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 purpose. Today, the court unanimously ruled that a defendant should only face patent litigation in the state where it’s incorporated. For Apple, that would be California. For a ton of other US companies, it’s the state of Delaware.
The move is expected to dramatically reduce the number of cases filed with federal courts in eastern Texas, which have frequently sided with patent holders in quick trials involving multi-million-dollar judgements. Nearly 45 percent of all patent infringement cases were filed in the Eastern District of Texas in 2015. The Electronic Frontier Foundation once belittled Marshall, Texas by claiming it’s “probably more well-known as the birthplace of George Foreman than for any technological industry.”
Now, Delaware — where many US companies are incorporated due to friendly business statues — is likely to see a surge in cases. 4,250 patent cases were filed nationwide in 2016, according to Lex Machina.
The Supreme Court case that resulted in this decision couldn’t be much less about technology. It centered on an appeal from TC Heartland, a maker of food sweeteners that argued it shouldn’t have to face a patent suit from Kraft Foods in Delaware since it’s based out of Indiana.
Many tech companies (Adobe, Garmin, HP, HTC, Oracle, Vizio, etc.) and groups including the EFF filed briefs urging the court to hear TC Heartland’s case, insisting that “patent trolls” have used venue laws to “forum shop” and pick and choose districts where they’ve got the best odds of a favorable judgement. Often times, defendants settle patent cases to avoid the costs of discovery and a protracted legal battle.
Even Texas itself filed to support Heartland’s petition alongside attorneys representing other states. “Marshall is so popular for patent suits that a hotel there got a PACER subscription and offered this electronic access to federal court dockets to help sell rooms to lawyers.” The same brief went on to note that “a technology company that finds itself sued frequently in Marshall has seen fit — in an apparent effort to bolster its reputation in town — to sponsor nearly every major festival plus an ice-skating rink in front of the Marshall courthouse.”
Now, patent holders will need to argue their case in courts throughout the entire country if they want to take companies to court.