Marshall, TX, is a city of 24,000 located 146 miles east of Dallas. Internet retailers, or at least their attorneys, are becoming well acquainted with the way to Marshall. That’s because it’s the seat of the federal court for the Eastern District of Texas, which has become a popular spot for holders of patents to file suits claiming patent infringement, including several against online retailers.
In the latest example, a Texas company called Actus LLC has filed a lawsuit claiming that four patents it holds on electronic payment methods have been infringed by 21 companies, including Wal-Mart Stores Inc., No. 14 in the Internet Retailer Top 500 Guide, Google Inc., Visa Inc. and MasterCard Worldwide.
"We are reviewing the complaint and we will file a response in court at the appropriate time," a Wal-Mart spokeswoman said. MasterCard said it was aware of the lawsuit, but declined further comment. Visa and Google did not respond to requests for comment.
The lawsuit claims the defendants’ e-commerce activities violate Actus patents in various ways. The suit specifically mentions Wal-Mart’s method for selling digital music and the Google Checkout online payment service. Actus is seeking triple damages, claiming the violations are willful.
“These types of suits are increasingly common in Marshall, Texas,” says patent attorney Peter Brann of the law firm Brann & Isaacson. “The Eastern District of Texas is now the most popular place in the country to file patent lawsuits.” While not sufficiently familiar with the specifics of this lawsuit to comment on its merits, he says it appears to be mainly aimed at credit card companies like Visa and MasterCard and the banks that issue their cards. Among the defendants are such credit card issuers as Bank of America, Capital One and JPMorgan Chase. Brann says online retailers should look to the credit companies to mount a defense against this lawsuit or to resolve it by licensing the patented technology from Actus.
While not a party to this lawsuit, online and catalog electronics retailer Crutchfield Corp. has been sued by patent holders in Marshall, TX, says founder and CEO Bill Crutchfield. “It’s a terrible breakdown of our legal system and an abuse that business process patents that were typically issued in the 1990s are being interpreted this way,” Crutchfield says. He says the U.S. Patent Office has adopted tougher standards on issuing such patents in recent years.
Crutchfield says online retailers must stand together to defend themselves against these lawsuits, which are often filed by companies whose only business is to seek licensing revenue from patents, or to file patent lawsuits. “The CEOs of online retailers should not be intimidated by these lawsuits. They are defendable,” he says.
Crutchfield Corp., No. 104 in the Internet Retailer Top 500 Guide, has successfully settled two such patent lawsuits, although Bill Crutchfield says he’s not permitted to speak about the terms. Crutchfield is currently one of 47 companies, including eBay Inc. and several retailers, being sued in the Eastern District of Texas in a patent lawsuit filed in February by Clear With Computers LLC.
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