TC Heartland: What should be the Patent litigation venue?

In the IP industry worldwide, the trend of filing patent infringement suit has grown exponentially in the recent years. Each patent litigation case involves a plaintiff (the attacking party to which the patent is currently assigned) who sue a defendant (the party whose product has been claimed to infringe on the asserted patent). Nowadays, the patent suit has proved to be a promising method for the plaintiff (in particular for the patent trolls/ NPE) to generate patent monetization benefits.

Let me take you to the background of how the patent litigation trend evolved in United States. Concerning the importance of venue selection for filing patent suit, a 1957 ruling from Supreme Court had determined that patent infringement cases were to be tried only in the state within which the defendant was incorporated. Making it sublime, the defendant needs to have either a production facility or a proper distribution network of the infringing product in the concerned state, in order to file a patent suit there against his selling of product. However, subsequent amendments in the judicial procedure by Congress has led the courts to rule that patent infringement cases could be brought anywhere the defendant is conducting business / selling the infringed products.

Such further decisions proved to be a boon for the plaintiffs - thus allowing them to selectively file litigations in the courts that were more favorable to their cause. In the dictionary of patent litigation, this practice is termed as ‘forum shopping'. This actually happened as few of the judges in litigation courts seemed to be biased towards the plaintiff (mostly patent trolls) and provided very quick decisions in some of the critical patent suits, thereby causing much damage to the defendant side (mostly large corporates). Consequently, the United States District Court for the Eastern District of Texas had become the most popular court for such cases where the patent trolls / NPEs settled for huge sums from large corporations.

However, with one landmark case, the dream run for the patent trolls soon came to an end. In 2016, Kraft Foods sued another food manufacturer TC Heartland of infringing on one of its patents related to low calorie sweeteners.

Kraft Foods filed infringement suit in the District of Delaware despite the fact that TC Heartland, an Indiana based company, had no physical presence in Delaware. Thereafter, TC Heartland filed a petition in the United States Court of Appeals for the Federal Circuit to change the venue to Indiana, it's incorporated state. However, the court rejected its appeal citing the amended language of 28 U.S.C. 1391 (since the decision of Fourco Glass Co. vs Transmirra Products) clarified how to determine where a company resides including the perspective of selling infringing product / providing services in a venue.

TC Heartland remained firm on its appeal and filed a writ of certiorari to the Supreme Court in September 2016 to consider the change of venue for infringement suit. The Court issued its decision in June 2017, ruling unanimously that the definition of 'reside' remains the same as determined by the Court in Fourco to be the state of incorporation for a company.

This decision concerned with the venue for litigation lawsuit became prevalent in the IP world as ' TC Heartland Decision / Holding'. This ruling has significantly changed the trend of litigation / infringement suit in United States.

Subsequently, the litigation filings in the Eastern District of Texas court dropped drastically after this decision. Meanwhile, the filing of such cases has grown significantly in the United States District Court for the District of Delaware.

According to the data provided by various sources, in the 12 months prior to TC Heartland, the Eastern District of Texas handled 36% of all the patent litigation, followed by the District of Delaware.

However, in the 12 months following the TC Heartland decision, the District of Delaware court toppled the Eastern District of Texas court from its top hold. Around 23% of all litigation cases were filed in Delaware, while only 13% were filed in the Eastern District of Texas. Hence, the outcome of TC Heartland has proved to be a disruption in the litigation filing trend and a message of relief for the defendants.

Food for thought

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