US top court tightens patent suit rules in blow to 'patent trolls'

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The Supreme Court on Monday placed tight limits on where patent lawsuits may be filed - a unanimous decision that was a blow to so-called patent trolls, or companies that buy patents not to use them but to demand royalties and sue for damages. This ruling hurts those companies since they can no longer file in remote federal courts that have a reputation for friendliness to plaintiffs.

The case has significant implications for the Eastern District of Texas, where more than a third, or 40 percent of all patent infringement cases are filed. Indeed, in 2016, an astounding 20 percent of all patent infringement cases pending nationwide were reported to have been assigned to a single judge located in Marshall, Texas: Judge Rodney Gilstrap.

"The Supreme Court took the title of "Patent Litigation Hotbed" away from the Eastern District of Texas and awarded it to the District of DE", says William Munck, a longtime patent litigator at the Dallas firm Munck Wilson Mandala. TC Heartland unsuccessfully tried to get the case moved to IN, where it resides. "I continue to oppose all forms of abusive patent litigation and intend to introduce legislation in the coming months to address other problems with our current patent litigation system".

Those determined to bring a case in the district could shift their attention away from manufacturers to retailers who, of course, tend to be more ubiquitous and could therefore still face cases in a broad range of venues. The court voted unanimously to say that patent lawsuits should be tried where the defending company is based, rather than in a court of the plaintiff's choosing. (Law360) In an 8-0 decision, . He noted Apple Inc AAPL.O , a frequent target for East Texas patent lawsuits, has stores in Plano and Frisco, two Dallas suburbs that fall within the district. That means plaintiffs filing patent lawsuits will likely have a much harder time justifying their choice of venue in Texas, or anywhere else that the defendant isn't incorporated.

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The ruling may well signal the demise of the Eastern District of Texas as a favorite venue for patent lawsuits, especially those brought by "patent trolls", which have no business outside of licensing and litigating patents.

"Patent trolls have regularly cherry-picked far-flung and burdensome judicial districts that they believe will be favorable for their case", said North Carolina Attorney General Josh Stein. In a 1956 decision called Transmirra Products v. Fourco Glass, the high court held that, in patent cases, the stricter rule, 28 U.S. Code § 1400, is the "sole and exclusive provision controlling venue" for patent infringement cases. This was enough to convince the Federal Circuit that § 1391 (c) now governs the definition of "resides" in 1400 (b).

"Today's decision will help return order to patent litigation, end the abusive forum-shopping practices we've seen in recent years, and reduce the ability of patent trolls to extort settlements from actual innovators on the basis of frivolous claims. Forum-shopping in patent cases will largely become a relic of history", he said. The case was between food and beverage company Kraft Heinz Co. and beverage flavoring firm TC Heartland LLC. That is a staggering number, but appears to have had little bearing on the justices' decision - in oral arguments Justice Breyer even asked why it mattered that so many cases were filed in one district.