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U.S. top court tightens patent suit rules in blow to ‘patent trolls’ (reuters.com)
746 points by robteix on May 22, 2017 | hide | past | web | favorite | 195 comments

We have been sued by patent trolls at least seven times in the last ten years, all in Marshall, TX. We also sign onto the amicus brief for the TC Heartland case. This is a huge victory and what it means, in short, is that we won't get sued in Marshall, TX anymore. That's important because the venue is full of nepotism and extremely plaintiff-friendly. The longer version is we won't have to pay a "toll" to trolls who sue many other companies and us for ridiculous reasons like using OAuth or providing a link to images we host.

Indeed. Delaware and Northern California are about to get very, very busy.

I'll wager it won't get crazy busy. The Texas court was letting anything and everything through. It won't take many summary judgements from courts in these jurisdictions before it is no longer profitable to troll.

Districts like Delaware have a vested interest in being a business friendly place to file your corporation papers. They won't likely allow the district to become an easy place to file phoney patent suits. And in districts where the companies actually reside will be even less likely to let through these time wasters that damage their biggest employers and shrink their tax base.

Why would federal judges care about the vested interests of the state of Delaware?

I'm not trolling, I just don't get the argument.

Federal judges are part of the local legal community, just like the law firms that survive by creating Delaware corporations. Social cues and environment affect all of us more than we imagine.

You can't just hand-wave stuff away and assume some rational actor model. Every IP lawyer I know disagrees with you, and I talked to a number of them today about their take. Their phones are blowing up and they're already making preparations to move the cases to Delaware and NDCal.

What is NDCal?

Northern District of California I believe.

California should be two states or it's own country (imo).

…but hopefully less busy than Marshall, TX has been.

>> That's important because the venue is full of nepotism and extremely plaintiff-friendly.

Could somebody explain this point in detail? Surely the law is the law regardless of where in the country a case is heard.

There is still a lot individual venues can do, a big part of why EDTX became a thing is that the jury pool was so unsophisticated and would often give lots of deference to an inventors personal story over the technical details of the case. That, and judges are given wide latitude in how they run their court and those judges all adopted plaintiff friendly policies in general. There is a good reason why it became a go to destination, there is a lot to a patent trial - or any trial - beyond what 'the law' is. Edit: and above all of that, the EDTX had developed a cottage industry of sorts to support and maintain the high level of patent litigation. Did you ever see the story of Samsung sponsoring the skating rink accross from the court house?

Did the rink have rounded corners?

Yes. If you got close to the edge you slid right off. They had to build a custom Zamboni for the thing.

The law is a bunch of words that can be interpreted many different ways.

The judicial branch is in charge of that interpretation. That interpretation is based on the wording of laws passed by Congress combined with the prescident set by previous judicial rulings.

The judge in Marshall, TX would find with a strong bias to the plaintiffs side[1]

[1] https://www.eff.org/deeplinks/2014/07/why-do-patent-trolls-g...

District court judges are still bound by precedent from the Fed. Cir. and Sup. Ct. in patent cases - that's only part of the story. They also have wide latitude in how they organize and schedule their courts, giving rise to the so-called 'rocket-docket' phenomenon. Speed favors the plaintiff, especially in patent cases, and the EDTX has local rules that favor speedy trials.

Off the top of my head, but I do remember a case in Texas where the son of the Judge was representing the Plaintiff. The judge refused to excuse himself from the case.

The son of a federal judge in that district started a law firm that specializes in patent law. Even if his son does not represent clients in front of him, his son makes money, because the judges there did not allow summary judgement for a long time. That judge retired in 2011 but the other judges continued his decisions that make it easier for patent trolls to work.



Source? I highly doubt that's true. There is a (now retired) judge whose son was a lawyer in EDTX. I'm not aware of any case where the judge refused to recuse himself from a case where his son represented one of the litigants.

Might be true? This doesn't specify whether they worked on the same cases, though. Also seeing articles on Vice & Ars Technica, but neither mention. http://thepriorart.typepad.com/the_prior_art/2008/03/judge-w...

Right, there's a judge whose son is an attorney in the district, but no mention of him presiding over a case where his son is representing a litigant. That would be a serious ethical breach. A judge having a child who is a lawyer in the same district, on the other hand, is perfectly normal.

The law is enforced by humans, not by machines. "The law is the law regardless of where in the country a case is heard" is obviously false for all kinds of laws, not just this one. Different humans have different biases.

I am curious what jurisdiction you have experience with where the law is applied so evenhandedly. We could learn from them.

Boy oh boy.

