Is the Supreme Court’s venue decision in TC Heartland anti-patent?

By Gene Quinn
June 6, 2017

Several weeks ago the United States Supreme Court issued its venue decision in TC Heartland v. Kraft Food Group. As one of the few intellectual property decisions the Nation’s high court will decide this term it has and will continue to receive disproportionate scrutiny within the intellectual property world, particularly within the patent world, and even more so within the patent litigation subset of the patent world.

In a nutshell, the Supreme Court decided that 28 U.S.C. 1400(b) is the only statute capable of conferring proper venue in a patent infringement litigation, which overruled nearly 30 years of Federal Circuit precedent that had stood for the proposition that the 1988 Amendments to 28 U.S.C. 1391(c) opened venue for patent infringement actions to wherever personal jurisdiction could be asserted over the defendant. For more see SCOTUS reverses Federal Circuit in TC Heartland and Industry Reaction to SCOTUS patent venue decision.

Much has already been written about the decision, including here on IPWatchdog.com. No doubt much more will be written as we start to see the fallout from the decision, whether the epicenter of patent litigation will move from the Eastern District of Texas to the District of Delaware where so many corporations are incorporated or the Northern District of California where so many technology corporations have their headquarters. But one important question hangs in the air – what difference does the decision make?

On its face the Supreme Court’s venue decision shouldn’t necessarily be anti-patent. In a perfect world where the litigation will take place shouldn’t matter to the justice that will be delivered. Of course, we know from experience that is not the case.

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If anything, the TC Heartland decision strikes me as more anti-business than it is anti-patent. In the wake of the Supreme Court’s decision all patent owners will now be forced to seek remedy for patent infringement where the defendant is incorporated or where the infringing defendant has a significant place of business. In other words, all patent owners will in theory have to fight patent infringement disputes against domestic corporations on the home turf of the infringer. Perhaps the concern about juries favoring a large local employer over a patent owner may be diminished compared to a generation or two ago, but there is no doubt that there are some district courts in America that are more favorable than others for patent owners.

While in theory there is nothing that inherently should make the TC Heartland decision anti-patent, it is precisely how different district courts view patents that correctly lead some to characterize the decision as another blow to patent owners.

The narrative, which you’ve probably heard, is that patent owners love the Eastern District of Texas because they are patent friendly. As with most bumper sticker length statements the truth is far more complicated. Indeed, if you look at the verdicts coming out of Eastern Texas there are some very large verdicts, but there are also a lot of zero verdicts or small verdicts as well. So if you as a patent owner are looking to hit a grand slam homerun the Eastern District of Texas provides an attractive forum given that the juries there are not afraid of large numbers, sometimes very large numbers. The juries are, however, also not afraid to give little or nothing. Other districts do not experience these same extremes, which is one reason they are more favored by defendants looking to minimize top line potential damage awards, and disfavored by patent owners looking for that lottery like score.

The primary reason patent owners like the Eastern District of Texas is because you are so much more likely to get to a jury trial than in other districts. The greater likelihood of getting to trial puts real pressure on infringers to settle, which doesn’t exist in many other districts. In other districts there is a double (or greater) likelihood that cases will be disposed on motions (i.e., motions to dismiss for eligibility, or summary judgment, for example).

Will the Supreme Court’s decision make a difference? The collective wisdom within the industry seems to be yes, but we’ve already seen fresh patent infringement actions filed in the Eastern District of Texas, so those who were expecting filings to trend toward zero will no doubt be disappointed. Furthermore, it is worth noting that Ashley Keller and Katharine Wolanyk recently wrote that they believe the consequences of the decision will be less dire than most in the industry are predicting, and that patent owners should not fear bringing suit in the District of Delaware. See TC Heartland: An Alternative Opinion.

We can’t know how many patent infringement cases will be filed in the Eastern District of Texas yet, but it is important to remember TC Heartland focused only on the first prong of the 1400(b) requirements, namely the state of incorporation. It is still possible, as mentioned, to bring a patent infringement action where infringement has occurred and the defendant has a regular place of business, whatever that winds up meaning. Sadly, we have a well-developed understanding of what that phrase means, or should mean, thanks to thousands of cases interpreting 1391(c), as well all the personal jurisdiction cases. But will the courts apply the same meaning we would normally understand from 1391(c) and personal jurisdiction cases when the Supreme Court has said that statute is irrelevant to patent litigation?

