Notoriously protective of its own intellectual property, Nike is on the opposite side of a lawsuit this time. The Portland, Oregon-based sportswear giant has been named in a patent infringement lawsuit, which was filed by East Texas Boot Company, in the U.S. District Court for the Eastern District of Texas last week. The interesting element: East Texas Boot Company is being represented by a law firm known for having its fair share of patent troll clients, and all signs point to East Texas Boot Company being one, as well.
As you may know, a patent troll (or "non-practicing entity" as the White House has coined it) is an entity that buys up ambiguous, vague or broad patents (typically patents that are not otherwise being used) and then tries to make money off of them by threatening to sue (i.e. demanding a license fee from) anyone who could arguably be said to be using them without permission (aka "infringing them"). "Trolls" typically operate as shell companies and file hundreds of lawsuits against everyone who could potentially be infringing. Because many of these alleged infringers cannot afford the lengthy litigation that would be necessary to establish that they are not infringing or to prove that the patent at issue is invalid (because it is too broad or too vague), they just agree to pay the "troll" a license fee.
There are a few signs that that the East Texas Boot Company, which alleges that Nike infringed two of its patents by advertising and selling an array of soccer shoes – including its Mercurial Superfly FG, and its Mercurial Vapor Superfly 3 through 5 models – is, in fact, a troll. First: it has virtually no record of doing any business. This suggests that it is a non-practicing entity, as it does not appear to actually be selling any footwear that embodies the two patents it cites in the lawsuit against Nike. (Note: both patents cover a “soccer shoe component or insert made of one material and/or a composite and/or laminate of one or more materials for enhancing the performance of the soccer shoe”).
Moreover, according to a number of sources, including Technology Review, Marshall, Texas is the town that has been almost exclusively recognized "a haven for patent pirates." Many offices there are, effectively, “mail drops established for the purpose of filing lawsuits.” Guess where East Texas Boot Company is located! 104 East Houston Street, Suite 180, Marshall, Texas. (Note: this is the exact same address listed for known patent troll, Lodsys Group LLC).
Second: The Davis Firm, PC, the law firm that is representing the East Texas Boot Company, has a bit of a reputation as one that deals with patent trolls. For instance, Davis has represented Lodsys Group LLC, a known “patent troll” and "trolling scum" – as antivirus software maker Kaspersky Lab Inc. called it – in a number of cases; and has also repped, Telinit Technologies, LLC, another known patent troll.
Third, and maybe most significant of all: The venue where the case was filed. The Eastern District of Texas is a notoriously favorable “rocket docket” for patent trolls. Why? Well, patent holders have a higher winning percentage in this jurisdiction than in other parts of the country; most cases are settled out of court since it costs millions of dollars to defend a patent suit. As a result, the number of patent infringement cases in the U.S. District Court for the Eastern District of Texas has skyrocketed since 2002.
According to a 2006 New York Times article: “What’s behind the rush to file patent lawsuits here? A combination of quick trials and plaintiff-friendly juries, many lawyers say. Patent cases are heard faster in Marshall than in many other courts. And while only a small number of cases make it to trial — roughly 5 percent — patent holders win 78 percent of the time, compared with an average of 59 percent nationwide […] The area remains a popular destination for broad and vague patents.”
A more recent survey, one conducted last year by the Electronic Frontier Foundation (“EFF”), suggests that recent changes to patent law – which comes by way of the Patent Reform Act, which was enacted in 2009, and the May 2015 Innovation Act, an amendment to the America Invents Act, passed in 2011 – have made it easier to beat patent trolls, but it hasn't made the patent hotspot of East Texas any quieter, as indicated by the Nike case and others. According to EFF lawyer, Daniel Nazer, “1,387 cases were filed in E.D. Texas in the first half of 2015. That's 44.4 percent of all patent cases in the nation, and the filings in East Texas are mostly by so-called ‘patent trolls,’ which have no business other than licensing patents.”
Given the recent changes in the law, and the increased likelihood of a pro-defendant ruling, there is a chance Nike will fight this. However, I do suspect the sportswear giant’s counsel will merely throw some money the plaintiff’s way in order to make this meritless lawsuit go away in a timely manner and continue on its quest to take over the world. Stay tuned …