Source: NYTimes.com

From the U.S. Patent Office’s alleged technological ineptitude to the controversial patenting of gene information and “innovative business strategies”, critics of the patent process have a number of arguments up their sleeves. However, one seemingly innocent loophole in the patent system has brought fame (and quite a bit of fortune) to a small Texan town – and has patent-holders lining up for their chance in court.

With a population of a little less than 25,000, Marshall, Texas is an unlikely center of patent litigation in the United States, though the town is no stranger to legal maneuvering. Starting at the end of the 19th century, Marshall was better known for the large number of personal injury claims filed by workers on the Texas and Pacific Railway, which connected Texas to San Diego, California. The town’s litigious past continued through the 20th century, when several local lawyers pursued class-action lawsuits against large corporations that exposed workers to asbestos and silica.

By the new millennium, however, patents were proving to be the Marshall’s next jackpot. The town’s serene appearance belies the bustling patent circuit that has recently set up camp in Marshall’s courthouse. In 2002, 32 patent lawsuits were filed in Marshall’s district. By 2006, that number had jumped to an estimated 234 cases, second-most in the country. Only California’s Central District in Los Angeles handles more patent cases.(1)

What’s the cause, then, for Marshall’s strange popularity? Marshall offers a number of compelling reasons for patent-holders to try their case in Texas. One selling point is Marshall’s sympathetic juries: according to LegalMetric, a company that tracks patent litigation, patent holders who file their cases in Marshall have won 78 percent of the time – the highest winning percentage in the United States, and 19 percentage points higher than the national average. Furthermore, legal cases are handled faster in Marshall than in more crowded federal courtrooms in larger cities. Alacrity is further encouraged by Judge T. John Ward, who – after sitting through several patent cases handled at a glacial pace – developed “The Rules”, which put patent lawyers on a strict timetable: “He puts page limits on documents and uses a chess clock to time opening and closing statements, brusquely interrupting lawyers when it is time for them to wind it up,” according to a New York Times article documenting the district’s rise to fame on the patent circuit.(2)

Judge Ward’s toughness on attorneys and the friendly juries of Marshall make the small Texas town an appealing destination for patent-holders, but also serve to attract a different kind of plaintiff, which industry lawyers pejoratively label “patent pirates” or “patent trolls”. These plaintiffs purchase patents from folding companies in order to coerce quick settlements out of companies whose technology might infringe on the patent. For the defendants, the choice between a $200,000 pre-trial settlement and a $2.8 million dollar trial (the mean cost to a defendant in Texas)(3) in the plaintiff-friendly court of Marshall is an easy one to make, even if the trial has little legal merit; for most companies, the risk-reward ratio is simply too high.

Though local lawyers defend Marshall as a neutral ground for companies to compete over patent rights, the situation in Marshall is a delicate one. In a city where many local businesses are experiencing a boom in business thanks to visiting lawyers, is it possible to create an impartial atmosphere for patent litigation? The value of the city to patent-holders rests upon its reputation as a haven for patent infringement claims, legitimate or not. For those with economic and personal investments in the city’s success, any case that rules against the patent-holder is potentially damaging that reputation. This kind of “forum-shopping” for a favorable jury is a lesser-known but still significant factor that could potentially weaken the already-contentious patent system.

(1,2) http://www.nytimes.com/2006/09/24/business/24ward.html?scp=1&sq=so+small+a+town&st=nyt
(3) http://www.technologyreview.com/communications/16280/page1/