There is also a real possibility that the Eastern District of Texas will continue to interpret patent venue loosely – very loosely. Indeed, many within the industry believe the Eastern District of Texas acts as a virtual arm of the local Chamber of Commerce. Patent litigation is big business in East Texas, which cynically (but not irrationally) leads some to suspect that the Eastern District of Texas will continue to interpret the law and Supreme Court decision so as to hold on to as many cases as possible. That will set up more challenges at the Federal Circuit for those patent owners who choose to continue to file in Eastern Texas without legitimate venue under the new old standard.

Although predictions may not be worth much, I think in the years to come we will look back on TC Heartland and see it as having had a rather minor impact on patent litigation. As good patents get harder to obtain and more difficult to keep thanks to the Patent Trial and Appeal Board (PTAB), those that will increasingly be litigated will be extraordinarily vetted, which should make the location of the trials and predisposition of the district courts toward dispositive motions increasingly less important.

It also seems unlikely that TC Heartland will do anything about any lingering patent troll problem. The truth has always been that patent trolls were, for the most part, a boogeyman created by the infringer lobby.[1]  There are, of course, some very bad actors who manipulate the legal system using patents and seek extortion-like settlements. But those truly bad actors are small in number, and they are enabled by the large entities that actually pay the extortion-like settlements instead of using the PTAB to kill those bad patents. As long as America’s technology companies continue to pay extortion there will be bad actors. Trolls will be trolls whether it is in the Eastern District of Texas or somewhere else, and it is recklessly naïve for anyone to think otherwise.

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[1] As explained by Karl Fazio: “More than 80 percent of patents litigated by PAEs are acquired from operating companies.” See Clearing the Underbrush.

The Author

Gene Quinn

Gene Quinn is a Patent Attorney and Editor and President & CEO ofIPWatchdog, Inc.. Gene founded IPWatchdog.com in 1999. Gene is also a principal lecturer in the PLI Patent Bar Review Course and Of Counsel to the law firm of Berenato & White, LLC. Gene’s specialty is in the area of strategic patent consulting, patent application drafting and patent prosecution. He consults with attorneys facing peculiar procedural issues at the Patent Office, advises investors and executives on patent law changes and pending litigation matters, and works with start-up businesses throughout the United States and around the world, primarily dealing with software and computer related innovations. is admitted to practice law in New Hampshire, is a Registered Patent Attorney and is also admitted to practice before the United States Court of Appeals for the Federal Circuit. CLICK HERE to send Gene a message.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

Discuss this

There are currently 20 Comments comments.

  1. Curious June 6, 2017 11:18 am

    On its face the Supreme Court’s venue decision shouldn’t necessarily be anti-patent. In a perfect world where the litigation will take place shouldn’t matter to the justice that will be delivered. Of course, we know from experience that is not the case.
    It is anti-patent. It requires (accused) patent infringers be sued on their home turf, and when multiple (accused) patent infringers need to be sued (which is extremely typical), they will likely be sued in many different venues, which substantially drives up the costs for patent holders to enforce their patents. All this puts the patent owner at a disadvantage.

    Unless you are a very large patent owner with lots of cash to spend, the US patent system is essentially useless to enforce your patent rights. The process of eviscerating the patent system has long been in the works. It has been death by a thousand cuts.

    For example, just yesterday the Federal Circuit issued Rothschild v. ADS Security. The issue involved determining with whether Rothschild engaged in conduct sufficient to make the litigation “exceptional” so as award ADS Security in attorney’s fees. In it, they cited Eon-Net for basically the proposition that if you are making a settlement offer for substantially less than the cost a defendant would have to expend to defend a suit, then you are going to be labeled a “troll” (i.e., engaged in “vexatious litigation”) in the Court’s eyes and subject to attorney fees if you lose. In other words, if the value of infringement doesn’t meet some threshold level (e.g., $500K), then if you lose, you’ll be faced with paying the other side’s attorney fees — chilling inventors of non-high value inventions from even attempting to enforce their patent rights.

