Earlier today the United States Supreme Court issued its much-anticipated decision in TC Heartland LLC v. Kraft Food Group Brands LLC. In a unanimous decision of the Court delivered by Justice Thomas (minus Justice Gorsuch who did not participate in consideration of the case) the Supreme Court reversed the Federal Circuit and ruled that 28 U.S.C. 1400(b) remains the only applicable patent venue statute. For the most part, this decision will require patent owners to sue those infringing their patents in a district court in the state where the infringer is incorporated. For my take see: SCOTUS reverses Federal Circuit in TC Heartland.
What follows is reaction from a distinguished panel of industry insiders who have been following this case. Each have offered their own instant analysis, several pointing out that important questions remain about what this Supreme Court decision will mean for the many thousands of patent cases already filed, many that are now in inappropriate venues. It is probably fair to say that the ruling did not surprise most of our panel (although one person did express surprise), but several on our panel did point to the Supreme Court’s decision as more in a decade-plus line of cases that have continually eroded the rights of patent owners.
Former Director of the USPTO
Senior Partner, Polsinelli
In its TC Heartland v. Kraft opinion today, the Supreme Court very predictably, and unanimously, reversed the CAFC’s 25 year old precedent on patent litigation venue, reverting to limiting venue to where the Defendant was incorporated, in addition to where the infringement occurred and had a regular place of business. (Foreign corporations still presumably can be sued most anywhere.) With nary a reference to “fixing the problem” with the Eastern District of Texas, (which many amici had gone into in gory detail), nor yet again chastising the patent assertion entity business model, Justice Thomas framed his opinion as a matter of simple statutory construction, with a soupcon of trendy ‘originalism’ tossed in for good measure.
That said, the impact on both the EDTx and PAE’s is likely to be significant. Assuming that they still want to file, the PAE’s will now have more limited options. However, as pointed out in a recent paper, Santa Clara Law Professor Colleen Chien calculated the impact on the various courts, and found significant, though not complete, changes. ln other words, the EDTx is probably not out of business just yet. Secondly, Justice Thomas gave no hint as to how to manage the near term procedural aspects, especially for pending cases. Just filed in EDTx? Move to transfer might be pretty straightforward. Pending for several years of discovery and motion practice, finally ready to go to trial? Not so much. So wait and see there, but at least a little extra lawyering to keep the cash flow up.
However, and perhaps more interesting for the policy/political geeks, is the impact on patent litigation reform legislation, pending the last several Congresses. Sen. Flake’s standalone venue bill was riddled with exceptions and detail, presumably to account for every possible stakeholder demand. With its limiting of “place of business” to bricks and mortar facilities, while at the same time carving out exceptions for all sorts of lobbyists, it may likely give way to more pressing concerns, as did various aspects of reform after eBay, Halo, and Therasense. And while House Judiciary Committee Goodlatte also announced today that, in light of this decision, he’s moving on to “on other aspects of abusive patent litigation”, it’s a little difficult to see how this now-narrow set of issues really stirs anyone other than some in Big Tech to action.
Former Commissioner for Patents, USPTO
Partner, Drinker Biddle
The TC Heartland decision finds venue proper where the defendant: (1) resides which now means where defendant is incorporated and, (2) where the defendant has committed acts of infringement and has a regular established place of business. It will be interesting to see how this plays out and what choices the plaintiffs will make. Does this mean that the plaintiffs could go after the stores in Texas that sell the alleged infringing products? Also will the intellectual property community now seek legislation to again reset the needle or will we wait to see how this all works? And what does this mean for foreign companies? We shall see.
Former Deputy Commissioner for Patents, USPTO
Managing Partner, Oblon, McClelland, Maier & Neustadt
Today, the Supreme Court in a 8-0 decision, in which Justice Gorsuch did not participate, issued an unremarkable and highly predictable opinion in TC Heartland LLC v. Kraft Foods Group Brands, LLC. Justice Thomas writing for the Court held, that consistent with Fourco Glass Co. v. Transmirra Products Corp., 353 U.S. 222, 226, for venue purposes of 28 U.S.C. § 1400(b) a domestic corporation “resides” only in its State of incorporation. The amendments to 28 U.S.C. § 1391 did not modify the meaning of § 1400(b). The opinion of the Court unsurprisingly takes a strict statutory constructionist stance and consistent with its pattern of granting certiorari in patent cases reversed the Federal Circuit’s interpretation of a patent venue statute. Notably, this is another instance where the Supreme Court unanimously shows animus against special treatment by patent laws of subject matter that is generally applicable to all types of law.
