Taking Patent Litigation Out of Texas: The Supreme Court’s TC Heartland Decision
For the last two decades, patent holders – many of them “trolls” – have favored suing accused infringers in the Eastern District of Texas, even those who never stepped foot in the state. This trend started in 1990 when the federal court ruled that a corporation could be sued for patent infringement in any court having personal jurisdiction over it.
The Eastern District of Texas rapidly became a favorite with its:
- Fast rocket docket;
- Significant and expensive front-loaded schedule, which burdens defendants significantly at the beginning of a case rather than spreading out the cost;
- Plaintiff-friendly local patent rules;
- Pressure on defendants to litigate somewhere they have no connections; and
- Judges with disproportionate patent litigation experience.
Most defendants would rather be almost anywhere else. Yet often, they had little choice. As a result, over the last twenty years, this one district of Texas – including some very small towns across the state – have heard more patent litigation cases than any other state in the country.
But Not Anymore: TC Heartland LLC v. Kraft Foods Group Brands, LLC
On May 22, 2017, the Supreme Court issued a unanimous decision holding that venue in a patent infringement case is proper only (a) where the defendant resides (meaning the state of incorporation for a corporate defendant), or (b) where the defendant has committed acts of infringement and has a regular and established place of business.
What Does This Mean?
Patent litigation defendants may no longer need fear suit in districts such as the Eastern District of Texas, in which they have no connections other than sporadic sales on a national-available website. Unified Patents, a company that coordinates anti-patent troll efforts, estimates that patent cases filed in the Eastern District of Texas may drop by 1,000 per year. Plaintiffs will likely file elsewhere, or not file at all. They no longer have the convenience of suing all defendants in the same district court. Instead, they’ll have to sue each defendant in the defendant’s home state, which will increase their expenses and the risk of inconsistent results. This could curb excessive litigation and make patent trolls more inclined to settle for lower costs.
Where Will New Patent Litigation Go?
The District of Delaware is most likely to become the next Eastern District of Texas, as a large percentage of U.S. entities are incorporated in that state. In fact, in the weeks since the Supreme Court’s ruling, the District of Delaware has borrowed four judges from the Eastern District of Pennsylvania to boost its bench for the expected influx of new and transferred patent cases. Other venues that are expected to see an increase in patent litigation are the Central and Northern Districts of California and the District of New Jersey. Additionally, the District of Northern Illinois, the Southern District of New York, the Central District of California and other courts are experimenting with “patent pilot judges,” which could make these court popular locations for patent suits.
What About Existing Patent Litigation?
Defendants currently in the Eastern District of Texas may seize on TC Heartland as an excuse to move their cases to a friendlier district. Whether they can, likely depends on the extent to which they asserted – and thereby preserved – an improper venue defense or filed a motion to dismiss on this ground. But even for those defendants who preserved this defense, a court may be reluctant to let it go if the case has proceeded too far in Texas.
The lucky cases will likely be ones at the pleading states or where a motion to dismiss is pending or only recently decided on. One of our cases here at Venjuris had a motion to dismiss fully briefed and ready for decision when TC Heartland was decided. We were excited the day TC Heartland decision was announced. We filed a three-page supplement to the Motion, bringing the case to the Court’s attention and requesting dismissal on that additional ground. A decision has yet to issue.
Can We Count Texas Out?
A patent infringement suit can be filed not only where a corporate defendant resides, but alternatively where it committed acts of infringement and has a regular and established place of business. The TC Heartland case refused to address the latter portion of the statute. A plaintiff eager to remain in Texas may try to use this portion of the law to keep their case in the Eastern District of Texas. What qualifies as a “regular and established place of business” may be hotly litigated in the near future by plaintiffs desperate to preserve their favored venue, and defendants desperate to avoid it.
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