    IMHO, any small-time inventor that is looking to get a patent should realize that the most likely consequence of this attempt will be that large companies will still be able to copy your invention with almost no repercussions — the result of how the US Patent system is now being set up by the likes of Google to protect their near-monopolies and insulate themselves from being sued for patent infringement.

  2. angry dude June 6, 2017 11:44 am

    Curious@1

    “…any small-time inventor that is looking to get a patent should realize that the most likely consequence of this attempt will be that large companies will still be able to copy your invention”

    It’s much worse than that..

    If some part of invented device or process can be kept a trade secret then patenting invention as a whole will essentially give away blueprints for copying by anyone in the world (I am talking about valid enabled patents, not some non-enabled bs like Cuban’s owned patent on self-balancing something discussed on this blog before)
    This is what essentially happened to me and many others (but I made my decision to patent back in 2001 in a different patent climate and by the time sh1t started (Ebay) it was already too late to change my mind )

  3. Gene Quinn June 6, 2017 11:50 am

    Curious-

    I think you severely overstate what Eon-Net and Rothschild stand for with respect to exceptionality. In Eon-Net the offer for settlement was less than 10% of the cost of defending. An exaggeratedly low settlement demand coupled with meritless claims is what triggers the exceptionality.

    I just don’t see anything in the cases that suggest that a legitimate demand for an appropriate amount that may be less than the cost to defend a case is relevant. There are some patents that when infringed will be worth $100,000 or $200,000 or $300,000, and all of those amounts would be less than the cost of a defense. If you make a legitimate demand and have a meritorious claim then you will be fine.

    I just don’t think it does any good to try and defend those that ask for very small amounts and never let their patents or allegations get tested. We need to get rid of all that trolling activity, which does exist, so as to not have it inappropriately impact the legitimate licensing and enforcement efforts of those with strong patents and portfolios that are being efficiently infringed because they can be infringed.

  4. Bemused June 6, 2017 11:56 am

    It’s hard to see how TC Heartland wasn’t anything other than an anti-patent decision.

    First, a patent holder now has to sue in multiple jurisdictions depending on where the infringer is incorporated or has a regular and established place of business and commits infringing acts. What that means is that transfer motions will filed to send those cases to an MDL panel and then those cases will be sent to whatever jurisdiction the MDL panel chooses (even if it’s not a jurisdiction that any party requested!). That adds several more months of delay to an already lengthy litigation timeline (the inter partes review process with the attendant stay of district court proceedings adds another 18-24 months to that timeline).

    Second, Delaware (which will likely see a marked increase in filings due to TC Heartland) is already down two district court judges so expect to see an even longer time to trial in that jurisdiction. I understand that Delaware has four visiting judges that will handle cases in that jurisdiction (in addition to those cases that will be handled by Delaware CJ Stark and Judge Andrews). However, that means that by filing in Delaware you end up in front of a judge that may or may not have a whole lot of patent litigation experience.

    Third, lots of plaintiffs (including well-known operating companies like Ericsson, Samsung, Whirlpool, etc) filed cases in TXED because of the well-established body of patent case law from that jurisdiction that added some degree of certainty on how judges would rule on certain issues. That is the same reason why so many companies incorporate in Delaware (the lengthy history of corporate law decisions and the expertise of the Delaware Chancery Court lend certainty to corporate law issues). TC Heartland does away with that and relegates plaintiffs to have to file in jurisdictions where there will be a lack of patent case law thereby increasing litigation risk.

    Fourth, TC Heartland gives infingers an opportunity for venue gamesmanship. For example, I sue Company A and Company B in TXED because I can hold venue in that district. Company B seeks indemnification from Company C. Company C files a DJ action against me in CAND because that is where they are headquartered. Then one of these three companies files a transfer motion to the MDL panel which can consolidate for pre-trial purposes all of these cases in CAND. By coordinating their activities, defendants/companies can deprive me of my chosen forum and create situations where venue is manipulated through the MDL process.

