Patent plaintiffs see way around US Supreme Court ruling

May 24, 2017, 05:30
Patent plaintiffs see way around US Supreme Court ruling

The business model for these entities often entails suing alleged infringers in patent-friendly venues like the Eastern District of Texas in an attempt to extort settlements from accused infringers. In 2013, there were more patent cases filed in the Eastern District of Texas than were filed in Los Angeles, Miami, New York, Chicago and Boston combined.

These are companies that make their money nearly entirely from patent licensing, representing two-thirds of all cases in United States district courts at the time, they became known as patent trolls.

A year ago professors Michael Risch of Villanova Law School and Colleen Chien of Santa Clara School of Law looked at the impact that TC Heartland (if the court ruled as it did yesterday) could have on patent owners' choice of venue and found a similarly large shift. Because many generic drug manufacturers are incorporated in DE, the TC Heartland decision means that DE will likely retain its favored-venue status for Hatch-Waxman cases.

Kilpatrick Townsend Partner Matthew Holohan pointed out that patent lawsuits involving foreign companies may still face forum shopping. Now, patent holders are required to follow the specific patent venue statute, 28 U.S.C. § 1400 (b), which requires suing "where the defendant resides", or "has committed acts of infringement" and where the defendant "has a regular and established place of business".

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The Supreme Court case that resulted in this decision couldn't be much less about technology.

The ruling will have broad implications for patent lawsuits, which are frequently moved to certain districts that have a track record of being favorable to patent infringement claims.

Yesterday, the court concluded that the amendments to section 1391, the statute governing "venue generally", didn't modify the meaning of section 1400 (b), the patent venue statute.

The iPhone maker on Monday filed its response to a Samsung petition for the nation's highest court to consider yet another aspect of the two companies' long-running patent dispute. For example, Apple would deal with patent lawsuits only in California. Wherever there is money to be made there will always be opportunistic individuals and companies who will obtain patents in order to profit from licensing or litigation.

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In its decision, the court reversed a 1990 decision by the U.S. Court of Appeals for the Federal Circuit that allowed patent infringement cases to be filed away from the defendant's home state. The Federal Circuit denied Heartland's transfer by relying on the 1990 ruling. This case would still likely leave approximately 60% of patent cases in these same five districts.

"Patent trolls have regularly cherry-picked far-flung and burdensome judicial districts that they believe will be favorable for their case", said North Carolina Attorney General Josh Stein.

The ruling, which came about after Kraft Foods sued TC Heartland LLC in Delaware-despite Heartland's headquarters being based in Indiana-was closely watched by the business world, particularly in the technology space.

The justices sided 8-0 with beverage flavoring company TC Heartland LLC in its legal battle with food and beverage company Kraft Heinz Co., ruling that patent infringement suits can be filed only in courts located in the jurisdiction where the targeted company is incorporated.

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The court's newest member, Justice Neil Gorsuch, did not participate in the consideration of the case or the court's decision.

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