On May 22, the U.S. Supreme Court issued its much-anticipated decision on patent venue, potentially upending a years-long practice in patent infringement litigation in which defendants could be sued in virtually any jurisdiction.
With many celebrating the decision as a shake-up that may loosen the Eastern District of Texas’ grip on patent infringement suits, in-house lawyers are faced with questions around if–and how–patent strategies should change.
At issue in TC Heartland v. Kraft Foods Group Brands was whether venue for patent cases is determined solely by the federal patent venue statute—which limits patent infringement suits to venues where a defendant “resides,” or has committed infringement and has a “regular and established place of business”—or if it may be supplemented by the federal general venue statute that allows suits in any location where there is personal jurisdiction.
In the 8-0 decision, Justice Clarence Thomas wrote that “a domestic corporation ‘resides’ only in its state of incorporation for purposes of the patent venue statute.” The prevailing practice for nearly 30 years has been to follow a 1990 Federal Circuit decision that read the statutes together, resulting in the concentration of cases in the Eastern District of Texas, where nearly one-third of all patent cases in 2015 were assigned to one judge in the district’s Marshall Division. But the TC Heartland decision is in keeping with the high court’s 1957 ruling that the patent venue statute is the “sole and exclusive provision controlling venue.”
“The Supreme Court looked at the way the Federal Circuit had interpreted the statutes and the court’s own decision on this and said: ‘How did we get here?’” said Dana Rao, vice president of intellectual property and litigation at Adobe Systems Inc. “This is a huge change for us and for everyone. Patent trolls depend on forum-shopping to make their business work. …TC Heartland is a stake in the heart of the troll business model.”
Looking forward, this decision may free up attorneys at Adobe who have previously been heavily involved in litigation with nonpracticing entities (NPEs)–often referred to as patent trolls– according to Rao. “From a resource allocation perspective, I do expect [that] my litigators who have been focused on nothing but patent troll litigation defense will be able to focus on other issues for the company in the next few years,” he said. “And that’s great for the company. Adobe should be using its resources to protect its assets that are important and not just [to fight] these frivolous lawsuits.”
There’s no question this is a landmark decision, said Mark Ringes, vice president and assistant general counsel at International Business Machines Corp., who leads the company’s intellectual property team. “The fact is that for 30 years, it’s been very easy to establish venue almost anywhere in the country under the interpretation from the Federal Circuit,” Ringes said. “It will now be a disputed issue in many patent cases if the case is filed anywhere but the state where a defendant is incorporated. Something that was before automatic will now be a subject of debate.”
For certain companies, the impact of this is likely to be significant, Ringes said. “I think what’s clear is that for companies that operate primarily on the internet, it will be very difficult to bring them into the common district for nonpracticing entities, which is the Eastern District of Texas,” he said.
And Delaware may see more patent litigation, he added. “I think another thing that’s evident is that based on the Supreme Court decision … and the fact that such a large percentage of companies are incorporated in Delaware, I think we’ll see a shift of much of the litigation to Delaware.”
But the Eastern District of Texas will likely still host its fair share of patent disputes, as far as Ringes is concerned. “I think there are still plenty of opportunities for the Eastern District to have a significant role going forward, although these venue issues will be much more highly contested,” he explained. “I can foresee a future where a smaller percentage of cases but still a fairly significant percentage of cases remain in plaintiff friendly jurisdictions [such as the Eastern District].”
For a company that operates nationwide like IBM, a longtime leader on the list of U.S. patent recipients, the decision may not be that significant in terms of where the tech giant can be hailed into court, Ringes said. Where it could make a difference, though, is in the rare situation in which the company brings offensive patent litigation, in which case he said IBM “will have to factor this decision into what venue to file those cases in.”
While there are no plans to change the approach to patent litigation at Vizio Inc., the ruling is a major step in the right direction in trying to address abuses in the patent system, said Jerry Huang, the company’s vice president and general counsel. But it’s by no means “the end-all be-all or the silver bullet to fix the issues,” he noted.
Additional efforts from federal lawmakers to modify some of the procedural processes in patent litigation related to Markman hearings, for instance, or limiting damage recovery on expired patents would go a long way in addressing some of the still-existing issues, Huang said.
“The Supreme Court is setting a really strong tone in its unanimous ruling,” he said. “Hopefully this will set the tone for Congress to act once and for all.”
Supporters of the decision have come out in droves. But not all in-house lawyers are pleased. “We were disappointed,” said Kirk Goodwin, chief patent counsel in the North America region at Whirlpool Corp. “We think the law was clear, but the Supreme Court I guess corrected us on that.”
The decision adds “another consideration when you do a large campaign against multiple infringers,” Goodwin said. As he explained in an amicus brief in the case authored with Whirlpool patent counsel Nathan Davis in support of Kraft, a ruling that changes the established approach to venue “may require [Whirlpool] to file lawsuits in dozens of jurisdictions, if not more, which would dramatically increase the costs to enforce a patent, and would result in judicial inefficiencies.”
What’s more, the decision may not bring about the desired result when it comes to NPEs, Goodwin said. “Big picture, if parties are trying to get a nominal value for their patents, which is not what we do … I don’t think it matters what jurisdiction you’re in,” Goodwin explained. NPEs typically bring suits in jurisdictions they know, he added, but they can learn the others.
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