June 29, 2017

Patent plaintiffs see way around U.S. Supreme Court ruling

24 May 2017, 05:33 | Ignacio Smith

Historic Harrison County Courthouse Marshall Texas. Joe Mullin

Historic Harrison County Courthouse Marshall Texas. Joe Mullin

Rather, the Supreme Court says, courts should follow a 1957 ruling that sets the defendant's place of incorporation as the venue for infringement cases to take place. "Such companies have often sued in remote federal courts that have a reputation for friendliness to plaintiffs".

Even more surprising is the fact that, in 2016, a whopping 36 percent of all patent infringement lawsuits filed in the United States were filed in the rural courthouses of Eastern Texas, in cities such as Tyler, Marshall, and Sherman, Texas. 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.

Heartland sought to transfer the case to its home base in IN, arguing it has no presence in DE and 98 percent of its sales are outside of that state. "Now, Delaware - where many US companies are incorporated due to friendly business statues - is likely to see a surge in cases".

The U.S. Supreme Court issued a ruling Monday that may have effectively ended a 15-year intellectual property litigation boom in East Texas.

The court ruled 8-0 in favor of Heartland. In the case of patent infringement suits targeting Idaho-based businesses, this will mean the Idaho federal courts in many instances. But it also means that many Utah companies seeking to enforce their own patent rights may need to file the lawsuit in the home-jurisdiction of the accused infringer. "S. C. ยง1400 (b), provides that '[a] ny civil action for patent infringement may be brought in the judicial district where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business'".

Individuals and companies that generate revenue by suing over patents instead of actually making products have been dubbed "patent trolls".

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"It is important to recognize that the Supreme Court's decision today follows numerous other Supreme Court rulings over the last decade that have made it more hard for patent holders to enforce their patents", it said.

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.

In a unanimous ruling written by Justice Clarence Thomas, the court overturned a lower court's interpretation of federal venue rules and said that patent owners must sue companies in the districts where they are incorporated.

The TC Heartland case stemmed from a lawsuit brought by Kraft Foods Group Brands LLC against TC Heartland, LLC and Heartland Packaging the U.S. District Court for the District of Delaware. "In contrast, the federal District Court for the District of DE will undoubtedly see a significant rise in patent litigation, owing to the large number of corporations incorporated in DE". Large numbers of the cases claimed patents on business models with computer applications - triggering complaints that simply moving a business model to a computer platform doesn't warrant a patent.

Justice Neil Gorsuch joined the court after it heard arguments in the case and did not participate in the decision.

Not a word about "patent trolls" appears in today's 13-page opinion, but it's no secret that do-nothing patent holders were the issue at the heart of the contentious debate over patent venue.

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