In a unanimous 8-0 decision today, the US Supreme Court ruled on an issue that has been crucial to the success of patent trolls, who are known for filing infringement lawsuits over low-quality patents in pursuit of out-of-court settlements.
The issue has to do with where lawsuits are filed. More than a third of all patent-infringement lawsuits filed between 2014 and 2016 were filed in just one of the 94 federal courts: the Eastern District of Texas, which some say is friendly to trolls.
Not only has the East Texas court received a disproportionate amount of all patent lawsuits, but more than three-quarters of the cases that end up there are suits that were filed by highly litigious plaintiffs (read: likely patent trolls).
In the case before the Supreme Court, TC Heartland v. Kraft, TC Heartland argued that Kraft’s patent lawsuit against it should be carried out in its home state of Indiana, not in Delaware where Kraft filed the suit. And although that particular case didn’t involve the Eastern District of Texas, the issue in the center of the case—forum shopping—does.
Lower courts refused TC Heartland’s request to move the case to Indiana, based on a 1990 decision by the United States Court of Appeals for the Federal Circuit, which said patent infringement cases can be filed anywhere defendants do business. Plaintiffs have been known to push on that broad definition, at times suggesting having a website that’s accessible in Texas constitutes doing business there.
In its ruling today, the court upheld its 1957 interpretation of a federal law, in which it said that “any civil action for patent infringement may be brought in the judicial district where the defendant resides,” and the court considers that to be the place where the defendant is incorporated. 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.
But why have patent trolls historically preferred Texas? At least part of the answer lies in the number of summary judgments the court historically grants. Summary judgments allow defendants to ask the court to rule that a plaintiff’s case is invalid, without going to trial. In patent cases, particularly those that involve low-quality patents, a summary judgment is an opportunity for a defendant to shut down a troll without having to pay a settlement or endure a costly trial.
In the Eastern District of Texas, 72% of motions for summary judgment filed between 2013 and 2015 were denied. In the other 93 federal courts, only 43% were denied.
Quartz wrote an in-depth analysis of the case in April, which you can find here.