Recent developments in U.S. courts may remind business owners of the aphorism, “be careful what you wish for.” Last year was another one of landmark evolution in the law and procedures relating to patent infringement litigation. In September 2012, the inter partes review process created by the America Invents Act (AIA) became available as a new avenue to challenge issued patents administratively in the U.S. Patent Office, with a more advantageous burden of proof for the challenger than in a federal court. In June 2014, the U.S. Supreme Court in, Alice Corp. v. CLS Bank, narrowed the understanding of what subject matter is considered eligible for patent protection. Those two changes led to a dramatic and ongoing increase in the invalidation of existing patent claims. Many observers credit these develop-ments with discouraging patent assertions and reducing the overall volume of patent litigation across the country.
One of the most common complaints made by business owners sued for patent infringement, especially when the plaintiff is a licensing company or “non-practicing entity,” arises from being dragged into a distant court somewhere they had little connection to, often in a small town in the Eastern District of Texas. Warmer climes and scrumptious BBQ in Tyler or Marshall offer little consolation when forced to defend your products 1,000 miles from home. In recent years, roughly 35 percent of all patent litigation took place in that remote federal jurisdiction, widely considered plaintiff-friendly and prone to large jury awards.
In 2017, however, the Supreme Court addressed this concern as well. Its TC Heartland v. Kraft Foods ruling significantly limited where patent infringement suits may be brought against a domestic corporation ... solely in its state of incorporation or where it has a regular and established place of business. Previously a company could be sued where it developed even “minimum contacts.”
While existing defendants clamored to transfer out of Texas courts, an intriguing tangential ruling also emerged relating to a pair of local companies that had affirmatively launched patent suits in Minnesota. In November 2017, the U.S. Court of Appeals for the Federal Circuit ordered a local federal district court judge, who had transferred the long-running patent cases out of Minnesota following TC Heartland, to reconsider her decision in a case filed in 2012 by Cutsforth, Inc. The briefing on that question has continued in the district court through January 2018, and it remains unresolved.
Influence in Minnesota
Looking at the bigger picture, how might all of this affect patent litigation here in Minnesota, in particular for local businesses that could find themselves subject to patent infringement allegations? Far from a hotbed for patent cases, plaintiffs filed a mere 11 patent infringement suits in Minnesota in all of 2016. After the TC Heartland decision, 32 patent cases were filed between May 23, 2017 and the end of last year. In comparison, 1,684 patent cases were filed in Eastern District of Texas courts in 2016. From May 23, 2017 to the end of the year, that number dropped to 320, one-third the filing rate of the previous year. A continuing general reduction in patent litigation following the AIA and the Alice decision likely explains some of the drop. Nonetheless, of the cases that are filed, the vast majority of them necessarily now must come to where defendants reside. A review of the cases filed in Minnesota following TC Heartland reveals several patent licensing entities appearing here to pursue local businesses. This trend will almost definitely continue and probably accelerate in the future.
David is an intellectual property litigator with extensive experience in trial courts nationwide and before the U.S. Court of Appeals for the Federal Circuit. He also advises clients on the valuation and management of IP assets, plus related business strategies.