    B

  5. angry dude June 6, 2017 12:01 pm

    Gene Quinn @3

    “There are some patents that when infringed will be worth $100,000 or $200,000 or $300,000”

    Even if these figures were multiplied by 10 it would still be ridiculous to think about patenting those inventions
    Patenting starts at 50 or even 100 mil value – anything less is not worth the hassle and expense
    Unless there is small claims court for patents (not gonna happen in our lifetime) those valuations are not even close to justifiable figures

  6. JNG June 6, 2017 1:51 pm

    Greetings Gene

    You say:

    “It is still possible, as mentioned, to bring a patent infringement action where infringement has occurred and the defendant has a regular place of business, whatever that winds up meaning. Sadly, we have a well-developed understanding of what that phrase means, or should mean, thanks to thousands of cases interpreting 1391(c), as well all the personal jurisdiction cases.”

    I guess I disagree with this a bit, as all the material “venue” jurisprudence is now 30 years old on the subject of “regular and established place of business.” We haven’t had to revisit it bc venue and jurisdiction were coextensive. But since 1990 we’ve had the explosion of the Internet and companies doing commerce directly to people in their homes, all over the US. I suspect many of these plaintiffs will argue that loading a webpage from an e-commerce site into a browser on a PC (or within a phone app) in EDTX creates a “physical presence” akin to a physical building with a proxy electronic sales person. The old telephone cases were a lot more ethereal IMO. If they are available 24/7/365 to EDTX consumers then it will be harder for Ds to say it is not “regular” or “established.” In any event, I predict a lot of creativity from the patent bar, and a receptive ear from the Judges.

  7. Dozens June 6, 2017 4:44 pm

    I see someone on PatentlyO is claiming that Michelle Lee has submitted her resignation letter today (URL below). Has anyone else seen any confirmation of this?

    https://patentlyo.com/patent/2017/06/narrowly-surviving-challenge.html#comment-379614

  8. Night Writer June 6, 2017 5:17 pm

    Politico is saying the same thing.

  9. Anon June 6, 2017 5:20 pm

    Dozens,

    No I have not seen confirmation (and I posted the same link on another thread here at this blog just now…)

  10. Dozens June 6, 2017 5:20 pm

    Thanks. I just saw an e-mail pop up with Law360 saying the same thing.

  11. IPdude June 6, 2017 5:30 pm

    According to Law360 Lee has resigned!!!!

  12. Curious June 6, 2017 6:02 pm

    I think you severely overstate what Eon-Net and Rothschild stand for with respect to exceptionality. In Eon-Net the offer for settlement was less than 10% of the cost of defending.
    After several admonitions from SCOTUS, we know that the Federal Circuit isn’t likely to be drawing any hard and fast lines anytime soon. So, will 10% creep to 20%? to 30%? to 60%? The Courts have taken up themselves to “solve” the troll problem (although that isn’t their job — its the job of Congress). What happens when a defendant comes in and says it would have cost us $2M to defend this lawsuit and they offered to settle for $500K — clearly, this is vexatious behavior that the Court needs to award attorney fees for. What if the plaintiff is one of those “bad actors” that the Court wants to punish? In punishing the “bad actors,” the Courts will establish precedent that will make it harder for everybody to assert their patent rights.

    For example, the abstract idea exception used to be only for “a fundamental truth; an original cause; a motive” or “abstract intellectual concepts.” Bilski was cabined to a “fundamental economic practice long prevalent” and CLS Bank repeated this yet nowadays the Federal Circuit feels no constraint to deem real products “as abstract ideas.”

    This is all part of a death of a thousand cuts. Every decision expands upon the next, and every expansion makes it harder and harder for patent holders.

  13. Curious June 6, 2017 6:03 pm

    I received a note from AIPLA basically saying the same thing.

    Well, one problem has been addressed — let’s just hope that we haven’t traded worse for bad.

  14. Curious June 6, 2017 6:17 pm

    To follow up on the grand news of the day, I suspect it was probably communicated to Lee that she is no longer in the running for retaining her position. For that reason, she decided that it was time to leave as she has no real reason to stay.

    Of course, if she was committed to the USPTO and what it stood for, she could have stayed on until her successor was named and confirmed, which would have eased the transition, but I guess that was too much to ask. However, I don’t begrudge her for wanting to get paid. Any thoughts as to where she ends up? In house? A law firm? A think tank?