For those of us who don't understand how these things work, does someone know the answer to these questions:

1. So does this mean that almost all patent suits will be filed in Delaware?

1a. If that is correct, does someone know the TL;DR of the rules that make it a better choice than other places. (I mean, juries are juries).

2. Will tech companies now incorporate in non-Delaware states because there are even better rules somewhere else?

Thanks for helping us understand the context.

The patent venue statute, 28 U.S.C. 1400, says: "Any civil action for patent infringement may be brought in the judicial district where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business." This case holds that a corporate defendant "resides" where it is incorporated. But the second clause is still operative--you can still sue the company where it has a "regular and established place of business."

As for Delaware, I don't think it's particularly plaintiff friendly so much as its not defendant friendly. If you sue a tech company in N.D. Cal. you're in the position of telling locals that a business that generates jobs and tax revenues for them did something wrong. Delaware, being the hub of all sorts of business litigation, sees things at a more abstract level. You're less likely to get a judge or jury in Delaware that comes in with a particular preconceived notion of X or Y being bad. They're going to look at the facts and they're going to look at the law and make a decision. That manifests itself in some practical ways. For example, some Delaware judges are loathe to permit summary judgment motions (decisions on the case before it goes to a jury). Many infringement questions are, according to the law, jury questions, but judges grant summary judgment anyway to save defendants the time and expense of a jury trial. Delaware judges don't really care about that.

Wow, so if they can still be sued in a "regular and established place of business", does that dissuade startups from moving to, or starting in, Austin? Is Dell a target now because of the plaintiff-friendly juries. (That is what I hear, I don't know the details).

Does this mean that startups should actually stay in Delaware to reduce the footprint of places they can get sued in?

Doesn't sound like it changes much for the large tech companies who are all over the place anyway.

Austin is in the Western District of Texas, which doesn't have the same plaintiff-friendly reputation.

Austin itself is actually known for being quite plaintiff-friendly, at least for certain kinds of cases.

I didn't realize that within a state, the court choice was still by district.

Thanks for clarifying, and for taking the time with the other answers.

Rayiner has already pointed out that Austin is not in the so-called plaintiff friendly Eastern District of Texas (EDT).

Also, it's not clear that EDT is actually plaintiff friendly. Defendants win plenty of cases there, and last time I saw stats it didn't seem particularly outstanding. There were several that had significantly higher plaintiff win rates. The numbers can change dramatically from year to year, though, so what I saw may be outdated.

(Update: 2016 plaintiff won 36% of patent trials in EDT. 2015 was 50%, 2014 was 67%, and 2013 was 33%. These are lower than the overall national plaintiff patent win rate, I think [1] [2] [3]).

A big reason plaintiffs choose EDT is that it is fast and experienced (the former partly due to the latter). Patent suits are civil cases heard in Federal district courts. Federal district courts also deal with criminal cases, and criminal cases have higher priority.

In some districts where there is a heavy load of criminal cases the civil cases can end up move very slowly. EDT doesn't have much crime, so there aren't many criminal cases there. They have plenty of time for civil cases.

Patent cases are among the more technically complicated cases. They will go a lot smoother if handled by a judge who is experienced with them. Once a judge gets experience with a few patent cases, that can attract plaintiffs to that district. Some judges like patent cases, and so whenever one is filed in the district they serve in, they ask to have it assigned to them. That in turn makes the them even more attractive to future plaintiffs.

Patent cases are often "big". What I mean by that is that they often involve a lot of people attending the trial or accompanying those who attend the trial. Each party will have patent lawyers (often more than one) and trial lawyers (often more than one) on their team. Those will all have secretaries and paralegals. They will have witnesses, which on the plaintiff side will at least include the inventor(s) and probably others who were involved with the invention, and on the defendant side will include the people who developed the technology that defendant used that is accused of infringing. There will be expert witnesses both sides have hired to explain the patent and the technology, both as used by plaintiff and by the accused infringer. Both sides will also probably have a damages expert. Both sides will have rented at least one large conference room at their hotel, and will have brought along an IT team that will arrange high speed internet in that conference room and have set it up as a nearly complete office, complete with workstations, printers, phones, FAX, and so on. There will be a multimedia team that makes graphics and animations for presentation during the trial.

The trial itself might last a week or two, but most of the above team will be there for two to four weeks before the trial starts. What that means is that you might be looking at needing 30ish hotel rooms, plus a big dedicated meeting room, and probably several smaller dedicated meeting rooms, for four to six weeks, and you want this reasonably close to the court.

