Sorry East Texas: Supreme Court Slams The Door On Patent Jurisdiction Shopping

from the no-more-bulls dept

Another Supreme Court case on patents, and another complete smackdown of the Court of Appeals for the Federal Circuit (CAFC), the court that is supposed to be the “expert” on patent cases. This morning the ruling on the TC Heartland case came out, and it could help put an end to jurisdiction shopping for patent cases. As you’ve probably heard, for years now patent trolls and other aggressive patent litigants have been filing their cases in East Texas, as it’s become a jurisdiction that is ridiculous friendly to patent holders. The towns of Marshall and Tyler, Texas have practically built up industries around the fact that they are “patent friendly” jurisdictions. In the past few years, a second favored jurisdiction has popped up: Delaware, after a few academic studies showed that the courts there may have been even more friendly than East Texas. The TC Heartland case was about a case filed in Delaware, and raised the issue of whether or not this kind of patent forum shopping was okay. CAFC, in its usual CAFC manner, said “sure, that’s great, we love jurisdiction shopping and have since our 1990 ruling in VE Holding v. Johnson Gas. This was kind of ironic, as one of the key justifications given for setting up CAFC in the first place was to put an end to jurisdiction shopping in patent cases.

Either way, CAFC once again blessed the ability of patent holders to sue in plaintiff friendly locations, and the Supreme Court — which has spent the past decade reteaching patent law to CAFC every chance it gets — has done so again. Once again, the decision was unanimous, with the court voting 8 – 0 that trolls can’t just file over and over again in East Texas (Gorsuch, having just joined the court after the case was heard, did not take part). The opinion, written by Justice Thomas, goes through the history of jurisdiction issues related to where one can bring lawsuits, noting that historically, where a company was incorporated was the proper jurisdiction.

While most of the ruling is deep in the weeds about definitions in the law, and whether or not Congress intended to change certain definitions, here’s a simplified version of what happened: some have interpreted patent law to mean that a patent holder can sue an alleged infringer anywhere that a product is sold/available. In the age of the internet, this generally means “anywhere.” Thus, as long as your product was available in Texas or Delaware, trolls could sue in those locations — even if the company was nowhere near those locations. Here, however, the Court has said that the lawsuits are supposed to be filed where the company “resides,” which it says is the state where the company is incorporated. This is a huge win for companies who are targeted by patent trolls. Rather than being dragged across the country to courts like East Texas or Delaware, which have built up large practices and reputations for supporting patent trolls over actual innovators, now cases will need to be filed where the alleged infringer is actually incorporated.

Expect to see the usual whining from patent trolls and their supporters about this — but just remember: if they have a serious case of infringement, they should be fine filing it wherever the defendants actually are. Their concern is not about how this is somehow bad for patent owners. It’s really about how certain courts were biased in their favor and they can no longer take advantage of that. Of course, this might mean that the ice rink in Marshall, Texas needs to find a new sponsor.

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Companies: tc heartland

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Comments on “Sorry East Texas: Supreme Court Slams The Door On Patent Jurisdiction Shopping”

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21 Comments
Anonymous Anonymous Coward (profile) says:

In the name of the Corp., for the Corp., and by the Corp. and keep the peons paying.

Laws favorable to corporations makes Delaware a place where corporations like to file their incorporation papers. Last I checked (a long time ago) the fee was only $50, and the paperwork limited. Lots of mailbox sized corporate headquarters there.

Maybe they should make corporations file their papers where they actually ‘reside’. That may be difficult with companies that have many facilities, and in recent years companies ‘moving’ their headquarters to tax beneficial locations, even out of the country, compound the problem.

I am not sure the best way to go about it, but corporations, in some aspects, are out of control, and need to be reigned in without doing too much damage.

nerd bert (profile) says:

Re: In the name of the Corp., for the Corp., and by the Corp. and keep the peons paying.

But as the article points out, Delaware is now becoming even more troll friendly than East Texas. How will companies incorporated in Delaware react to that fact?

I really suspect that you will now see jurisdiction shopping — but on the part of companies seeking protection from patent trolls. Given Delaware’s current configuration of laws and patent-troll friendliness, I expect to see some pushback on Delaware legislators from companies or an exodus of companies, especially tech companies, incorporated there.

streetlight (profile) says:

East Texas becomes the new Deleware

Companies could move their incorporations to East Texas as well as startups incorporating there. The Post Office will need to add new mailboxes and there will be new employment opportunities as jury members deciding patent cases. Might need a larger court house and additional judges. Incorporation lawyers might need to open offices there, too. The economy may boom. Then again, it’s East Texas.

Anonymous Coward says:

Re: East Texas becomes the new Deleware

You have this completely backward. The suit needs to be filed in the jurisdictional residence of the defendant, not the plaintiff. The only reason anyone would do what you say is if they are producing a product that they want patent trolls to attack. Nobody does that.

Anonymous Coward says:

This is just too beautiful. I say forget about the blasted states who made a living by helping to cripple innovation and make it mostly impossible not to get sued and go bankrupt as a new company. If they go poor now, it is their own damned fault for putting it all on black and they deserve every hardship that comes with that.
They gained wealth at everyone’s expense by preventing startups from succeeding and made prices go up on every other product. All that wealth was transferred to themselves, the lawyers, and the companies that horded patents that only a very few people ever gained anything from.
There is still a long way to go, but this is a major victory… wonder if it lasts.

Anonymous Coward says:

Didn’t there used to be a trope of “real” companies being incorporated in Delaware for some reason, even when they had nothing to do with the state? I’m sure I recall the phrase “***, a Delaware corporation” being a thing…

Do companies still do that? If so then there might be a fair number of companies who have incorporated in Delaware getting suddenly hoisted by their own petard, if it’s also become a place to start patent trolling.

Thad (user link) says:

Re: Re:

Didn’t there used to be a trope of "real" companies being incorporated in Delaware for some reason, even when they had nothing to do with the state? I’m sure I recall the phrase "***, a Delaware corporation" being a thing…

Yes. GoDaddy, for example, is based in Arizona but incorporated in Delaware. It’s a tax thing.

Do companies still do that? If so then there might be a fair number of companies who have incorporated in Delaware getting suddenly hoisted by their own petard, if it’s also become a place to start patent trolling.

Could be, though most big companies still choose to settle with patent trolls rather than go to court. If the cost of settling is less than the amount they’re saving on corporate taxes by incorporating in Delaware, then the cost/benefit analysis doesn’t change.

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