The scenario: A Silicon Valley startup is accused of infringing the patents of a New York company. They sue. Where’s the case heard—California or New York? Try Texas. Until now.
On May 22, 2017, the Supreme Court issued a unanimous decision and reversed a 1990 Federal Circuit ruling allowing patent holders to essentially pick whichever court jurisdiction they believed to be most advantageous to their side of the case. The world of innovation is populated by patent assertion entities (PAEs)—companies that obtain rights to patents to profit by means of licensing or litigation, not making things. They’ve earned the sobriquet “patent trolls.” Their favorite place to litigate: the Eastern District of Texas in the city of Tyler.
Now, any company alleging patent infringement needs to file where the alleged infringer is headquartered or incorporated. That’s the outcome in TC Heartland v. Kraft Foods. SCU scholars Brian Love and Colleen Chien were among the four leaders of an amicus brief signed by 61 law and economics professors arguing for the decision the Supreme Court reached. The group denounced the “rampant forum shopping” that was happening, and urged the court to remedy the “dubious interpretation” that allowed it.
Chien has spent years quantifying the impact of PAEs on small businesses. She also co-authored a study that was cited by both sides in the Heartland case. That study quantifies how drastically case distributions would change should the Supreme Court change the law. Closing the Texas loophole should give relief to 68 percent of small- and medium-sized businesses on the receiving end of patent lawsuits filed there.
Love, an intellectual-property expert and co-director of the High Tech Law Institute, co-authored a study analyzing the reasons PAEs and others flock to this district. His work was cited by U.S. Senator Orrin Hatch, a senior member of the Judiciary Committee, in an op-ed in Wired urging the Supreme Court to decide as it did.
This may not be the end of the matter. “The old law was clearly plaintiff-friendly and encouraged trolls,” Chien notes. “But now, the rules are going to be seen by powerful constituents such as pharmaceutical companies and universities as overly friendly to defendants.”
If these constituents lobby their lawmakers to make it easier to fight such cases in their own home districts, more changes will be afoot.