Keep in mind both sides are doing this, so you are looking at 60+ people staying at good hotels, renting expensive meeting facilities, using the services of many local businesses (restaurants, car rental, office equipment rental, cleaners, clothing stores, barbers and stylists) for a month or more. This can bring in a pretty good amount of money to the local economy.

District judges generally live in the districts in which they serve, and are aware that these big cases are good for their districts. They sometimes take steps to encourage such cases to come to their districts, such as adopting local rules to make handling particular types of cases more efficient. EDT has done that with patent cases. I recall reading of a few other districts that do similar, but for specialities other than patents, but cannot recall specifics.

[1] http://mcsmith.blogs.com/eastern_district_of_texas/2016/08/2...

[2] https://www.pwc.com/us/en/forensic-services/publications/ass...

[3] https://www.thenaplesroundtable.org/wp-content/uploads/2016/...

You may be making a mistake in trying to compare the plaintiff win rates between districts. If patent trolls/non-practicing entities with frivolous patents are suing in EDT and still winning at proportional rates to other districts, then the district still favors those plaintiffs disproportionately.

It would take a lot of work to work out variables like that. What I would be curious about is what proportion of patent suits brought by non-practicing entities are filed in EDT, and what is their win rate there versus elsewhere, and an attempt at analysis of how broad the patents are.

Finally, I wonder if your win rate includes settlements? My understanding is that the combination of the win rate of plaintiffs, the speed of the court, and the higher cost of defending a patent suit in a remote district, most cases are settled. Is that true?

To your point, I'm actually more interested in districts where troll suits are thrown out and never make it to trial. That was my understanding of the downside of the EDT: ridiculous suits could be heard, and the act of suing is being used as extortion.


> Each party will have patent lawyers (often more than one) and trial lawyers (often more than one) on their team. Those will all have secretaries and paralegals.

Often way more than one. It's not unusual for a patent trial team to have five or six lawyers, divided into teams that handle different aspects of the case, plus a couple of paralegals, and possibly an admin / secretary.

(A patent infringement trial is often bet-the-product-line or even bet-the-company, so you often spend 16 to 20 hours a day either in court or in the "war room" in your side's headquarters hotel, getting ready for the next day in court. And as I can testify from personal experience, it's not hard to put on a few pounds snacking on the food with which the paralegals oh-so-helpfully stock the war room.)

Also, every one of those trials hires a local counsel when they're in EDTX, and those local counsel are, well, local. Lots of attorney's fees being racked up for just being a native to that district!

>Delaware, being the hub of all sorts of business litigation, sees things at a more abstract level. You're less likely to get a judge or jury in Delaware that comes in with a particular preconceived notion of X or Y being bad.

There are also some problems which come from so much being litigated in Delaware. I have been working with a bankruptcy attorney looking at venue laws which run into similar issues as patents. As many patent lawsuits have been filed in Eastern Texas, many bankruptcies are filed in Delaware even if there is no functional basis for the company there outside of the state of incorporation.

By running everything through Delaware, you're often taking the chance of reasonable representation away away from defendants (or creditors in the case of bankruptcy). If a company who only has facilities in Iowa goes belly up, there are likely dozens of companies who they owe money to, many of which are in the surrounding communities. Now the hundreds of farmers who are owed money have to fly to Wilmington Delaware if they want any chance of representation.

Delaware Bar will require that a local attorney introduce whatever attorney from Iowa was hired to represent the farmers (if the Iowa attorney is competent, the Delaware attorney is literally introducing them and reviewing some documents before submission). Local council adds another expense for small businesses on the short end of a bankruptcy.

The geographic difference adds significant expense in terms of travel. The VeraSun grain elevator case had a company headquartered in South Dakota with no operations east of Indiana and they filed in Delaware. There are other cases with even larger geographic differences out of California and Hawaii.

Marsh supermarkets is headquartered in Indianapolis, Indiana and recently filed for bankruptcy in Delaware. They have thousands of employees, but only about 250 are salaried, the rest are hourly, largely store employees. Many of them are owed money from working their normal shifts. It will be very hard for the employees to feel like they had a chance at getting fair representation if they have to go to Delaware to see court proceeding happening. It could just as well have been held in Indianapolis with local attorneys representing hourly employees at a more reasonable total expense.

Finally, a disproportionate amount of power in deciding bankruptcy or patent cases should not lay in the hands of a few judges. We've already seen what happens when a single judge has vastly different views on a given topic than pretty much anyone else with the mess of patent trolls in Eastern Texas. That one judge cost companies hundreds of millions to billions of dollars in cases which would have seen a different result if heard by a variety of judges from across the country. By running everything through Delaware, the concept of various opinions from across the nation being debated through many cases and going to appeals where needed goes out the window. A handful of judges in Delaware will decide what happens in the nations most significant bankruptcy and patent cases.

