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24 May 2017, 05:35 | Vickie Mathis
Supreme Court makes it much harder for patent trolls to sue in East Texas
These lawsuits are complex and expensive, sometimes costing each side millions of dollars in attorneys fees alone.
While the ruling could effectively shake up the legal infrastructure around patent suits, it won't prevent those suits from happening. Not surprisingly, such lawsuits can dramatically alter the competitive landscape in any given industry and change business fortunes. "This ruling will help these businesses and their employees focus on innovating and creating, not on defending against abusive litigation tactics". The AGs "have an interest in protecting their citizens from abusive claims of patent infringement, which businesses and residents confirm are a drag on economic growth".
In 2015, a report from Unified Patents showed a surge in patent lawsuits was being driven by non-practicing entities (NPEs).
In fact, more than one-third of patent lawsuits are filed in the Eastern District Texas, a venue known for favorable rulings and massive jury verdicts. These variations can impact the substantive outcome of a patent lawsuit, because patent cases are closely supervised by judges (who, like anyone else, have their own biases) and also involve trials by jury. "Patentee-friendly jurisdictions - in particular, the Eastern District of Texas - are destined to see a dramatic decline in patent litigation".
"The half of patent cases previously filed in East Texas will now have to shift to places like Delaware, California and NY", patent attorney Shawn Hansen said Monday.
Following the conclusion of the case, which ruled for Kraft, TC Heartland took its appeal all the way to the Supreme Court. More than 40 percent of all patent cases have traditionally been filed in the Texas district, according to The New York Times-becoming a well-known example of "forum shopping" in legal circles. This is thought to be because of the high success rate these patent trolls have in the district, garnering wins that other areas would, perhaps, rule as losses.
The US Supreme Court ruled (PDF) today on how to interpret the patent venue laws, and the controversial business of "patent trolling" may never be the same.
Yesterday, the court concluded that the amendments to section 1391, the statute governing "venue generally", didn't modify the meaning of section 1400 (b), the patent venue statute. If alleged infringers only "reside" in their state of incorporation, as opposed to anywhere they are subject to personal jurisdiction, patent holders will no longer necessarily get to choose the venue in which they may file a patent infringement lawsuit.
The reputation of East Texas juries for handing down mind-boggling verdicts (one jury previous year ordered Apple to pay $625 million to a shell company over patents from 1998) led many companies to simply pay the trolls to go away even if the patents in question appeared to be of dubious quality.
"Given the definition of "resides" is limited to the "state of incorporation, ' it may lead to a swell in patent cases in DE, and otherwise funnel cases towards defendants" home jurisdictions", said Kirkland & Ellis intellectual property partner John O'Quinn.
This development represents good news for Idaho's rapidly growing economy. Heartland attempted to get the matter transferred to its home state of IN, arguing that it has no presence IN DE and that 98 percent of its sales come from outside of the state.
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