMetric, a St. Louis-based company that tracks patent litigation. The number grew steadily until it reached 155 last year, said Greg Upchurch, LegalMetric's research director. As of April 12, 48 had been filed this year, he said.

Spillover cases

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The district is one of just eight with more than 100 new patent filings a year. The popularity of other forums is more predictable. Courts in Silicon Valley in Northern California, in New Jersey, headquarters of some big drug makers, and in Delaware, where many companies are incorporated, also handle many patent cases.

The Marshall site is getting so busy that patent cases are spilling over to nearby courts in the district, including Tyler. A jury there ruled April 19 that Microsoft, the world's biggest software company, and design-software maker Autodesk should pay $133 million for infringing a Michigan man's patents on technology to fight software piracy.

Jurors in Marshall — or anywhere in the country — tend to favor patent owners, in part because federal law does.

A company sued for infringement can claim as a defense that the invention wasn't really new. Finding a patent invalid can be a hard decision for a juror. Under federal law, a patent is presumed valid unless proved otherwise. Ruling it invalid has the effect of overturning a U.S. government decision.

Property rights and respect for government resonate particularly strongly in East Texas, Ward said.

Trust in government

"I think the people in this part of the world still trust their government, and they think the role of the government is to protect their property," the judge said.

"When you say a patent is presumed to be valid because it's been issued by the U.S. Patent and Trademark Office, and it's got that big red-and-gold seal, that means something."

Verdicts for patent owners bear that reputation out, LegalMetric's Upchurch said. Patent owners won 12 of 15 patent trials from 1994 to March, including 9 out of 10 by jury trial, he said. Nationwide, patent owners win about two-thirds of all jury trials.

With the wins for patent owners in the Microsoft and TiVo cases included, the victory rate for jury verdicts since 1994 is 92 percent.

The technology industry has singled out Marshall as part of an overall problem of increased litigation that has put it under siege from small patent owners. The Business Software Alliance in court papers said many personal-injury lawyers in Marshall switched to patent law after Texas legislators limited how much could be collected in personal-injury cases.

Cases settled

Microsoft, Hewlett-Packard and others are pushing Congress to require that either the patent owner or the accused infringer have a physical presence in the district where a suit is filed, such as the patent owner's hometown or a factory owned by the accused infringer.

Now, a patent owner can sue in any district where a product is sold.

The reputation of the court hasn't led to a greater percentage of settlements, Upchurch said. Two-thirds of cases end in settlement, about the national average.

The TiVo and Microsoft cases may lure more patent litigators to eastern Texas. That, in turn, may mean the end of at least some of Marshall's appeal. Among the 30 federal district courts with the most patent filings, it now ranks 11th in speed of completing such cases.

"We've got too many cases now," Ward said.

"It will correct itself over time. Time is money for these people in technology cases so they need their cases to be handled quickly."

Already, other courts are looking to pick up some of Marshall's slack. Pittsburgh courts have adopted "aggressive patent rules" that promise to resolve cases quickly and the city offers better local hotels and attractions than eastern Texas, said Rob Lindefjeld of Jones Day in Pittsburgh, a member of the American Bar Association's intellectual-property law group.

"Our plan is to make Pittsburgh the Marshall, Texas-plus," he said.

Copyright © 2006 The Seattle Times Company

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