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Like many other dog parks in the country, the new Stragent Dog Park in Longview, Texas, provides an opportunity for man’s best friend to frolic off-leash in fenced-in playgrounds. But that’s not its only function. Strange as it sounds, the nine-acre park, set in woods of tall pine trees in east Texas, may also shape the next chapter in patent litigation.
Thanks to their reputation for friendly juries and fat verdicts, several east Texas towns including Longview have over the years become go-to venues for patent plaintiffs looking to extract millions of dollars from major companies. But lately, a couple of appeals court rulings have made it easier for defendants to move those cases out of Texas, thus jeopardizing that tried-and-true strategy for plaintiffs’ attorneys. The new dog park in Longview is part of one man’s quest to make sure that east Texas’s courts keep humming with patent cases.
The patron of the newly opened Stragent Dog Park in Longview, it turns out, isn’t a local dog whisperer but a California lawyer named Kevin Zilka.
Zilka became a leader in the Texas patent game by suing companies that refuse to license a portfolio of patents he acquired from previous owners. Relying on the friendly juries of East Texas, Zilka has brought hundreds of lawsuits in the district through shell companies like Azure Networks LLC, Aloft Media LLC and Stragent LLC. He first came to public notice through the reporting of paidContent alum Joe Mullin.
Critics say shell companies like Zilka’s don’t invent or produce anything but instead rely on dubious patents to shake down productive enterprises. An academic study last month found that the practice, known as patent trolling, has drained $500
million billion from the American economy since 1990. [Thanks, Uri, for your comment]
For years, major companies like Google (NSDQ: GOOG) and Microsoft (NSDQ: MSFT) have had to defend patent troll suits in east Texas towns like Marshall and Longview. According to reports, there were 446 cases pending in the District of Eastern Texas in 2010 — more than in Los Angeles and Silicon Valley combined. The district also provides a win-rate far higher than the national average and has handed out 12 of the largest 25 awards in recent years. Many of the cases filed by patent trolls name dozens of companies as defendants and jury awards are frequently in the tens or hundreds of millions of dollars.
Companies hit by troll suits often wind up settling the cases to avoid sending their executives before hostile juries unfamiliar with the nuances of technology. Darren McKinney of the American Tort Reform Association, a critic of the rise of patent litigation, says that eastern Texas is a leading candidate to be the first federal district included in his group’s annual list of “judicial hellholes.”
Patents lawsuits typically involve products used in every state, which means that a plaintiff theoretically can sue in any federal court in the country — including those in eastern Texas. Defendants, however, have been pushing back by asking that the cases be tried in a more convenient location. Lately, they have caught a break, eliminating a geographical advantage that lawyers like Zilka have long enjoyed.
In January, the U.S. Court of Appeals for the Federal Circuit ruled that an eastern Texas judge abused his discretion by not allowing Microsoft to move a patent case to its home turf. The court found that Seattle, where all the relevant witnesses were located, was the “only convenient and fair venue to try the case.” The court also slammed the plaintiff’s attempts to keep the case in Texas by means of opening a sham office with no employees. The January decision followed a 2009 order in which the appeals court said a plaintiff could not stay in Texas simply because it had shipped 75,000 pages of documents to its lawyer there.
The appeals court decisions mean it is becoming harder for plaintiffs to hold on to their favorite patent playground. In response, smart lawyers like Zilka appear to be crafting new strategies that will allow them to stay in eastern Texas a while longer. These include the creation of the Stragent Foundation, which shares the same name as Zilka’s LLC and claims to be “bringing vitality to east Texas” with initiatives like the Stragent Dog Park as well as a computer lab and a community garden.
The idea behind these initiatives is that patent plaintiffs will be able to point to more than just empty office space as evidence they have a real business presence in Texas. The dog park, for instance, is likely to provide Stragent LLC with both a tax deduction and a way to oppose future venue motions.
The board of the Stragent Foundation has four directors: They include Zilka and his wife, who practices law in Silicon Valley. The other two are an east Texas patent attorney and a lawyer who appears to have worked for Zilka in California.
Zilka did not respond to phone and email requests for comment on the Stragent Foundation, but others familiar with east Texas litigation suggested its purpose is to help keep patent cases in the district. Michael C. Smith, a lawyer who writes a blog about federal courts in east Texas, said the Stragent strategy has yet to be tested in court. He believes that judges will consider contributions to a local non-profit when deciding change of venue motions, but says it is unlikely the courts will give such factors the weight Zilka may be hoping for.
“What Stragent is doing is what good lawyers try to do — they lay the facts out consistent with what courts say they are,” said Smith.