A string of recent defense verdicts in the Eastern District of Texas has the patent bar buzzing about whether it’s a new era in that traditional plaintiffs stronghold.
Several changes have altered the landscape for litigants in the three Eastern District divisions particularly known for plaintiffs verdicts: Marshall, Texarkana and Tyler. The shifts stem from retirements of three judges in 2011, appellate precedents limiting which cases can stay in the district and the patent reform law’s sharp restrictions on multidefendant cases. In addition, lawyers say the retirements have resulted in slower-moving cases, at least until new appointees get up to speed.
Lawyers who try cases in the district — and Chief Judge Leonard Davis — say behavioral changes are also behind some of the verdicts: Defense teams are more focused on telling a good story. “[In] some of the defense cases that I’ve seen, the defense lawyers are getting much better at putting together a story and a defense that is not just technically right but appeals to an average lay juror’s sense of right and wrong,” Davis said. “I think they’re making it simpler and doing a good job of communicating with the jury.”
Davis, who sits in the Tyler division, has presided over five high-profile defense verdicts in the past year. These began in May 2011 with Bedrock Computer Technologies LLC v. Yahoo! Inc., a suit over Bedrock’s patented method of preventing denial-of-service attacks caused by outsiders inundating a company’s computer servers with traffic. The jury found that Yahoo did not infringe the patent.
In June, the jury in ColorQuick LLC v. Vistaprint Ltd. found no infringement of ColorQuick’s patent for software for preparing data for printing.
In October, in Alcatel-Lucent USA Inc. v. Overstock.com Inc., the jury found no infringement of Overstock’s three patents for e-commerce functions and deemed one of them invalid because it was anticipated and obvious. The jury also cleared Newegg Inc. of infringement liability.
This past February, the jury in Eolas Technologies Inc. v. Adobe Systems Inc. found that two patents owned by the University of California and licensed to Eolas were invalid. The patents allowed Web browsers to host embedded interactive applications. Five of the original 23 defendants were still in the case at the time of the verdict. Those prevailing defendants were Amazon.com Inc., Google Inc., JC Penney Corp. Inc., Yahoo and Google unit YouTube LLC.
In March, the jury in CEATS Inc. v. Continental Airlines Inc. found that two ticketing companies and eight airlines each infringed at least one of the plaintiffs’ four ticketing software patents that enable passengers to pick commercial airline seats. But the jury simultaneously found all four patents invalid because they were anticipated and obvious.
Juries across the United States, not just in Eastern Texas, have been affected by recent anti-patent rhetoric, said Mike McKool of Dallas’ McKool Smith, whose firm was lead plaintiffs counsel in Bedrock and Eolas. “The anti-patent forces…have been successful in getting their message out particularly on the Internet,” McKool said. “That’s one of the things that’s happened in terms of the jury pools that’s not limited to east Texas.”
Patent filings in the district spiked in recent fiscal years, before the enactment of the patent reform law and two of the retirements. The district was a magnet for patent plaintiffs because of its reputation for being plaintiff-friendly. Filings climbed from 242 in fiscal year 2009, which ended on Sept. 30 of that year, to 446 in 2010, to 738 in 2011, according to data from the clerk’s office.
For the six-month period from October 2011 through March 2012 there were 415 new cases, but far fewer defendants, said Clerk Dave Maland. “Prior to enactment of the new law, patent plaintiffs tended to sue multiple alleged infringers in one case,” Maland said.
The District of Delaware has recently overtaken the Eastern District of Texas in the number of patent cases filed, according to a paper published by James Pistorino, a Palo Alto, Calif., partner at Seattle’s Perkins Coie and Los Gatos, Calif., lawyer Susan Crane. Excluding cases based on a company’s false marking of items as patented, which were curtailed by the patent reform law, Pistorino’s data show 279 Eastern District of Texas patent cases and 278 Delaware patent cases filed from Jan. 1 through Sept. 15, the day before the patent reform act took effect. From Sept. 16 through the end of the year, the data show 206 Delaware patent cases versus 139 in Eastern Texas.
“Are plaintiffs still choosing east Texas? Definitely,” Pistorino said. “Are they choosing it as much as they were before [patent reform] relative to other districts? The answer is no.”
And without the three long-time judges, “it’s going to be harder for the Eastern District to process the cases that have been filed there,” said Ed Reines, a partner in the Redwood Shores, Calif., office of Weil, Gotshal & Manges, who helped represent Newegg in the Alcatel-Lucent case.
