Google Doesn’t Mind Messing With Texas in Patent Lawsuits

Google Inc. (GOOG) and United Continental Holdings Inc. (UAL) won two patent-infringement trials this year in a courthouse where that’s not supposed to happen.

The courts in the Eastern District of Texas, which includes the Tyler courthouse where Google and United defended themselves, have delivered half the largest U.S. patent verdicts against corporations in history. A quarter of defendants in U.S. patent cases filed in 2011 were sued there.

The recent defense victories, along with changes in U.S. patent law from courts and Congress, have chipped away at the district’s title of top location for patent suits. Since September, more infringement suits have been filed in Wilmington, Delaware, than in eastern Texas, according to an analysis co-authored by James Pistorino, a lawyer with Perkins Coie LLP in Palo Alto, California.

“It’s more problematic to file a case here than it was three years ago,” said Sam Baxter, a patent lawyer with McKool Smith PC in Marshall, Texas, who represented Versata Software Inc. in a $345 million verdict it won last year against SAP AG (SAP), the 10th-largest patent verdict in U.S. history.

Delaware had more patent suits filed in 2011 while more companies were sued in eastern Texas. There were 484 suits involving 2,458 defendants in Delaware and 418 suits with 3,163 defendants in Texas, according to Pistorino’s study.

United, Amazon

Patent owners still have the advantage in east Texas cases that come to trial. They’ve won about two-thirds of the trials in 2011 and so far this year, according to LegalMetric Inc., a St. Louis-based company that compiles data on litigation. Of the 22 trials since Jan. 1, 2011, patent owners won 15, said Greg Upchurch, director of research.

This year, though, airlines including United won a March verdict in Tyler, Texas, that invalidated patents for a way to reserve seats online. A month earlier, another Tyler jury invalidated a patent challenged by companies including Google and Amazon.com Inc. (AMZN) over a way to make the Internet more interactive.

Google has won three of its four trials in east Texas, Catherine Lacavera, director of litigation for the Mountain View, California-based company, said. In the fourth, the jury awarded $5 million and the companies settled. All have been in the past two years.

“I heard about the statistical reputation that plaintiffs are far more successful, but we’ve had a very good experience there,” Lacavera said.

Google’s Wins

The interactivity case involved a company called Eolas Technologies Inc. that had won a $521 million verdict in Chicago against Microsoft Corp. in 2003 that was later overturned on appeal. Eolas claimed to own a patent that covers features including music clips, search features, maps, advertisements and embedded applications.

Microsoft and Eolas settled before a second trial could be held to challenge the validity of the patent, and Eolas chose Tyler for a new complaint against companies that do business on the Internet.

Tim Berners-Lee, the British computer scientist credited with inventing the World Wide Web, testified on behalf of Google, Amazon.com, Yahoo! Inc. (YHOO) and J.C. Penney Co.

“What we did by invalidating that patent -- and I hope it stands up on appeal -- is we cleared the way for a lot of people who were being sued or coming behind us,” Lacavera said.

Court Changes

The biggest change affecting the Texas courts was the patent-law overhaul signed in September, Pistorino said. It included a provision that bars filing a single suit against dozens of unrelated companies. That makes it more expensive to sue a large number of companies in hopes of getting quick settlements.

The September law followed years of court rulings that narrowed the power of patents and chipped away at the appeal of the courts in Marshall and Tyler. The Supreme Court, in a series of rulings since 2006, made it easier to challenge a patent and harder to block an infringer from using the invention, which led to more trials.

The U.S. Court of Appeals for the Federal Circuit, which handles patent appeals, made it easier to transfer cases and limited the amount of money that can be collected when the invention covers just a small feature of a product such as a computer. It’s also not as fast to reach trial, with some now taking upwards of three years.

Like Land, Oil

The Federal Circuit threw out the largest U.S. infringement verdict, a $1.67 billion decision won by Johnson & Johnson (JNJ) against Abbott Laboratories (ABT) in Marshall over technology used to create the arthritis drug Humira.

The Versata-SAP case is on appeal, as are a $482 million verdict won by a New Jersey doctor against Johnson & Johnson over heart devices and a $625.5 million verdict against Apple Inc. (AAPL) over how documents are displayed on a computer screen. The trial judge in the Apple case reversed the verdict against the iPhone maker, and the Federal Circuit heard the case March 8.

When cases come to trial, Texans on juries have tended to see patent ownership as analagous to oil and gas rights or fences around property, Baxter said.

“People here believe if you own something, you own it and certain rights come with that,” Baxter said. “If you didn’t want someone coming to your pastureland and building a house, you can tell them ‘no.’ ”

Defense lawyers have learned how to turn that argument around, which has helped companies increase their chances of winning, said Hilda Galvan, a lawyer with Jones Day in Dallas.

“Property rights are like a fence on the land, but you’ve got to own the property you fence in,” she said. “We tell them the patents are invalid because they didn’t own that property.”

To contact the reporters on this story: Susan Decker in Washington at sdecker1@bloomberg.net;

To contact the editor responsible for this story: Bernard Kohn at bkohn2@bloomberg.net

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