Well, the thing with having judgment flowing through Delaware is that whatever corporations have incorporated there have chosen that venue. Specialization isn't bad thing, merely specialization which results in one-sided processes. Delaware already specializes as venue for corporations to incorporate in (why it looks like suits will head there). If Delaware winds-up offering an unfair venue for patent defendants, those defendants can incorporate elsewhere but they'd lose Delaware's other advantages.

The issue in the bankruptcy example isn't that it's unfavorable to the company that's chosen to incorporate in Delaware (in which case, yes, they could choose otherwise), but to its creditors who had no say in the decision. An Iowa creditor, to collect from a bankrupt company whose main place of business was also in Iowa, for arcane reasons of corporate law has to fly to Delaware and retain Delaware counsel, even though venue ought under any common-sense standard to be located in Iowa.

> but to its creditors who had no say in the decision

One would argue that the creditors did have a say, in that they knowingly chose to extend credit to a company incorporated in Delaware.

But overall, it feels like the real problem is that a company can be incorporated in one state, and have no actual business presence or interests in that state. Having a single focal point for lawsuits makes sense, since otherwise businesses (that can be very small) could potentially be dealing with the huge expenses of lawsuits in many different states over the same thing. And then the state of incorporation is an obvious choice. But why should other states allow such an obviously contrived setup for companies coming and doing business in their borders.

(I'm sure there's some kind of convoluted constitutional explanation here as to why the states actually can't restrict this, because of the Commerce Clause etc. Still, though.)

Delaware also has a vested interest in keeping it a friendly place to incorporate. So I would expect that to color decisions of both judges and juries.

Yeah, I'm not a lawyer but a small set of judges hearing such a large number of a type of case seems to run counter to what they attempt to set the legal system up as. It runs counter to the geographically distributed system and it runs counter to some of the criticisms of how to split up the 9th circuit (e.g. giving California it's own circuit is looked at as a poor solution).

Given that I don't see how it's a positive thing at all.

In this case it worked out bad. But it could also work out well: Judges, just like software developers or any other profession have specialties, and a judge that is well versed in patent cases should be able to reach a better verdict quicker than someone who is new to patent cases.

Though, in the nature of legal cases, "work out well" is relative. While one side might appreciate a court that provides a "better verdict quicker" the other side would almost certainly decry that court, since they, for example, would have less time before the verdict and, presumably, less of a chance of successfully appealing it.

Many district courts have designated judges for patent cases to try to take advantage of this

Also note that it's not like DDEL or NDCAL don't have any patent experience, if memory serves me they are still among the top patent venues even at the height of the EDTX phenomenon.

> you can still sue the company where it has a "regular and established place of business."

Sounds like it would be a good idea to embargo East Texas.

On Delaware, because many corporations incorporate there (or incorporate a subsidiary there). It's strange this hasn't been mentioned yet, but the primary reason Delaware is so popular is because it's a domestic & international tax haven [0][1][2]. It's one of the reasons the US is ranked 3rd (of 102) on the Tax Justice Network's "Financial Secrecy Index' (behind Switzerland and Hong Kong).

Interestingly, Delaware should be especially attractive to 'IP heavy' companies, and other companies that have large amounts of 'intangible capital' (e.g. tech companies), as Delaware doesn't tax earnings generated from 'intangible assets'. So if you're a large multi-state / multi-national corporation, you set up a subsidiary (or incorporate your HQ) in Delaware, dump all your intangible assets there, and then charge your related entities fees when they use these intangible assets (e.g. IP & trademark licensing fees).

These fees can then be claimed as deductions in the State / Country the related entity happens to be in (unless the jurisdiction has strong transfer pricing laws that outlaw the more egregious instances of this practice). As with all tax-havens, it's the 'beggar-thy-neighbour' approach to attracting 'capital investment'.

[0] http://www.nytimes.com/2012/07/01/business/how-delaware-thri...

[1] https://www.theguardian.com/us-news/2016/apr/06/panama-paper...

[2] https://en.wikipedia.org/wiki/Corporate_haven#North_America

For (1a), the reasoning I've heard behind Delaware is that a larger amount of company-based law has been tested there. So from a legal perspective, it's more predictable (for lack of a better word) what the outcome of any particular issue could be.

They have a dedicated state court for business issues, and a deep well of case law. The judges focus on these sorts of cases.

Patent cases are federal matters, so I don't think it applies there.

Depends. Delaware is also known for having a better jury pool for defendants. It's not a bad place to be a plaintiff, either, but it's no East Texas.

