Ruling Could Halt Drop in Texas Court Patent Complaint Filings

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By Malathi Nayak and Peter Leung

A recent court ruling by the country’s busiest patent judge could stem the decline in patent infringement complaints filed in the U.S. District Court for the Eastern District of Texas.

The East Texas court in June lost its longstanding place as the top venue for patent infringement complaints. The number of complaints filed in the East Texas court dropped to 56, down 47 percent from May and 62 percent from the same period a year ago, according to Bloomberg Law data.

The monthly change follows the U.S. Supreme Court’s May 22 ruling in TC Heartland LLC v. Kraft Foods Grp Brands LLC, which many believed would limit plaintiffs’ ability to sue in districts with patentee-friendly reputations, like East Texas.

The U.S. District Court for the District of Delaware has seen a surge in filings, moving its ranking to number one. Delaware was widely expected to see a jump in filings because many companies incorporate there.

June patent complaint filings in the Delaware court nearly doubled to 66 from 36 in May. The number of complaints filed in Delaware during June was still below the same period a year ago, when the court received 71 complaints.

However, a June 29 ruling out of East Texas suggests that plaintiffs may have an easier time getting their cases heard there than previously thought. Judge Rodney Gilstrap of the Eastern District of Texas denied computer maker Cray Inc.’s motion to transfer a lawsuit filed against it to another district, even though the company doesn’t have an office in the Texas district.

Gilstrap’s Venue Test

A company can be sued in the district where it “resides,” or where it committed an infringing act and has a “regular and established place of business,” according to the patent venue statute. The Supreme Court’s TC Heartland ruling restricted the first path by limiting “resides” to where the defendant is incorporated—not just where they make a sale.

Gilstrap’s ruling lays out a test for analyzing whether a particular district is the appropriate venue for a dispute. By taking a broad view on what is a regular and established place of business, it could encourage plaintiffs to continue filing lawsuits in East Texas—despite the TC Heartland decision.

Under Gilstrap’s test, having inventory, employees, or infrastructure in a district would suggest a regular and established place of business. Other factors include the defendant’s representations about its presence in the district, and its contacts to its residents. Perhaps most importantly, a defendant can be sued in a district even if it doesn’t own or lease property there, Gilstrap held.

In Cray’s case, it had a regular and established presence in East Texas in part because it had a salesperson that worked remotely from there, Gilstrap said.

The test suggests that large companies with a widespread geographic presence are more likely to be found to have a regular and established place of business in East Texas than first expected when the TC Heartland ruling came out. Large retailers and chain restaurant companies, for instance, are likely to have locations in the district, a fact that well-known patent licensing company Uniloc USA Inc. latched onto when it sued Apple Inc. for patent infringement June 2—after the TC Heartland decision but before Gilstrap’s ruling.

Patent Complaints Drop

The data suggest that TC Heartland has had an impact on patent holders’ behavior. An overall decline in patent complaints filed may mean that some owners are waiting to see how the venue rules shake out.

Patent complaints filed in federal district courts totaled 307 in June, down 33 percent from the same period a year ago.

Patent-holding companies CryptoPeak Security LLC and Uniloc USA Inc were tied as the top filers of patent lawsuits.

Texas-based Uniloc filed 11 lawsuits in the Eastern District of Texas and one in the Delaware district court. In June, it brought patent infringement lawsuits against companies, including Apple, over motion sensor technology, and against Alphabet Inc.'s Google over online voice communication patents.

Uniloc also filed a second infringement complaint against Apple over another motion sensor technology patent a day after Gilstrap’s ruling.

CryptoPeak Security filed 12 lawsuits against online businesses such as Wal-Mart Stores Inc.'s Jet.com LLC, all in Delaware, over a patent on computer codes for online data transmission. It has been filing infringement lawsuits and reaching settlements with companies such as Yahoo Inc. since 2015.

Patent challengers filed 188 inter partes review petitions contesting the validity of patents in June at the Patent and Trademark Office’s Patent Trial and Appeal Board, an increase from 127 IPR petitions filed in May. Halliburton Energy Services Inc. topped the list of IPR filers, with 14 petitions challenging oilfield services company Schlumberger Technology Corp.'s patents on oil-extraction technology.

Movie Piracy Complaints Slip

Total intellectual property infringement complaints filed across all district courts were 865, down 14 percent from a year ago. The decline was driven by a drop in patent and trademark complaints.

Copyright infringement filings in June totaled 295, down 5 percent from May but up 13 percent from a year ago.

In May, Hollywood studio Millennium Films, which accelerated litigation in 2016 against online piracy of its movies, was the top copyright filer again, with 52 complaints related to downloads of action films “Mechanic: Resurrection” and “Boyka: Undisputed.”

Trademark complaints totaled 263 in June, falling slightly over 1 percent from May and dropping 8 percent from the same period a year ago. Counterfeit enforcement dominated docket activity.

Yeti Coolers LLC and Chanel Inc. were tied as the top trademark complaint filers.

To contact the reporter on this story: Malathi Nayak in Washington at mnayak@bna.com, Peter Leung in Washington at pleung@bna.com

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

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