Apple, the technology giant which runs successful Apple Stores all over the world, announced that it will close its only two stores in eastern Texas by Friday, April 12.
Apple, however, did not announce why it was closing those two stores. This is especially intriguing since Apple likely generates millions of dollars in revenue each year from those stores.
It begs the question: why would Apple close its only two stores in that area when those stores are typically very successful to its business?
The belief is this was a legally-driven decision: Apple closed those stores to avoid patent owners from having venue against Apple in eastern Texas and forcing it to defend patent infringement suits there.
If true, then this shows the power of how a patent infringement suit can affect your business - even if you are Apple.
While Apple wants to expand its branding, technology, and product lines into as many areas both domestically and internationally to maximize it marketing, revenues, and profits, it drew a hard line here despite the fact it will not generated desired foot traffic.
While we don’t know how much those stores generate, we do know how much patent owners seek in damages against Apple in eastern Texas, and can glean from that Apple’s line in the sand.
The tech industry is prime hunting ground for patent “trolls,” which are companies that buy up patents to products or services they don’t produce or provide to make money from licensing or litigation.
And eastern Texas has been a preferred venue for such “trolls” seeking to maximizing their opportunity in obtaining a plaintiff-friendly jury and maximize potential damages awards.
For big name companies like Apple, it means large legal fees and potential adverse verdicts with huge figures. For example, in 2015 Apple was ordered to pay $533 million to a company named Smartflash LLC in a case out of eastern Texas for infringing on patents for online media storage (although it was eventually overturned on appeal).
The legal costs for Apple in fighting these battles in eastern Texas appear to far outweigh running two stores there. Although not officially confirmed, this could be one of the reasons that Apple recently announced it is closing the two stores it operates in the eastern Texas, but opening a new store in a nearby northern suburb of Dallas.
The lesson here is that as you expand your distribution, manufacturing or stores, it may be worth considering any potential legal ramifications in such decisions - including legal ones such as potential patent issues.