High Court Could Decide Friday to Take Patent Venue Case

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By Tony Dutra

Dec. 7 — Congress and the patent community will be watching Friday to see if the U.S. Supreme Court grants TC Heartland LLC’s request to stop patent owners from “forum shopping"—the practice of handpicking courts to hear cases.

The high percentage of cases heard in the low-population U.S. District Court for the Eastern District of Texas is evidence that alleged infringers are being forced to fight charges in patentee-friendly courts, according to third-party briefs filed by banking, software and internet industry stakeholders.

In briefs, stakeholders specifically complained about abuses by patent assertion entities—derisively called “patent trolls"—who make money solely from patent licensing and litigation.

On Friday, the high court could grant the petition, call for the government’s views or “relist” the petition, which gives the justices more time to consider it. Otherwise, the court could deny the petition Monday, a move that would throw the issue back to Congress, where bills to address patent infringement litigation abuses are likely to be reintroduced after the new year.

Federal Circuit Standing Firm

TC Heartland was forced into the District of Delaware, not the Texas court, by Kraft Foods Group Brands LLC. Kraft filed its complaint in the Delaware court in January 2014, charging infringement of U.S. Patent Nos. 8,293,299, 8,511,472 and 8,603,557—covering liquid water enhancement products—by TC Heartland’s Splash product line.

The U.S. Court of Appeals for the Federal Circuit affirmed the Delaware court’s decision refusing TC Heartland’s motion to dismiss for lack of personal jurisdiction or to transfer. The appeals court said its 1990 ruling in VE Holding Corp. v. Johnson Gas Appliance Co. correctly reflected a change Congress made in the Judicial Improvements and Access to Justice Act of 1988, and that it remained good law.

Patent owners’ venue choices are bound by 28 U.S.C. §1400(b) allowing infringement case filing in a “judicial district where the defendant resides.” But VE Holding expanded “resides” to include anywhere the defendant makes a sale.

Specific Industry Groups Want Change

Seven third-party briefs were filed supporting TC Heartland’s contention that the appeals court got it all wrong in 1990 and, even if it didn’t, Congress changed course again in the Federal Courts Jurisdiction and Clarification Act of 2011.

The American Bankers Association, the Clearing House, the Financial Services Roundtable and the Consumer Bankers Association contended that banks are particularly vulnerable to lawsuits filed by patent assertion entities in the Eastern District of Texas. The non-practicing entities frequently file only to extract settlements less than the cost of defense, their brief said. The Texas court is attractive because it is 4.65 times less likely than other courts to stay the litigation—i.e., halting discovery costs—while a parallel patent validity proceeding is in progress at the Patent Trial and Appeal Board, the brief said.

The Software & Information Industry Association joined Dell Inc. in a brief and also claimed to be targeted by “made-for-litigation entities.” They also cited pre-verdict abuses, but added that patent trolls deliberately choose courts that award “damages in eye-popping amounts.”

Oracle Corp. led a list of 32 internet companies, retailers and associations whose brief cited a study that found patent owner victories 58 percent of the time when the owner selects the forum, compared to 44 percent when a company beats the owner to court seeking a declaration that it doesn’t infringe or the patent is invalid. Ironically, the professor who conducted that study—Kimberly A. Moore—became the federal circuit judge who wrote the somewhat caustic opinion that TC Heartland is now challenging.

The other briefs were filed by 56 professors of law and economics, internet user advocacy groups Electronic Frontier Foundation and Public Knowledge, the Washington Legal Foundation and former Federal Circuit Chief Judge Paul R. Michel. The judge identified “numerous practical negative consequences” with results “directly contrary to what Congress intended when it established the Federal Circuit.”

James W. Dabney of Hughes Hubbard & Reed LLP, New York, represents TC Heartland. John D. Luken of Dinsmore & Shohl LLP, Cincinnati, filed Kraft’s response in opposition.

TC Heartland LLC v. Kraft Foods Grp. Brands LLC , U.S., No. 16-341, 12/9/16 .

To contact the reporter on this story: Tony Dutra in Washington at adutra@bna.com

To contact the editor responsible for this story: Mike Wilczek at mwilczek@bna.com

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