While this decision is not favorable to patent owners, patent venue as interpreted by the Federal Circuit in VE Holding Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574, 1578 has been the target of patent reform debates in Congress for many years. Had the Supreme Court not reversed the Federal Circuit Congressional leaders may have pursued legislation in 2017 to accomplish the same outcome as in today’s decision in TC Heartland.
William A. Munck
Managing Partner, Munck Wilson Mandala, LLP
The Supreme Court took the title of “Patent Litigation Hotbed” away from the Eastern District of Texas and awarded it to the District of Delaware. In finding that the two prior amendments to §1391 did not modify the Fourco meaning of §1400(b), the Court ruled that a patent infringement claim must be brought in a judicial district in the State where a defendant (i) is incorporated or (ii) committed acts of infringement and has a regular and established place of business.
Patent litigation became a lot cheaper today for the defendant. The Eastern District’s local rules are as rigid as they are quick, requiring patent infringement defendants to invest significant resources in the frontend of a lawsuit (e.g., substantial development of defenses/contentions prior to case management conference). The Delaware District, while known for patent savviness, does not require such upfront investment, and is certainly not considered pro-plaintiff as many consider the Eastern District to be. Today’s decision will lead to patent infringement suits being filed in States where the defendant (i) committed acts of infringement and (ii) has a regular and established place of business.
Vice President of Intellectual Property and Litigation, Adobe
Adobe commends the Supreme Court for its unanimous decision to limit forum shopping in the TC Heartland v. Kraft Foods Group ruling. This is a critical step towards ending predatory patent litigation. Like many tech companies, Adobe deals with frivolous patent suits in places like the Eastern District of Texas because plaintiffs search for friendly courts. There’s no place in the judicial system for the type of blatant forum shopping that is occurring in patent litigation today. Our country needs a patent system built for the 21st century innovator, and the first step to achieving that is ensuring forum shopping becomes a thing of the past. Adobe is a strong believer in the patent system, where high quality patents are used to defend innovation. Ending abusive litigation tactics and continuing to focus on issuing high quality patents will help the country refocus the patent system back to its original principles.
Managing Director, US Inventor
Most patent suits must now be filed in the district where the defendant is incorporated. For the most significant inventions, those with the greatest commercial success that have created or significantly improved entire industries, particularly those in technology, the cost, complexity and risk of defending patent rights will be increased to prohibitive levels. From a practical perspective, this means that many of the most valuable new technologies will very likely be unenforceable in the United States. These are the technologies that construct our infrastructure and defense and create most of our new jobs. These technologies are enforceable in China, so venture capital and the startups that develop them these technologies will continue to move to China and in a short time, this will become a national security disaster as we are forced to buy technologies that support our infrastructure and military from China.
This ruling continues a decade long pattern of Supreme Court activism and Congressional misdirection that is devastating to small entities because it increases cost and complexity and creates enormous uncertainty. The current environment of patent law for small entities is already bleak. Injunctive relief is impossibly hard to prove, obviousness is no longer defined, what is patentable subject matter is not defined, damages are in free fall, patents are invalidated at incredibly high rates, and administrative tribunals within the USPTO are invalidating an overwhelming percentages of issued patents, a property right. Contingent fee attorneys and investors have largely already fled the patent business. This ruling will cause whatever few are remaining to go wherever they went.
We are embarked on a course of economic and technological self-destruction as the rest of the world goes the other direction.
