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Messing with Texas: How TC Heartland changed patent venue

In May 2017, the Supreme Court issued a decision in TC Heartland v. Kraft Food Brands overturning years of precedent on proper venue for patent cases. For over two decades, patent holders could sue alleged infringers in essentially any federal court nationwide. This led to a disproportionate number of patent infringement cases being filed in certain courts perceived to favor patent holders. The TC Heartland decision will likely make it harder for patent holders to forum-shop their way into favorable outcomes. Thus, some have labeled the TC Heartland decision a sea change for patent infringement actions.

Patent infringement is a federal cause of action, and is therefore always fought in federal court. Which federal district may serve as the battlefield for a patent infringement action depends on where an alleged infringer is subject to personal jurisdiction and whether a particular judicial district is a proper venue for the suit. Under the patent venue statute, venue is only proper (i) where the defendant resides, or (ii) where the defendant has committed acts of infringement and has a regular and established place of business.1 Until recently, it was well-established precedent that a corporation resided in any district where it was subject to personal jurisdiction.2 Thus, for a corporate defendant, answering the personal jurisdiction question effectively decided venue as well.

Forum shopping

There are perceived advantages and disadvantages to litigating in different districts. You are probably familiar with the phrase “forum shopping,” which refers to the practice of choosing to bring suit in a court one views as most likely to provide a favorable outcome. Before the Supreme Court’s decision in TC Heartland, many plaintiffs in patent infringement actions succeeded in bringing suit in certain favored forums. Those forums included the District of Delaware, the Central and Northern Districts of California, the Northern District of Illinois, and, perhaps most famously, the Eastern District of Texas.3 In 2016, nearly 1,700 new patent cases were filed there.4 Interestingly, the large majority of those cases were filed in Marshall, Texas, a town with only around 25,000 residents. Since 1997, patent holders have won 54 percent of infringement cases in the Eastern District of Texas—the highest win rate in the nation. Juries there have also handed out some of the highest damages awards in the nation as well, with a median award of $9.9 million.5    

With odds like that, it’s no wonder patent holders bet on the Eastern District of Texas. And when proper venue was coextensive with personal jurisdiction, patent holders effectively had free rein in picking their venue.

In TC Heartland, however, the Supreme Court unanimously reversed that long-standing venue precedent, holding that “[a]s applied to domestic corporations ’residence’ under §1400(b) refers only to the state of incorporation.”6 Thus, patent holders are now limited to filing suit where the defendant is incorporated, or where the defendant committed acts of infringement and has a regular place of business.

Commentators predicted that the TC Heartland decision would shutter the Eastern District of Texas, at least with respect to patent cases. A recent study seems to support those predictions, showing a dramatic decrease in patent cases filed there post-TC Heartland and a big uptick in cases filed in the District of Delaware (a common state of incorporation).7 In the 90 days prior to TC Heartland, for example, 33 percent of new patent cases were filed in the Eastern District of Texas. In the 90 days following, that number dropped to 13 percent. By contrast, before TC Heartland, just 13 percent of new patent cases were filed in Delaware; afterward that number rose to 26 percent.8 

Venue matters

No matter how salient this development is to patent lawyers, you may be thinking, if this venue issue is specific to patent litigation, why should I care? The fact that this change has garnered so much attention in the patent world underscores how important choosing (or avoiding) certain venues can be for any type of case. For example, some venues decide cases faster than others. Other venues may side with a plaintiff more often. Putting your case in front of a hometown jury may be advantageous. And, of course, there are cost considerations with litigation in courts far away from a client’s location versus those closer to their home. So even if you’re not litigating a patent dispute, it is worthwhile to do a venue study to assess the best venue for your client’s suit. 

 

KELSEY THORKELSON is an associate at Robins Kaplan LLP who focuses her practice on intellectual property litigation in the health and life sciences industry. Ms. Thorkelson has significant experience representing pharmaceutical companies in Hatch-Waxman cases and has also handled patent litigation matters involving other complex technologies including semiconductor fabrication and medical devices.

 

Notes

1  28 U.S.C. §1400(b).

2 VE Holding Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574 (Fed. Cir. 1990).

3 Pedram Sameni, Patexia Chart 6: Top 10 Venues for Patent Litigation, 8/10/2016, https://www.patexia.com/feed/weekly-chart-top-10-venues-for-patent-litigation-20160809

4 Data generated using Docket Navigator Analytics.

5 PWC, 2017 Patent Litigation Study: Change on the Horizon?, available at: http://www.ipwatchdog.com/wp-content/uploads/2017/05/2017-Patent-Litigation-Study_PwC.pdf.    

6 TC Heartland LLC v. Kraft Foods Group Brands LLC, 137 S. Ct. 1513, 1516 (2017).

7 Brian Howard, Patent Litigation Trends in the Three Months After T.C. Heartland, 10/18/2017, https://lexmachina.com/patent-litigation-trends-in-the-three-months-after-t-c-heartland/

8 Id.

One Comment


  1. Anonymous
    Aug 10, 2018

    There’s a very simple explanation as to why Patent Trolling is so rampant in East Texas and it’s done through the 10 step program below:

    1. Take out a stupid patent or buy one cheap
    2. Form a dummy corporation in East Texas
    3. Rent an abandoned Office building
    4. Find Victims who cannot afford a defense
    5. SUE THEM!
    6. Use a Dummy name on the lawsuit
    7. Force average settlement of $340,000
    8. Force Vitims to sign NDA on settlement
    9. Watch the East Texas Judges refuse to throw out cases while their sons in the law firms rack up settlements.
    10. Repeat steps 1 through 9, forever!

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