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Patent Troll TC Heartland

The TC Heartland Decision: Big Loss for “Patent Trolls”

On May 22, 2017, the Supreme Court issued a decision in TC Heartland v. Kraft Foods Group Brands. Now, it is much harder for “patent trolls” to file their cases in the Eastern District of Texas.

What Are “Patent Trolls?” Why Marshall, TX?

A patent troll is a derogatory term for a company that obtains the rights of one or more patents from which to profit. Rather than producing its own goods or services, the company profits through patent licensing or litigation.

The Eastern District of Texas, in Marshall, Texas, houses one sitting federal judge. This district can be very friendly to plaintiffs. So friendly, in fact, that more than 40% of all patent litigation cases filed in the United States file in Marshall.

Why Were Patent Trolls Allowed to File in Marshall?

Courts have rules about who can file a suit where. Lawyers call this “venue.”

Usually, a plaintiff can file a suit in a court where the defendant lives, does business or has significant ties. The federal government put the rules related to “venue” in a federal statute - 28 U.S.C. § 1391.

But, because patent infringement cases enjoy special treatment (they have particular rules governing their procedure), the Supreme Court, in 1957, held that 28 U.S.C. §1400(b) is the “sole and exclusive” provision controlling venue for patent infringement actions and not 28 U.S.C. § 1391

However, the Federal Circuit (the exclusive appeals court for patent issues – again because patent infringement cases enjoy special treatment) handed down a decision in 1990 adopting another statutory provision (specifically 28 U.S.C. 1391(c)) for controlling venue in patent infringement actions.

Essentially, this provision stated that a corporation may be

deemed a resident of any judicial district in which such defendant is subject to the court's jurisdiction.

(The Federal Circuit cited to an amendment in the venue provisions from Congress.)

In other words, someone can bring suit against the corporations anywhere the corporation does business – which, for a large company, means they could probably be sued in the Eastern District of Texas.

Opponents claim the Federal Circuit decision allows plaintiffs to “forum shop” or to pick the most plaintiff-friendly venue possible.

What Did the Supreme Court Say in TC Heartland v. Kraft?

On May 22, 2017, the Supreme Court issued a much-anticipated decision that a corporation could not be sued for patent infringement anywhere it was subject to personal jurisdiction.

The court heldthat 28 U.S.C. §1400(b) is the ONLY statutory rule that controls venue in patent infringement actions. This holds consistent with the Supreme Court’s 1957 decision.

The Court found that the congressional amendment the Federal Circuit cited never intended to amend 28 U.S.C. §1400(b). Therefore, the Federal Circuit incorrectly interpreted the law. The Court said, pursuant to §1400(b), that a

patent infringement may be brought in the judicial district where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business.

Period. No more significant ties.

What Does This Mean for Patent Trolls?

The TC Heartland v. Kraft decision means the end of forum shopping for patent infringement cases. It also means that the Eastern District of Texas may see a bevy of Motions to Transfer Venues for the currently pending case.

It probably also means that Marshall hotels will suffer.

TC Heartland reversed decades of law governing where patent-holders could bring a patent infringement suit could. Now, everyone will have to wait and see how the courts go about enforcing patent protection.

About Meghan Nugent

Meghan Nugent is an associate with SpencePC. She has extensive experience assisting clients in both transactional and litigation matters of all natures. The focus of her practice is Intellectual Property. She also assists the firm’s clients in the prosecution and litigation of trademarks.

View all articles by Meghan Nugent »

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