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Supreme Court closes court-shopping loophole for patent trolls

Supreme Court closes court-shopping loophole for patent trolls”

Though the TC Heartland and Kraft case focused on a disagreement between whether the case should take place in IN or DE, 40 percent of all patent suits are filed in east Texas.

Teague Donahey is an intellectual property litigator with Holland & Hart. Slip op.at 10. The decision has significant consequences for Hatch-Waxman litigants and for litigants under the Biologics Price Competition and Innovation Act (BPCIA). One major example is the Eastern District of Texas, which is notorious both for hearing a lot of patent infringement cases and also for handing accusers big wins. The Federal Circuit denied Heartland's transfer by relying on the 1990 ruling. Because of confusion about where the suit belongs, however, the merits of this case have gone untested.

With the latest ruling from the U.S. Supreme Court, patent trolls just lost their advantage of filing patent infringement lawsuits in places where they typically favor the plaintiff.

One hotbed for patent trolls is East Texas as evident by the fact that more than 40 percent of all patent suits in the U.S. are filed in that region.

"As 17 states noted in an amicus brief supporting Heartland, the Eastern District of Texas is popular because 'local practices and rules depart from national norms in ways attractive for incentivizing settlement for less than the cost of litigating the early stages of patent cases.,'" points out the Wall Street Journal in an editorial applauding the court.

The number of patent disputes in the USA is soaring in 2017, though that could all be about to change after a new ruling from the country's highest court.

Much of the consternation surrounding the issue involves the fact that Congress has amended the general venue statute, Section 1391 (c) of Title 28, twice since Fourco, while Section 1400 (b) remains untouched.

A 1990 ruling by the Federal Circuit loosened the geographic limits on patent cases and has served as a blueprint for such cases ever since. VE Holding also gave flexibility to pharmaceutical companies to select a single jurisdiction for bringing Hatch-Waxman cases against multiple ANDA filers. TC Heartland is incorporated in Indiana, and has its headquarters in Carmel, Indiana. "We conclude that the amendments to §1391 did not modify the meaning of §1400 (b) as interpreted by Fourco". The court found, emphatically, that patent suits can be filed only in courts located in the jurisdiction where the targeted company is incorporated.

The focus may now fall on the second part of the statute concerning where a defendant has a "regular and established place of business" and this leaves some room for uncertainty.

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In an 8-0 decision, the Supreme Court answered in the negative and reversed the Federal Circuit. TC Heartland, LLC v. Kraft Foods Grp.

Under the ruling, businesses only reside in the state in which they were incorporated.

Congress last re-codified the patent venue law in 1948, and it updated the general venue laws at the same time.

These are companies that make their money nearly entirely from patent licensing, representing two-thirds of all cases in United States district courts at the time, they became known as patent trolls. "This decision is likely to reverse that trend". "Now, Delaware - where many US companies are incorporated due to friendly business statues - is likely to see a surge in cases".

Those determined to bring a case in the district could shift their attention away from manufacturers to retailers who, of course, tend to be more ubiquitous and could therefore still face cases in a broad range of venues.

This could lead to a great change in how successful patent trolls manage to be in their endeavors, and how companies are able to defend themselves in patent litigations.

Holwell Shuster & Goldberg partner John DiMatteo labeled the Monday ruling as setting back the clock.

The court reversed a U.S. Court of Appeals for the Federal Circuit decision from past year that had been used as justification for bringing cases to venues wherever the companies involved happened to conduct business.



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