Why do patent defendants say such bad things about the U.S. District Court for the Eastern District of Texas?

I asked this question of Michael C. Smith, the noted lawyer and blogger from Marshall, Texas.

To prime the pump, I noted Texas Monthly calls his hometown “the intellectual property equivalent of a speed trap, a place where juries smack big companies with huge judgments.” See Patently Unfair (Oct. 2014).

“Man bites dog,” Smith replied. “It makes better news.”

Smith has nothing against Texas Monthly or other reporters covering the local patent docket. They frequently call him after reading about the docket on his blog.

He recalls being interviewed by Texas Lawyer after winning a defense verdict in a Marshall patent case the day before a patent plaintiff won a different case in the courtroom upstairs. But he noticed the same tendency to value the unusual over the usual. “Upstairs, the plaintiff won,” Smith explained, “and Texas Lawyer named the lawyer upstairs as their ‘Lawyer of the Week.’”

But defense verdicts? Texas Lawyer was uninterested, even though Smith’s defense verdict was the sixth in a row. “The news doesn’t report the 55,000 cars that went through the intersection without a wreck,” Smith observed. “The regular story is uninteresting.”

Patent Litigation in East Texas

Patent owners certainly like filing in the Eastern District, and the perception is that defendants are trapped there. But the reality, says Smith, is that motions to transfer out of East Texas are granted more often than not. “Defendants still just don’t like being here,” Smith admits.

Cases in East Texas are subject to judicial management. “Judges hold the parties’ feet to the fire, and East Texas judges are not intimidated by complex intellectual property cases,” says Smith. Generally the parties have to go forward.

And the Eastern District is less likely than most courts to grant summary judgment. According to Smith, the Court has a “well developed sense” of what a jury should decide. “Eastern District of Texas judges have a great deal of respect for the jury’s role under the Seventh Amendment, and if there’s a genuine factual dispute, they send it to the jury.” As a result, cases tend to go to trial.

Big Numbers or Small?

Contrary to popular belief, “awards tend to be on the low side,” says Smith. In patent cases, damages are usually not high “unless the sales numbers are high,” Smith explains. He recalls being in multiple cases in which “the plaintiff got 10% of what it asked for,” which isn’t an uncommon outcome.

Smith compared awards in typical patent cases with personal injury verdicts, in which even death or permanent disability still tends to result in a low number from local juries. “That’s not the conventional wisdom or what a lot of lawyers tell their clients,” he admitted, “but that’s what I’ve seen, over and over.”

Large damages awards might be seen in cases against Apple or Microsoft, or if the case involves a medical device. Such cases can generate big damages numbers simply because of the size of the damages “base,” meaning the dollar value of the products sold.

According to Smith, it is actually worth something to a defendant to have the plaintiff put a big number up. “As the saying goes, ‘pigs get fat, but hogs get slaughtered,’” he says. “Plaintiffs lose a lot of credibility when they ask for a number that’s easy to portray as excessive. If the defendant is reasonable, the jury will often be much closer to the defendant’s numbers.

While it is hard to generalize, Michael C. Smith referenced trials where the jury might come in at two to four times the defendant’s number, which might be 10% of the plaintiff’s number. But there are fewer data points on damages than there used to be, he noted, because these days most defendants win on non-infringement and/or invalidity. Therefore, there are fewer damages awards to examine.

Hold On For a Fast Ride!

Most cases go to trial on a fairly…

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Now that we’ve named and eased your fears of East Texas patent litigation, turn to Part 2, How to Win. Don’t miss my next blog post: Subscribe to Beem on Patents.

About Michael C. Smith: The partner in charge of the Marshall office of Siebman, Burg, Phillips & Smith, a former Eastern District law clerk, Smith has appeared as counsel of record in over 800 cases in the Eastern District of Texas. He authors EDTexweblog.com, a blog devoted to federal court practice in the Eastern District of Texas.

Author’s Note: This article was finalized before the Supreme Court’s recent grant of certiorari in TC Heartland v. Kraft Foods on the issue of venue in patent cases. That case will bear watching in the coming months.

A version of this article was published by the State Bar of Texas, Section of Intellectual Property Law, in a “tipsheet” distributed recently to Section members.

The author thanks Michael C. Smith, the State Bar of Texas IP Section, and Section leaders George W. Jordan III and Michael D. Paul for their helpful input and edits. The author is responsible for any errors or omissions. Comments are invited.