In an attempt to curb the behaviour of non-practising entities (NPEs), the Supreme Court will now limit ‘venue shopping’ in patent cases – stopping plaintiffs from choosing court locations they believe are favourable to the cases they are arguing.
Sparking a change
The Supreme Court has reversed a U.S. Court of Appeals for the Federal Circuit decision from 2016 that had been used as justification for bringing cases to venues where the companies involved happen to conduct business.
Petitioner TC Heartland LLC, an Indiana-based water-flavouring company, argued that Kraft’s patent-infringement suit against it should not take place in Kraft’s chosen district in Delaware. The company instead petitioned to have the case moved to Indiana, where it is incorporated.
Ted Gelov, Heartland CEO, said: “Individuals and businesses in the U.S. have been unfairly required for decades to defend patent suits in far off locales adding cost, complexity and unpredictably to the intellectual property marketplace. The Supreme Court’s decision in favour of Heartland changes that system for the better.”
The court’s venue decision hinged on the word “resides,” which the court found to mean the state of incorporation. The court unanimously ruled in favour of Heartland and US corporations are now required to bring lawsuits to where the targeted company is incorporated.
A changing future of IP
The ‘venue-shopping’ ruling will have broad implications for patent lawsuits, which can be frequently moved to districts that have a track record of being favourable to patent infringement claims.
NPEs can generate revenue from buying patent licenses and suing other companies for infringement and damages. The Texas district is well known for large awards to patent plaintiffs, with 40 percent of all patent suits filed in east Texas according to the Stanford Law Journal.
With ‘easy - win’ litigation cases no longer avalible to draw plaintiffs to Texas, the number of people requiring local services will reduce too. Law firms and supporting businesses – even hotels and restaurants – in Texas will feel the effects of the decision.
The tech effect
The ruling may go some way in limiting litigation cases from NPEs, but could also have significant implications for patent-rich Silicon Valley companies. NPEs will no longer be able to shop around for a sympathetic venue, which is good news for common patent suit targets like Apple and Alphabet's Google.
The Supreme Court’s decision has also been met with open arms by major players in the technology industry: Dell; Oracle; Intel and Adobe had all filed briefs in support of Heartland.
The court’s decision is an important step towards restoring balance in litigation, as well as industry confidence in the patent system. However, the ruling is also likely to make for busy times in Northern California's federal courts, and the federal courts in Delaware, where many companies choose to incorporate.