  15. Eric Berend June 7, 2017 7:05 am

    Gene:

    I must vigorously object to your use and therefore, legitimization of the pejorative term “troll” in association with the word “patent”.

    As revealed in the response of comment # 22, to my screed posted as comment #11, to the IPWatchdog article “PTAB Procedural Reforms are Necessary to Restore Balance and Due Process” (http://www.ipwatchdog.com/2017/05/24/ptab-procedural-reforms-necessary/id=83651/):

    “…Quit going to TED and giving talks on making society ‘accessible to all’ while you a) fund efforts to funnel all benefits of IP to you and b) fire hose massive volumes of applications at the patent office. ”

    Patent “trolls” were CREATED BY so-called “Big Tech”, themselves – THEY are the ones who inundated the PTO with mountains of low-quality U.S. patent applications, severely diluting the proportional Constitutional benefits as intended for individual inventors. THEY are the ones who then turned around and exploited the milieu THEY CREATED, to force small entity inventors with little other choice, to sell out to PAE’s – then used the FEW ‘real-world’ instances, to induce a cult of hatred for inventors, in general society today.

    It is sorely past high time, that accountability; if not outright responsibility; is placed where it truly lies: the wealthy, well positioned IP pirates and monopolists – after all, the very term “patent troll”, is the creation of a flack at Intel, Inc.

    You may think there is benefit to be gained by co-opting this part of the opposition’s narrative; however, I disagree: the legislators and judges who hold the actual power of decision and change on the essential tenets of this issue, are not that sophisticated and sometimes too corrupt, to respond with nuanced recognition of your approach. Once again, you are allowing for too much credit and collegial respectability amongst seeming peers who are instead, dedicated to a scorched-earth strategy with a take-no-prisoners mentality.

  16. angry dude June 7, 2017 9:09 am

    Eric Berend@15

    “to induce a cult of hatred for inventors, in general society today”

    Very true

    To further clarify on this – they also created a cult of open-source movement (both software and hardware) where they can “borrow” whatever they want without any repercussion and without paying a dime
    For a few things that are patented they used Goebbels-style “patent troll” propaganda to downgrade life achievements of those few remaining American inventors standing in their way
    Good job, google

  17. Kevin R. June 7, 2017 10:06 am

    I think we need to better connect the dots to how venue limitations may help NPEs on the patent market:

    1. TC Heartland limits venue for patent owners to bring infringement suits
    2. Venue limits increase risk for patent owners with (a) extra expenses, (b) lower chance of prevailing, and (c) smaller payouts […on defendant’s “home turf”].
    3. Increased risk will further discourage bringing infringement suits, especially with small businesses/solo inventors who own patents.
    4. Small businesses/solo inventors will still look to monetize their patents to recoup their investment.
    5. Small businesses/solo inventors will be more willing to sell their patents [to a PAE] than try to litigate on a defendant’s “home turf” themselves.

  18. Paul F. Morgan June 7, 2017 12:08 pm

    “What difference does the decision make?” is a good question. As a practical matter, as noted above, one difference is that some venue disputes for suits not based on the state of incorporation may delay suits. Another difference is in litigation costs. E.D. TX has higher costs than various other districts because of, e.g., delaying Markman’s until the eve of trial, allowing unrestricted discovery burdens on undefined claim scopes, and rarely granting timely S.J.

  19. Annonymous June 30, 2017 11:34 am

    Are you kidding me? We have some patents where there are more than 50 infringers, all essentially engaging in identical infringing activities. And, oh by the way, they are spread out over 30 separate jurisdictions across the country. Do you understand how much more complicated and expensive that will be?

    I’ve read a lot of your articles, but this one is S-T-U-P-I-D!

  20. Paul F. Morgan July 3, 2017 3:55 pm

    Anonymous, if you really plan mass tort suits against 50 companies [on the same patents] there may be a way get them consolidated and tried in one district court. Also, a big percentage of those 50 companies are likely to be incorporated in Delaware and can all be sued there.
    [Meanwhile of course some of those 50 targeted companies will be filing IPRs.]