I once took an Uber in Fairfield, Ohio. As we sat at a light, the driver pointed to an empty big box storefront.
“What’s that building look like?” he asked. I said it looked like an empty big box storefront.
“That’s right. You know where it went?” I said no, confused. He pointed down the street a few hundred yards away to a brand-new big box store.
“There it is. You know why they moved down the street? Taxes. Lower sales tax across the county line.”
I was reminded of that story of fiscal competition at its finest when reading about Apple’s recent decision to close two of its stores in the Dallas suburbs.
Or more accurately, as Ars Technica reported, Apple’s decision to close two stores within the federal court jurisdiction of the Eastern District of Texas. Rumor has it that Apple’s move could be in response to intellectual property litigation. Per Ars Technica:
The Eastern District is known for its extremely patent-friendly judges, and so for decades patent plaintiffs have set up shop there and sued defendants located all over the country. Prior to 2017, the law allowed a plaintiff based in the Eastern District of Texas to sue defendants there if defendants had even tenuous connections to the district. And, of course, a company of Apple’s size has business ties to every part of the country.
These plaintiffs are often called “patent trolls,” which the Electronic Frontier Foundation defines as companies or individuals that cheaply purchase patents (often “overbroad and vague” patents, at that) and then threaten expensive litigation against companies allegedly in violation of said patents:
These letters threaten legal action unless the alleged infringer agrees to pay a licensing fee, which can often range to the tens of thousands or even hundreds of thousands of dollars.
Many who receive infringement letters will choose to pay the licensing fee, even if they believe the patent is bogus or their product did not infringe. That’s because patent litigation is extremely expensive — often millions of dollars per suit — and can take years of court battles. It’s faster and easier for companies to settle.
The Eastern District has been a favorite venue for this kind of litigation – even after the Supreme Court sought to rein in so-called “venue shopping” in a 2017 decision. Ars Technica explains:
[U]nder the Supreme Court’s 2017 TC Heartland decision, a defendant can only be sued in a district where it “resides”—meaning where it was incorporated—or “has a regular and established place of business.”
Apple’s two stores in the Eastern District would likely count as “regular and established places of business” for patent-law purposes. So under the new rules, continuing to operate the stores makes it easier for patent plaintiffs to sue Apple in the Eastern District.
Apple has not confirmed that its move is related to patent-troll litigation. But, tellingly, the company is replacing its two shuttered stores with a new store…directly across the border of the Eastern District. Sometimes, the best offense is a good defense.