The recent U.S. Supreme Court decision on TC Heartland LLC v. Kraft Foods Group Brands LLC has major implications for the patent venue statute, patent litigation, and the dockets for the U.S. District Court for the Eastern District of Texas and other patent litigation forums.
“The Supreme Court decision in this case goes against 30 years of Federal Circuit precedent in how the patent venue statute has been interpreted,” said Alston & Bird Intellectual Property Litigation attorney Pamela Councill said.
In 2015, 45 percent of patent cases in the U.S. were filed in the Eastern District of Texas and almost one-third were handled by a single judge there, as this jurisdiction has proven to be attractive to plaintiffs seeking to extract settlements in patent infringement lawsuits.
The Supreme Court’s interpretation of the patent venue statute significantly narrows the meaning of “resides” for patent venue purposes, limiting a corporation’s residence to only the State of incorporation. So, Councill says that we may see fewer cases filed in the Eastern District of Texas, where relatively fewer corporations are incorporated (as required by the first prong of the patent venue).
According to Councill, a narrow interpretation of the patent venue statute means that patent owners cannot rely on the “resides” prong to bring patent infringement litigation in any forum where a defendant is subject to personal jurisdiction. Instead, patent owners are limited to suing only where the defendant corporation is incorporated or where the defendant has committed acts of infringement and has an established place of business.
“Patent owners and defendants should more carefully consider pleading venue and motions to dismiss for lack of venue,” she explained. “Expect to see courts and litigants expend a lot of time and money litigating the outer bounds of the second prong of the patent venue statute and, in particular, what it means to have a ‘regular and established place of business’ in a forum.”
The Supreme Court’s interpretation of the patent venue statute may curtail the ability of non-practicing entities to file cases in the forum of their choosing, particularly against entities whose only presence in a forum is a website, according to Councill. This means high volume filers of patent litigation may not be able to count on the strategy of suing defendants and consolidating the suits for pretrial purposes, as has become common in courts like E.D. Texas. In turn, this will increase the cost and complexity of litigation for high-volume filers, discouraging nonpracticing entities.
“Internet retailers and other related companies are hopeful that the Supreme Court’s reading of the patent venue statute curtails patent litigation against internet retailers and other related companies who have found themselves subject to patent litigation in an inconvenient forum based on nothing more than a website,” explained Councill.
Lately, many have decried patent litigation forum shopping for its stifling effect on innovation and hope that limiting the venue statute will discourage frivolous patent litigation. Many technology companies who filed amicus briefs in support of a narrower reading of the “resides” prong of the patent venue statute hope this will happen.
“While a more limited reading of the ‘resides’ prong of the patent venue statute may discourage some nuisance litigation because of the likelihood of increased cost and complexity, only time will tell how big the impact will be,” she said. “What's clear, however, is that patent owners and potential defendants alike are watching closely to see how district courts apply Heartland and whether the practical implications are really as far-reaching as many hope.”