Too often in recent memory, patent trolls have forced organizations both large and small to make decisions that run counter to their business plans. This is the case with Apple, which recently took the drastic step of announcing its plans to close two of its stores in the Eastern District of Texas. Though they do not say it in so many words, in-the-know observers understand that the closure of these stores is a bid by Apple to protect itself from patent troll litigation.
Sometimes called a Patent Assertion Entity, or PAE, a patent troll is not an inventor or a creator. They don't manufacture a product or provide a service. Instead, they exist solely to make a profit through patent infringement litigation.
The troll picks up patents at an extremely low cost, usually from an organization that is going through a difficult time and needs to divest itself of assets. The PAE swoops in to buy the patents, then starts looking around for companies that may infringe on the rights of those patents.
Once a potential infringer is identified, the troll sends a letter informing the rival company. They offer a license to the infringer, which may cost hundreds of thousands or even millions of dollars. The infringer has a choice to either pay up or face litigation.
Do the infringement claims have merit? Sometimes yes, and sometimes no. Nonetheless, companies tend to simply pay the licensing fees because it ultimately is cheaper, less time consuming and less disruptive than having to deal with patent litigation, which could drag on for years.
If they can, patent trolls love to sue for infringement in the Eastern District of Texas. This is because judges and juries in this district have proven to be unusually sympathetic toward the claims of plaintiffs in patent cases. Just a few years ago, a study concluded that approximately 40 percent of all patent infringement cases were filed in this district, with plaintiffs hoping to take advantage of the favorable atmosphere.
However, recent changes to the law state that patent infringement cases must be brought in places where the defendant has "a regular and established place of business." This means that if a company isn't operating in this district, then they cannot be sued there.
Apple is always the target of patent
trolls, and in recent memory, a court decided that the
tech-giant should pay VirnetX $440 million in connection with the company's patents. The Eastern District of Texas remains a hotbed for patent infringement lawsuits, but Apple is headquartered in
California. If they don't have a permanent place of business within the Eastern District, they cannot be sued there.
Currently, Apple has two stores within the district. These will be closed in mid-April, with employees being shifted to a shopping center in Dallas. In its announcement, Apple mentions upgrading the store and streamlining, but this is a clear maneuver to get out from under the favorable conditions for plaintiffs in the Eastern District.
Apple is a huge and incredibly successful company that can well afford to close a couple of stores without it affecting their bottom line too much. They can even afford to pay out some sizable settlements when patent trolls come knocking. However, paying patent trolls and getting mired down in years of litigation likely are not parts of Apple's business plan, so this contingency becomes necessary.
Firms both large and small would be wise to look for ways to protect themselves from patent trolls. One of the best ways to do this is with the assistance of experienced intellectual property and business attorney. Their advice may help to ensure that patent trolls don't succeed when they try to press a meritless lawsuit on an unsuspecting victim.
Schedule a free consultation with the Law Office of Jeff Williams to get gudiance on your intellectual property needs.
Author: Jeff Williams
Jeff Williams is an experienced mechanical engineer and lawyer that consults closely with clients in a strait forward and clear manner. He brings a particular set of strengths and unique perspectives to the firm.
Jeff received a B.S. in Mechanical Engineering from Arizona State University in 2005. He was an engineer for a number of years at a number of large corporations before pursuing his law degree. He graduated from Texas A&M University School of Law (formerly Texas Wesleyan University School of Law) with a J.D. in 2010. By combining his education and prior work experience into the field of intellectual property law, Jeff has developed key skills to fully assist clients.
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