Justices make it easier for companies to defend patent cases

The Supreme Court case involved an appeal from TC Heartland, an Indiana-based food sweetener company sued by Kraft Foods in Delaware.

The Federal Circuit "has made clear, with its en banc decision, it is paying little more than lip service to this principle", Chris Mohr, vice president for intellectual property and general counsel for SIIA, said last month.

The Texas attorney general, joined by 16 other states, filed a brief (PDF) as well, noting the incredible concentration of patent cases in the Eastern District of Texas.

Mark Miller is a partner in Holland & Hart's Salt Lake City office, focusing his practice on patent, trademark, and trade secret litigation and appeals in federal and appellate courts nationwide. Because of confusion about where the suit belongs, however, the merits of this case have gone untested. Almost 45 percent of all patent infringement cases were filed in the Eastern District of Texas in 2015. Utah's federal district court has adopted balanced "local patent rules" to govern patent infringement litigation, and the federal judges in Utah have gained extensive experience in objectively resolving patent disputes for many years. But, in 1988, Congress revised the definition of "reside" in Section 1391 to allow for venue wherever personal jurisdiction could be established over a defendant.

The Federal Circuit denied the transfer by relying on one of its precedents from 1990, which loosened the geographic limits on patent cases. Accused infringers, on the other hand, will be less likely to be sued in remote locations that are otherwise unrelated to the case. The Federal Circuit hewed to its precedent previous year in blocking removal of the case to in, the home of TC Heartland.

The case, Heartland v. Kraft, focused on the beverage industry, but its outcome should have a significant impact on technology companies that are constantly fending off patent trolls.

"The current version of §1391 does not contain any indication that Congress meant to alter the meaning of §1400 (b) as interpreted in Fourco", he wrote.

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Then, in 1990, the Federal Circuit decided VE Holding Corp. v. Johnson Gas Appliance Co. In that decision, the top court had found the specific rules of the Patent Act, which require a plaintiff to sue companies where they are incorporated, applied despite rules to the contrary in the general venue law.

The justices ruled unanimously on Monday that such lawsuits can be filed only in states where defendants are incorporated. But a prior appellate court decision held that suit was proper wherever the defendant sold products.

The decision is silent on this issue, Loh noted, but TC Heartland is not actually even incorporated. The Court reaffirmed a prior holding that "resides" for a domestic company refers only to the state of incorporation. But while the case may have begun as a straightforward patent infringement suit, it eventually took on national significance as it called into question where cases like these could be tried. "This decision is likely to reverse that trend". The main difference is that most cases would shift out of the Eastern District of Texas, but two other districts would see a potentially commensurate uptick in filings - the Northern District of California and the District of Delaware.

Larus noted that just past year in the Eastern District of Texas, U.S. District Judge J. Rodney Gilstrap "was assigned more than a thousand new patent cases - amounting to almost 25 percent of the nation's total".

In fact, more than one-third of patent lawsuits are filed in the Eastern District Texas, a venue known for favorable rulings and massive jury verdicts.

While today's decision is a big blow for patent trolls, it is not a panacea.

  • Ronnie Bowen