Partner, Baker Botts
The Supreme Court’s decision in TC Heartland will now shift the analysis for venue in patent cases to where a domestic corporation “has committed acts of infringement and has a regular and established place of business” or its state of incorporation. There is a limited body of caselaw that exists on this subject that will now be the basic framework for venue battles. However, that caselaw is from the 1980’s, so it isn’t clear how courts will treat modern day situations, including for example Internet-based websites. But the caselaw does make clear that the test is not limited to whether a company has a fixed physical presence such as an office or store in the district, but instead “whether the corporate defendant does its business in that district through a permanent and continuous presence.” In re Cordis Corp., 769 F.2d 733, 737 (Fed. Cir. 1985).
In addition, this decision may provide an incentive for patent owners to target customers, distributors, or their own suppliers who satisfy the venue requirements rather than suing the primary target directly. What is also notable in the Supreme Court’s decision is what it did not address. Another issue to consider is that footnotes 1 and 2 make clear that this decision applies only to domestic corporations, not to foreign companies or other types of domestic entities.
Given that more U.S. corporations are incorporated in Delaware than in any other state, the first test means that many new cases which, prior to the Supreme Court’s decision, may have been filed in the Eastern District of Texas (and elsewhere around the country), now will be heading to the First State. Fortunately, the District of Delaware is well-equipped to meet the challenge.
Delaware has been the second-busiest patent district in the country, behind the Eastern District of Texas, for years. The district has seen its share of complex, multi-party patent cases in a range of industries. The judges in Delaware are well-versed in patent law, and patent cases proceed in an organized, timely manner. Litigators can expect a courteous, but no-nonsense and formal, approach from the court. Further, Delaware has the legal infrastructure to accommodate high-level patent litigation.
Partner, Kilpatrick Townsend
The Court’s ruling will likely lead to a significant reduction in the number of cases filed in the Eastern District of Texas as plaintiffs must now look for venues where defendants are either incorporated or have a regular and established place of business. Many U.S. companies are incorporated in Delaware, so we should see an increase in cases filed in that district, which is already a somewhat popular venue for patent cases. Large technical centers like Northern California will also see an uptick, and in general there will be more regional diversity in patent filings. This may even encourage more courts to adopt patent local rules to more easily litigate patent cases. Further, the Court left unanswered the question of how its ruling impacts foreign corporations, so the Eastern District of Texas will likely remain a popular venue for suits against foreign defendants. This could tee up another venue fight over foreign corporations in the near future. Courts will also have to consider how to apply the ruling in cases that name multiple defendants incorporated in different states.
It is important to recognize that the Supreme Court’s decision today follows numerous other Supreme Court rulings over the last decade that have made it more difficult for patent holders to enforce their patents. This decision also comes on top of several major legislative and administrative measures adopted in recent years that have similarly weakened patent rights. Taken together, these patent system changes have made it harder for American inventors to succeed and undercut a key driver of U.S. innovation and job creation.
Disturbingly, the U.S. is no longer considered the gold standard among patent regimes. While the U.S. has been curtailing patent protections, our foreign competitors, such as China and Germany, have been moving to strengthen those protections and promote innovation in their countries. Notably, in 2016, the U.S. fell to 10th place in the U.S. Chamber of Commerce’s international ranking of patent system strength, falling behind countries such as Singapore, Spain and Italy.
As a result, innovation – and the jobs and economic growth that go with it – has increasingly moved overseas, along with the venture capital that funds so much of our start-up and entrepreneurial growth. In 2014, the rate of new U.S. startups was the second lowest on record. In 2015, the U.S. share of global venture capital shrank to 54%, down from 83% in 1996. And according to the National Venture Capital Association, in three of the last four years, at least half of the top ten largest venture investments in the world occurred outside the U.S.
Patents provide a vital incentive for inventors, entrepreneurs, start-ups and universities to innovate and bring new technologies and medical breakthroughs to market. Without strong intellectual property rights, our innovations can be knocked off by large corporations and foreign entities, and small inventors have no recourse when their ideas are stolen. The American patent system has been central to creating an innovation ecosystem that has produced the strongest economy in the world. The U.S. must adopt policies that strengthen our patent system, instead of further weakening it.
Partner, Robins Kaplan
The Supreme Court’s decision in TC Heartland v. Kraft Foods strikes a substantial blow against plaintiffs who seek to bring patent suits in the Eastern District of Texas. The Eastern District of Texas is a forum of choice for many plaintiffs in patent litigation, with 37 percent of all patent cases filed there in 2016. In 2016, a single judge in that district – U.S. District Judge J. Rodney Gilstrap – was assigned more than a thousand new patent cases – amounting to nearly 25 percent of the nation’s total.