Why will almost all patent suits be filed in Delaware specifically? Are most tech companies incorporated there?

Half of US public companies, 64% of fortune 500. It's generally recognized as a corporation-friendly location.


It's a tax haven that doesn't tax earnings derived from 'intangible assets' (e.g. licensing fees that "Widget Co. California" pays to "Widget Co. Delaware" for using the trademarked Widget Co. logo).

Yes, but not all. For instance, Microsoft and Apple aren't.

Interestingly, Microsoft was:

Q.What year and where was Microsoft incorporated? A.Microsoft was incorporated in the state of Washington on June 25, 1981; reincorporated in the state of Delaware on September 19, 1986; and reincorporated in the state of Washington on November 1, 1993.


HTML version here: https://www.law.cornell.edu/supremecourt/text/16-341

The page starts with the syllabus (a summary by the Reporter of Decisions), but in this case the opinion is not much longer than the syllabus.

There has been this weird insurrection by the Federal Circuit defying Supreme Court precedents to push for overly-strong intellectual property laws. Hopefully this is the beginning of the end of that insurrection. Personally I would like to see the Federal Circuit disbanded; the idea of a court with technically-specialized judges seems like a good idea but in practice we have ended up with a court filled with a bunch of biased patent-enforcing corporate litigators.

First of all, the Fed. Cir. doesn't only do patent cases! They also handle appeals from the court of federal claims (read: suing the government) and veterans matters among other stuff. But consider the reason why appellate jurisdiction was concentrated in the Fed Cir in the first place, imagine a court of appeals that went off the rails as much as the EDTX! The Fed Cir is a good thing, and I'd even advocate for a unified court of first instance for all patent infringement matters to avoid another EDTX happening in the future.

According to last year's stats, the tradeoff between Delaware and EDTX is that the patentee has a slightly lower chance of winning in Delaware (40%) than EDTX (54%), but when they do win, they get almost twice as much in damages ($17m vs. $9.4m). See https://www.pwc.com/us/en/forensic-services/publications/ass...

Likely there is a lot of bias in those stats that aren't skewed by the courts themselves but rather the cases brought to bare.

Sadly, take-away message from this underdetermined by the numbers you give.

If the cases that come to all of these courts are roughly the same, then these data mean EDTX is only a little more patent friendly.

But if it is true that EDTX is swamped by troll-plaintiffs with weak cases, then the fact that 54% of them steal win, is very damning.

That's an interesting report. The table only has 15 districts, but it looks like the best area against NPEs is Northern Illinois, and Northern California, with only a 13% success rate (vs. 48% success rate in EDTX)

Texas Southern only has the lowest success rate for NPE (9%), but the median damages is $58m, compared to only $5m and $6m for the California and Illinois.

It would be interesting to see the data for All district courts in the US. In those 15, California Northern looks the best in term of outcomes if you're likely to be at the mercy of NPEs, but I wonder how it compares to lets say Oregon, Western Texas, or Western Washington.

> The decision overturned a 2016 ruling by the U.S. Court of Appeals for the Federal Circuit, a Washington-based patent court, that said patent suits are fair game anywhere a defendant company's products are sold.

Why didn't companies stop selling in patent troll friendly districts to avoid lawsuits? If you sell on the Internet, couldn't you just put a list of territorial exclusions in your terms and conditions?

1) the practical implications and difficulties in doing so, and 2) the "stream of commerce" theory which blurs the lines significantly. Even if a web site managed to exclude certain districts, it would be pretty easy to make the argument that they have a large enough economic impact that they also affect those in that district.

Going forward, I can't see any tech companies making the mistake of incorporating in the state of Texas. Better safe than sorry.

Reading this story made me curious as to why software companies haven't made an effort to exclude sales in that area. It seems like that would at least get you out of that jurisdiction.

Because, to a certain extent, it's cutting off your nose to spite your face.

When you're an early-stage, cash-strapped business entity, doing business in TX probably seems like an acceptable risk.

Also probably wouldn't work - see the "stream of commerce" idea discussed above

Otherwise Texas policy seems to be pro-corporation. No corporate franchise tax until you make at least $100k, and you can form a corporation to do whatever you want. I know of one Texas corporation that did business for years in a Schrodinger's cat-like state, where it only kind of existed because they were in the process of finding a new board. Technically, the corporation existed, but wouldn't have been a valid entity to do business with, but most people would only check that the company existed. I'm not sure why it was done, but I suspect those guys got out of paying the franchise tax this way. (No, it wasn't my company!)