Judge David Folsom, who sat in Texarkana, retired in March. In Marshall, District Judge T. John Ward and Magistrate Judge Chad Everingham both left the bench in September to return to private practice. Judge Rodney Gilstrap filled the Ward vacancy in December, and Magistrate Judge Roy Payne filled the Everingham vacancy in February.
Ward said the vacancy caused by Folsom’s recent retirement is “naturally going to slow things down,” but only temporarily. “If you give the judges a little time to get up to speed, they’ll handle cases as fast as we did,” he said.
But the judges aren’t the whole story, Reines said.
He and other lawyers point to the Sept. 16 enactment of the patent reform act, which curtailed joinder — cases with multiple defendants, without a common question of law or fact for all defendants and without claims stemming from one transaction. Patent owners who use patents to file lawsuits or demand licenses, also known as “patent trolls,” rushed to file multidefendant cases before the patent reform law took effect. But a ruling by the U.S. Court of Appeals for the Federal Circuit on May 4 in In re EMC Corp. is likely to break apart such cases. The Federal Circuit held that the test for determining whether the joinder of independent defendants is appropriate is whether “the accused products or processes are the same in respects relevant to the patent” and whether there is “substantial evidentiary overlap in the facts giving rise to the cause of action against each defendant.”
A growing body of case law also requires plaintiffs to prove a deeper connection to the district. Venue uncertainty can be traced back to the Federal Circuit’s December 2008 ruling in In re TS Tech USA Corp., which held that the district abused its discretion by denying a defendant’s transfer motion.
‘PRESENT A STORY’
Fay Morisseau, the partner-in-charge of McDermott Will & Emery’s Irvine, Calif., office, said the pendulum is swinging back to neutral in the district because “the attorneys and parties are better at trying cases” in the district. Morisseau was lead counsel for CEATS Inc. in its case against two ticketing companies and eight airlines.
Defense lawyers are working with local lawyers “and learning how to try cases better and learning how to present a story better to juries of that district,” said Yar Chaikovsky, a Menlo Park, Calif., partner at McDermott Will. Chaikovsky and Morisseau were Yahoo’s lead lawyers in the Bedrock case.
The case was filed in June 2009, before the patent reform law restricted multidefendant cases, so Yahoo’s legal team prepared to fly solo early on in case other key parties settled, Chaikovsky said.
They also took some cues from a January 2010 report in The Prior Art blog about a May 2009 jury verdict in the district in i4i L.P. v. Microsoft Corp., which hit Microsoft with $290 million in damages. According to the report, published by NLJ affiliate Corporate Counsel, jurors thought Microsoft should have sent executives instead of a software engineer to testify and they found the defense counsel cocky. “The two takeaways are, one, if you’re going to have a case with some significant liability, let’s bring someone important down and, two, be nice, bring out your charm,” Chaikovsky said.
Chaikovsky’s team convinced Yahoo co-founder David Filo to take the stand. “He didn’t go willingly, but he went,” Chaikovsky said. Tapping local trial lawyer Jennifer Doan, a partner at Texarkana’s Haltom & Doan, as a co-lead trial counsel was also vital, he said. “The team did a great job of presenting something that’s entertaining,” Chaikovsky said.
Doan was also the lead trial counsel for Amazon.com and Yahoo in the Eolas trial, which also featured testimony from heavy-hitters. Tim Berners-Lee, who is credited with inventing the World Wide Web, and Mosaic browser co-author Eric Bina took the stand for the defense. “We brought in third parties who had first-hand knowledge of what the state of the art was with respect to Web technology at the time, and before the time of the patent,” Doan said.
Ultimately, the secret sauce is hiring strong communicators, Doan said. “It’s the parties themselves migrating away from hiring just patent lawyers and hiring trial lawyers and patent lawyers together,” Doan said.
Despite these changes in the district, “you’ve still got the foundations of a plaintiff-friendly forum,” said Tom Melsheimer, managing partner of Fish & Richardson’s Dallas office and lead attorney for the defendants in the CEATS case. Melsheimer also represented a few defendants in the Alcatel-Lucent case who settled just before trial.
In the three traditionally plaintiff-friendly divisions, there’s still a jury pool willing to award large damages and judges who move cases quickly, Melsheimer said. Plus, the local rules for patent cases require defendants to make invalidity contentions fairly early in the case, he said, which benefits plaintiffs.
“I still view Tyler and Marshall as two of the three or four venues that I would recommend a client file in,” Melsheimer said.
Sheri Qualters can be contacted at email@example.com.