Today’s Supreme Court decision substantially restricts patent filings to only those states in which a defendant is incorporated, or maintains a regular and established place of business. The decision was based on the Court’s narrow reading of the patent-specific venue statute, and rejected the longstanding interpretation of the lower Federal Circuit Court of Appeals that allowed patent suits to be brought in any judicial district in which the defendant is subject to personal jurisdiction and sells an allegedly infringing product.
This decision substantially restricts the venue options for patent plaintiffs. Over the past decades, patent litigation has been increasingly concentrated in four of the country’s 94 judicial districts – including the Eastern District of Texas. This decision is likely to reverse that trend. We expect to see many more cases brought in states in which defendant companies are incorporated or have major business operations. This decision will also make it more challenging for patent plaintiffs to bring parallel patent suits against multiple defendants in a single district. As a result of today’s decision, suits against multiple patent infringers may have to be brought in courts throughout the country – potentially increasing the plaintiff’s litigation costs and increasing the risk of inconsistent outcomes.
Partner, Marshall, Gerstein & Borun
The Supreme Court stunned the nation’s IP community today by declaring that a nationwide venue for patent cases is now dead. Ruling in TC Heartland LLC v. Kraft Foods Group Brands LLC, the Supreme Court rejected precedent established by the Federal Circuit that has reigned for nearly 30 years. The Supreme Court declared that patent holders may sue only in the state in which an accused infringer is incorporated, or in a district in which they have committed acts of infringement and have an ‘established place of business.’
The consequences of the Supreme Court’s action cannot be understated. Patentee friendly jurisdictions—in particular, the Eastern District of Texas—are destined to see a dramatic decline in patent litigation. In contrast, the Federal District Court for the District of Delaware will undoubtedly see a significant rise in patent litigation, owing to the large number of corporations incorporated in Delaware.
In the immediate aftermath of the Supreme Court’s decision, parties will likely scramble to answer a number of questions. What becomes of pending cases in venues that are improper under the Supreme Court’s decision? Will litigants now be offered an opportunity to assert a defense of improper venue if, in reliance upon previous precedent, they failed to previously raise such a defense? What interpretation will courts now give to the alternative requirement that venue is proper where the defendant has ‘committed acts of infringement’ and has an ‘established place of business’? In the last 30 years, courts have had little occasion to address this second basis for venue.
Partner, Nixon Peabody
Forum shopping in patent litigation is over. Today the Supreme Court rejected a venue rule that for more than 25 years has permitted patent suits to be filed anywhere an accused infringer is subject to personal jurisdiction. This rule enabled the Eastern District of Texas – a rural region between Dallas and the Louisiana border – to attract something like half of all patent litigation in recent years despite its lack of a meaningful connection with most patent disputes. After today’s ruling, very few patent cases will qualify for venue in East Texas.
Much like all politics are local, litigation procedures and policies are highly localized, which is why venues like East Texas can become popular. Although the Supreme Court’s ruling is mundanely procedural on its face, it will have major impacts on the practicalities of patent litigation going forward. The half of patent cases previously filed in East Texas will now have to shift to places like Delaware, California, and New York. The costs of defending patent litigation will be reduced, and the costs of patent trolling activity will be increased. Together with the reforms of the America Invents Act, todays’ ruling in TC Heartland may be remembered as among the most impactful patent reforms in recent memory.
Partner, Kasowitz Benson Torres
The Supreme Court’s TC Heartland decision is the most significant Supreme Court decision in patent law in 20 years, putting a cap on the Court’s reshaping of patent litigation over the last decade. By restricting venue to the place of incorporation for patent cases, the Court has dramatically changed the dockets of the Eastern District of Texas and the District of Delaware overnight. The decision will also lead to significant motion practice across the country as defendants seek to move pending cases. This will cause a fair amount of confusion and inconsistent results as district courts and the Federal Circuit struggle in a game of musical chairs, expected to last several years.