Texan here. The Eastern District of Texas is a federal court and patents are federal law. The court is physically located in Texas but Texas state policy does not influence it.

But juries are selected locally.

Yes but State Law is separate from Federal Law. Texas can't pass a law that says only patent troll-hating Texans can sit on a federal jury, no matter how friendly Texas is to business.

State law doesn't matter in a federal court, but the culture of the place the jury is selected and the practice specialties of the local attorneys do. The parent post to yours was talking about Texas broadly, not specifically about Texas state law overriding federal law. That's your assertion, and borders on a straw man.

The state, and especially that part of the state within that federal court district, being generally friendly to one type of party or another has to do with more than state laws. It has to do with public perception, legal specializations in that court district, and more. The juries are selected from that public and local attorneys in a district known for patent trolling will likely specialize in patent trolling cases.

Local people may know that having large corporations fight legal battles in their district benefits the local economy.

They definitely know because all the free goodies the trolls have gifted them. The whole operation is akin to racketeering.

>> No corporate franchise tax until you make at least $100k,

Actually that limit is $1.11m.


Note that it's revenue. You still owe franchise tax even if you're losing money.

Which is good incentive to make some, money that is.

It's also an incentive not to incorporate/operate low margin businesses in Texas.

They have a clause to lessen that problem

"Franchise tax is based on a taxable entity’s margin."


It's a lie though, it is not, especially if you're a services and not a physical product company that can show "COST OF GOODS SOLD". Their definition of margin is not correct.

I don't think it's intended to account for all expenses. You do have the option of using compensation to cover your costs, though - why would that not be adequate for cost of providing services?

There are many flaws. For example, paying 1099 contractors doesn't count as an expense. That's just one. There are others.

Especially on the East of Texas

I'd imagine this will lead to defendant-friendly patent laws becoming one of the selling points that states use to try to lure tech companies to relocate.

these suits are filed in federal district courts as far as I can tell. State law won't be controlling on the issues there.

Yeah, I further encourage not selling anything to people in that court's area of influence except maybe through a specific corporation designed to do just that. Make sure it constantly transfers its money out, too. Reason being there's a lot of money to be made selling in Texas, Austin is a tech hub, and University of Texas does some of the best work w/ top-notch researchers. So, can't leave entirely missing the benefits but certainly hedge against the risks.

Austin isn't in the Eastern district, but the Western. None of Texas' major cities are in the Eastern district.



I was wondering about that. Thanks for the info. :)

Plenty didn't incorporate in East Teas (my home area) and still sued and won anyways. This ruling wouldn't really stop them from incorporating or not. Just going to make them think twice about actual jurisdiction. Many companies won't have lawyers that know of or understand this case, and as such some companies will try taking advantage of that fact. Notice - we had to go all the way back to the 50s to resolve this case, and since the earlier 90s is when out-of-true-jurisdiction cases started happening. It took almost 30 years to stop that.

What really needs to happen is anyone's guess. Every system someone comes up with will likely have a flaw to be exploited.

For those curious, because jurisdiction is a fundamental limitation on court power (IE courts can't make rulings about things/people/etc they have no jurisdiction over), this will likely result in the immediate transfer or dismissal of ~400 cases pending in EDTX. Maybe more. (some defendants will have waived it by not objecting)

This ruling is about venue, not jurisdiction. Venue is less fundamental, and waivable; jurisdiction is fundamental, as you discuss.

First: Yes, i misspoke, because i forgot this was TC heartland, which was the venue case. My brain appears to have melted this morning. Oh well.


Personal jurisdiction is also waivable Subject matter jurisdiction is not. In any case, the number i gave is actually the number where venue arguments have not been waived. There are about 400 where they have probably waived the venue argument, but have no real jurisdiction argument.

Third, yes, the statute in question is the patent venue statute. However, you can't disconnect it that easily from personal jurisdiction, since the entire case was about the meaning of "“shall be deemed to reside, if a defendant, in any judicial district in which such defendant is subject to the court’s personal jurisdiction with respect to the civil action in question"

It just turns out they already decided the jurisdiction part of that in previous holdings, and decided this venue statute did not really modify the general venue statute, which did not modify the definition of personal jurisdiction they decided before that, ..

As for the transfers/dismissals, that part is also correct. See https://patentlyo.com/lawjournal/2017/03/imminent-outpouring...

So yes, less fundamental, but in these cases, venue and jurisdiction will now mostly be the same again (IE minimum contacts, etc)

Venue != jurisdiction.

It's actually a big deal. We've been sued once and settled. It was Eastern Texas of course. There was no merit to the case, our patent application just matched one the keywords monitored by the NPE.

