The Supreme Court issued an opinion today that restricts the ability of patent owners to choose the court in which they bring an infringement suit. The case is called TC Heartland LLC v. Kraft Food Group Banks LLC, and the justices unanimously ruled in favor of the new restrictions.
The importance of the decision arises from the fact that litgants have always engaged in “forum shopping,” meaning a party files suit in a given court because that’s where they think they will be most likely to win.
For patent owners, that means the federal district court for the Eastern District of Texas, where 35% of all patent cases are brought. Until today’s decision, a patent owner could bring an infringement suit in any court where the defendant could be sued generally, which in most cases meant almost any federal district court – including the E. D. of Texas.
Potential patent defendants, of course, play the same game when they expect they are about to be sued. Where that’s the case and the facts and their strategic best interests otherwise allow, they may sue the patent owner first, filing suit in a more neutral, or patent un-friendly, district court. The vendor in its suit would ask the judge to rule either that the product in question was non-infringing, or that the patent itself was invalid.
No one disputes the fact that federal laws should apply to everyone, everywhere, in the same way. It undermines faith in the judicial system if it’s obvious that one party will win in this court, but lose in that one, on exactly the same facts.
To be fair, this type of situation frequently arises when new issues are presented, and courts try to figure out what the best answer should be. If they eventually settle on a common approach, all is good. If they don’t, the Supreme Court will eventually accept a case involving the contentious issue and a determination which is thereafter binding on all courts.
In the case of patent law litigation, there has been a difference in outcomes for many years, to no good purpose. Everyone who knows anything about patent suits acknowledges that the Eastern District of Texas is friendly to patent owners, and that patent owners bring cases there solely for that reason.
In theory, at least, this state of affairs isn’t quite as bad as it sounds. That’s because a single court – the Court of Appeals for the Federal Circuit – hears all appeals of patent cases. That means virtually all cases that are appealed will ultimately be heard by one court, applying the law consistently. Ironically, it’s the Federal Circuit that has, until now, affirmed the broader jurisdiction interpretation that the Supreme Court just over-ruled. But patent appeals are expensive and time consuming, so defendants that lose in Texas may decide to settle, or pay up, rather than fight.
Clearly, something needed to be done.
For whatever reason, the Supreme Court decided that this term was the time to make a change. The critical point at issue involved which of two federal statutes controlled choice of venue, and the Court ruled that the statute with the narrower definition applied.
Under the Supreme Court’s ruling, a patent owner will now only be entitled to bring suit in federal courts having jurisdiction over a state where the defendant is either incorporated, or has a regular and established business and is also engaging in infringing activity. That will rarely be the Eastern District of Texas, and perhaps even less frequently in the future as the news gets around that Texas is a bad place for a tech startup to incorporate, and that the Eastern District of that state is a lousy place for any technogy company to maintain an office.
The holding is additionally ironic due to the facts of the case: the suit in question was brought not in the Eastern District of Texas, but in a federal court with jurisdiction over Delaware, the state where the Defendant was incorporated. In other words, in this suit there was no forum shopping wrong to be righted. The court simply decided to ignore its usual practice of declining to rule on a point if it could avoid doing so.
That was bad luck for the patent owner, but good luck for patent defendants. Still, it’s an example of another kind of judicial larbitrariness. Apparently, all parties to litigation should always be treated equally – except when the Supreme Court decides its time for a change.