23 May 2017
Washington DC
Reporter: Mark Dugdale

Lawyers react to TC Heartland v Kraft Foods

The US Supreme Court’s unanimous ruling in favour of TC Heartland to put severe restrictions on where patent owners can bring infringement litigation has reset the clock to 1987 and could encourage the intervention of Congress, intellectual property lawyers have warned.

Supreme Court justices delivered their highly anticipated ruling in TC Heartland v Kraft Foods yesterday (22 May). They ruled: “As applied to domestic corporations, ‘reside[nce]’ in Section 1400(b) of the US Patent Act refers only to the state of incorporation. The amendments to Section 1391 did not modify the meaning of Section 1400(b) as interpreted by Fourco.”

Ron Abramson, partner at Lewis Baach, explained its meaning: “Under this ruling, the controlling statute on patent venue is the narrower provision of Section 1400(b), whose meaning is not impacted by the broader provision in the general venue provisions of 35 USC 1391(c).

“There will now be fewer places to bring a patent infringement lawsuit, to be sure.”

Christopher Larus, partner at Robins Kaplan, agreed with this assessment, saying: “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.”

As Larus explained following the ruling, the Eastern District of Texas, “a forum of choice for many plaintiffs in patent litigation”, will feel the ruling hardest, with “37 percent of all patent cases filed there in 2016”.

Larus said: “In 2016, a single judge in that district—US district Judge Rodney Gilstrap—was assigned more than a thousand new patent cases, amounting to nearly 25 percent of the nation’s total. [The] Supreme Court’s 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 Court of Appeals for the Federal Circuit 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.”

The Supreme Court has “reversed nearly three decades of established law on patent venue and reset the clock to 1987”, according to John DiMatteo, partner at Holwell Shuster & Goldberg.

He said: “This is a win for the lawyers in Delaware and Northern California, as well as a few other districts, where many defendants are incorporated or do business, and a loss for those in the Eastern District of Texas and other remote pro-patent venues. Over the next year, thousands of cases will be transferred or dismissed to proper venues under this ruling. I expect Congress will also act in the near future to either clarify this decision or overrule it.”

Stroock IP partner Pierre Yanney questioned the likely effect on litigation going forward.

Yanney said: “While the court’s ruling limits where a defendant may be sued for patent infringement, it still doesn’t close the door on being able to sue a defendant where they are incorporated, or where they have a ‘regular and established place of business’—which is really more in harmony with the relevant due process considerations.”

“The decision does away with the opportunity to sue a defendant wherever they sell products—regardless of where they are incorporated or where they have a place of business—but the practical reality is that for larger defendants this will not mean much of a change since these companies typically have a ‘place of business’ in many, if not most or all states,” he adds.

Other lawyers doubted whether Congress would intervene. Abramson of Lewis Baach concluded: “This is a defensible ruling, but in my mind questionable. Unless Congress changes the law once again broaden the bases for patent venue—which I very much doubt will happen—the narrow rule of today’s decision is will be the law going forward.”

He explained: “From here on forward, patent infringement suits will have to be brought where the defendant is incorporated (Delaware in a good number of cases), or (under the second prong of Section 1400(b), which is not affected by [the] decision), where both infringement takes place and the defendant has a regular and established place of business.

“The latter provision (place of infringement plus established place of business) still leaves a lot of possibilities, for example in cases of infringement arising on the internet, which can be difficult to locate geographically and appears to leave open the possibility to sue large companies in jurisdictions in which they maintain offices if it can be plausibly alleged that infringement takes place in that jurisdiction. But the argument under the second prong of 1400(b) only pertains to a subset of cases.”

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