24 May, 2017
The Supreme Court has dealt a significant blow to "patent trolls" that often sue and squeeze a quick payday out of major technology companies using patents that they've bought up for that exact objective. The reason this matters is because a whopping 40 percent of all patent lawsuits in the USA are filed in East Texas, which has a history of ruling in favor of patent trolls. Indeed, we know from the briefs that one-quarter of all patent cases nationwide in the last three years have been assigned to a single federal judge in that court sitting in the bustling community of Marshall, Texas.
The Supreme Court is making it easier for companies to defend themselves against patent infringement lawsuits in a case hailed by North Carolina's attorney general. Utah's federal district court has adopted balanced "local patent rules" to govern patent infringement litigation, and the federal judges in Utah have gained extensive experience in objectively resolving patent disputes for many years.
"Samsung's petition challenges two Federal Circuit decisions, neither of which implicates any broad or disputed question of substantive patent law", Apple said in its filing. Generic pharmaceutical companies filed a brief (PDF) decrying an "undue and unhealthy concentration" of patent cases in DE and New Jersey.
Critics of the Eastern District have long said it's a haven for patent law, because the juries are plaintiff-friendly.
"Patent trolls continue to drain $29 billion a year from US companies, and while today's ruling removes one tool used to manipulate the system, there are still others enabling the abuse of the patent system", he added. Having recited that rule, the court needs only to note that Congress has never amended Section 1400 (b) since the decision in Fourco and that "t$3 he current version of § 1391 does not contain any indication that Congress meant to alter the meaning of § 1400 (b) as interpreted in Fourco".
In the Eastern District of Texas, 72% of motions for summary judgment filed between 2013 and 2015 were denied.
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Companies including Adobe, Ebay, Etsy, HP, Kickstarter, Oracle, Walmart, and others filed a brief with the court urging it to make the conclusion set down Monday. In that year, the general venue law was liberalized to allow a lawsuit to be filed where a defendant corporation "resides or is doing business". Previously, the so-called trolls would buy patents and then sue larger companies for royalties or damages.
The decision overturned a 2016 ruling by the U.S. Court of Appeals for the Federal Circuit, a Washington-based patent court, that said patent suits are fair game anywhere a defendant company's products are sold.
As a result, hundreds (even thousands) of patent suits that would have been filed in plaintiff-friendly courts like the Eastern District-providing plaintiffs with unwarranted advantages unrelated to the merits of their claims-will now be redistributed to federal courts dispersed around the United States that are linked to the defendants. In patent cases, particularly those that involve low-quality patents, a summary judgment is an opportunity for a defendant to shut down a troll without having to pay a settlement or endure a costly trial. Instead, Justice Thomas's opinion unpicks the statutory language and the case law to once again overrule the Federal Circuit.
The Supreme Court ruled in a suit by Kraft Foods Group, which sued drink maker TC Heartland for infringement in DE federal court.
According to Monday's ruling in TC Heartland v. Kraft Foods, plaintiffs seeking to file patent infringement lawsuits against defendant companies will now have to sue in the states where those companies are incorporated. "Forum-shopping in patent cases will largely become a relic of history", he said. Justice Neil Gorsuch did not participate in the decision. "While the decision ending venue shopping will strengthen our patent system and slow down abuse, we still need Congress to act and pass legislation to close additional loopholes exploited by patent trolls".
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