Supreme Court Ruling Halts "Forum Shopping" in Patent Suits

This ruling hurts those companies since they can no longer file in remote federal courts that have a reputation for friendliness to plaintiffs.

Legal analysts say this decision could shift a huge number of cases away from "plaintiff-friendly" districts and toward more "neutral" venues where a defending company stands a better chance of fending off a suit. In 2015, of 5,819 new patent cases filed in the country, 1,686 landed before U.S. District Judge Rodney Gilstrap in Marshall, Texas. TC Heartland is incorporated and headquartered in IN, and it sought to transfer the case to federal court in the Southern District of Indiana. Because many generic drug manufacturers are incorporated in DE, the TC Heartland decision means that DE will likely retain its favored-venue status for Hatch-Waxman cases. "This decision also comes on top of several major legislative and administrative measures adopted in recent years that have similarly weakened patent rights".

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.

For the past 27 years, patent owners and accused infringers have operated under a Federal Circuit decision that made venue analysis under 28 U.S.C. § 1400 co-extensive with personal jurisdiction analysis.

In an 8-0 decision, the Supreme Court answered in the negative and reversed the Federal Circuit.

According to the research, the impact would be most marked for NPEs - just over 64% of NPE cases in the Risch/Chien sample were filed in East Texas, but under TC Heartland that would drop to 19%. "Supreme Court Messes With Texas "Patent Troll" Hotbed in Win for Tech Industry", wrote Fortune.

"Given the definition of "resides" is limited to the "state of incorporation, ' it may lead to a swell in patent cases in DE, and otherwise funnel cases towards defendants" home jurisdictions", said Kirkland & Ellis intellectual property partner John O'Quinn. Under the old rules, our little corner of the world got a good share of the patent lawsuits, mainly because of the expertise of our judges and our bar.

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The term patent trolls refers to individuals or companies that hold patents with one sole or main goal in mind: sue other companies to obtain financial awards.

Technology companies in particular had sought Monday's ruling as a means of combating plaintiffs, including patent holding firms often derided as "trolls".

In its ruling today, the court upheld its 1957 interpretation of a federal law, in which it said that "any civil action for patent infringement may be brought in the judicial district where the defendant resides", and the court considers that to be the place where the defendant is incorporated.

The dispute began when Heartland, a subsidiary of Heartland Consumer Products Holdings, sought to transfer a patent infringement suit Kraft filed against it in DE federal court to Heartland's home base in Indiana. That case involved Apple's slide-to-unlock, autocorrect and quick links patents.

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.

The court's newest member, Justice Neil Gorsuch, did not participate in the consideration of the case or the court's decision.

  • Rita Burton