FTA:"patent infringement suits can be filed only in courts located in the jurisdiction where the targeted company is incorporated"

Hello patent lawsuits in Delaware instead of east Texas!

I wonder if this opposite of this is going to happen now?

-- A court district emerges that often rules against patent holders(and trolls) that suddenly becomes a haven for corporations to incorporate in that district to take advantage of the favorable court system?

Not entirely unlike the popularity of Deleware corporations.

Some would argue that NDCAL is that venue (Silicon Valley and all)

>The justices sided 8-0 with beverage flavoring company TC Heartland LLC in its legal battle with food and beverage company Kraft Heinz Co, ruling that patent infringement suits can be filed only in courts located in the jurisdiction where the targeted company is incorporated.

This no-name company probably just saved the tech industry from its own greed and short-sightedness. I imagine most lawsuits will happen in Delaware where it might be harder to find a radicalized pro-IP jury like they have in that East Texas district which has bizarrely turned itself into something of a cottage industry based on fees and fines patent abusers pay. Scratch my back and I'll scratch yours it seems.

Perhaps regular verdicts of hundred(s) of millions of dollar settlements over trivial patents are behind us. Some sanity in patents would be a welcome change.

All companies are vulnerable to patent lawsuits and many are really just lawsuits created by this multi-million dollar industrial parasite called "patent troll". So this is not just a battle for the big coproations but also a battle many small businesses are fighting to win.

I suggest you do an Interent to get a list of patent troll cases. The gist is someone can sue you for a workflow like authentication. Yeah that's pretty ridiculous right?

Often patent trolls just want a settlement. Many businesses don't qant to deal with patent trolls they go for a settlement.

US patent is easy to file in case you aren't aware.

Patent trolls should be prosecuted by the FBI, before they can even start harassing anyone, in my opinion.

Gotta love these kinds of comments. Meaningless pandering to the pitchforks.

Seriously, what are you even suggesting? That the FBI sniff out anyone planning to be a patent troll, then arrest them before they can even commit their crime?

Drunk drivers should be prosecuted by the FBI before they can even get behind the wheel, in my opinion.

Let's make patent trolling a crime, so an organization/company doing/preparing that crime could be stopped.

And how would you define that crime, in a way that isn't so vague it just becomes a tool for either the government to arbitrarily prosecute people or for companies with solid IP lawyers to shield themselves from taking anyone else's IP seriously?

In the same way as you define the mafia: a business based on making profit from extortion.

If you include threatening to bring court cases as extortion, what's the point in having any laws that let you sue for damages? Or enforceable contracts?

If my landlord starts neglecting my lease, do I now have to choose between just letting them get away with it and criminal charges? I wasn't expecting you to come up with a particularly great condition, but this one is particularly silly pitchfork-pandering.

The one concluding that would be a judge, of course.

That description also matches virtually any government in existence :)

Government is under democratic control. A private company, is not.

Yes! Finally. 8-0 even. Yes! All I wanted to say. Common sense finally.

So, they're moving all patent trials from Texas to Delaware (since 99% of tech companies are incorporated in Delaware). Doesn't seem like that big of an improvement.

> ruling that patent infringement suits can be filed only in courts located in the jurisdiction where the targeted company is incorporated.

That should immediately put an end to the one district in Texas that has a cottage industry of patent lawyer tourism, right?

I suppose it opens up the reverse problem: Find a court that never upholds patents, incorporate in the local town, and infringe everyone's patents with relative safety. Somehow that seems like a better problem to have, though.

Not quite the reverse. As another commenter noted, a large part of the problem is that that particular east Texas district didn't force plaintiff to pay defendants' costs when they (the plaintiff) lost. When you let the defendant choose the (presumably friendly) court, the cost of failed litigation shifts from the defendant to the plaintiff, who, unlike the defendant, has the option to appeal failed litigation. (But IANAL and I'm sure there are exceptions to this.)

And indeed SCOTUS has smacked both the CAFC and the Eastern District over patent fees in the past 10 years. More than once.

Do you mean plaintiff instead of prosecutor?

Yes, fixed, thanks.

You're still subject to being sued where you have a presence. So, not only do you have to incorporate in a friendly jurisdiction, you have to restrain yourself to operating out of such locations as well. At least based on my non-lawyer understanding.

It's a pretty high standard for operating. You have to have employees or a place of a business in the district. If you have one location and sell via delivery services, you are only vulnerable in that location.

Then you'd have to do your business in the district of Eastern Texas, which may well be punishment enough.

The major cities in the district aren't Houston, Dallas, Fort Worth, El Paso, San Antonio, and Austin. They are Beaumont, Lufkin, Marshall, Sherman, Texarkana, and Tyler. There are four US districts in Texas, and pretty much anywhere you'd want to run a major business is in one of the other three.

I think it would more be that you have to find an entire state where the juries are decidedly opposed to patent trolls, since you could still get sued anywhere in any valid jurisdiction within the state, right?

> Find a court that never upholds patents, incorporate in the local town, and infringe everyone's patents with relative safety.

Yes, or -you know- incorporate in another country.

It seems to be a bad deal specifically for other countries companies which do businesses in the US. If you're incorporated in another country, I feel that patent Trolls can decide the state they want in the US to sue you about US law patent infringement on US territory. To protect itself a foreign company would need a local branch in the right state

Woohoo. This supreme court decision instantly kneecaps many patent trolls, not just in software. No more patent-friendly 9th circuit Texas district.

EDTX is in the 5th Circuit, not the 9th Circuit.

The IPXL vs Amazon case probably has a bigger impact than this case. That case invalidated a large number of system plus method claim patents.

Long term, maybe. Short term, I think this has a bigger impact since even if method parents were invalidated, people could still scare tactic sue you with an invalid patent.

It's just a matter of educating people. That case was only dated to 2005. Most people probably don't know the implication. Once the simple test of system+method detection is applied, a large swap of BS patents can be thrown out at the first sight.

Most patents use "operable to" or "configured to" to get around mixed apparatus/method claim prohibition.

This isn't really a solution. The court in the defenders courtyard will soon turn to be more likely to defend their neighbours.

> Justice Neil Gorsuch did not participate in the decision.

It does not appear that Gorsuch has yet added opinions on any cases this year as a Supreme Court Justice. Has he been participating in new cases?

Cases heard on the merits with decisions were probably heard before Gorsuch was on the court, which is why he won't be part of the decision.

New petitions for the court to hear cases which are being approved or denied he will participate in, which is why you will see him not on current substantive decisions, but on decisions to hear or not hear cases.

"Justice Neil Gorsuch joined the court after it heard arguments in the case and did not participate in the decision."

The last line in the article.

Is it typical for a judge to wait to make decisions when new to a court?

It's typical for a judge not to take part in decisions relating to cases which were heard before he was on the court, even though the final decision was rendered after they joined.

He had one entirely predictable opinion actually:


Scalia incarnate I suppose.

Fact: Certain federal judges were getting a disproportionate amount of patent cases.

Consider: Over time, it is possible judges in other jurisdictions did not like this. (Why?)

Question: Can anyone assume that these other judges not in, e.g., ED Tx, will not also be "plaintiff-friendly"?

Consider: Being "plaintiff-friendly" can have the effect of more patent cases being filed in the judge's jurisdiction. Further consider that some judges may want more patent cases filed in their jurisdiction.

As such, the headline may be prematurely drawing conclusions. Or not. Will patent litigation continue to rise, will it remain steady, or will it begin to fall?

Call it coincidence, or nepotism, or maybe something worse... both of the judges that hear most of the patent cases in ED Tx have son's that represent most of the trolls in court.

I would love to see the Justice Department or FBI investigate the financial relationships between the Judges and their sons. Are they jointly invested in anything that could be used to launder funds and provide kickbacks? Or are these just two fathers that are proud to see their kids get rich?

To my knowledge, the statement "both of the judges that hear most of the patent cases in ED Tx have son's that represent most of the trolls in court" is incorrect as written. The comment may be thinking of former judges, who retired in 2015 and 2011, but even for those judges I am skeptical of the "most of the" portion of the assertion. To be clear, the former judges had sons who practiced in ED Tex (and still do), but I would be surprised if they ever represented the most plaintiffs in a given year (either individually or in combination), though I admit I have not pulled the numbers to check.

For the current judges in the district, I am only aware of one who has a child that is an attorney, and to my knowledge that child does not practice in ED Tex (and does not practice in patent cases at all).

I guess it's become normalcy that the location where you are sued decides your fate, but it's so absurd.

Finally, a bit of justice.

The federal judge(s?) in East Texas should still be investigated. This was a federally sponsored extortion racket. How can a judge be allowed to interpret patent law so much differently than the rest of the US for so long?

Because, until there's precedent from the Supreme Court, any ambiguities in the law can be interpreted to practically any viable way of interpretation. Further, because of precedent, a single "weird" decision in a given district that comes early becomes effectively binding upon future decisions in that same circuit and lower circuits under its purview.

So as to avoid politics, if the law says "Go to the nearby grocery store to buy some bread. Also, if they have eggs, buy 6," there are two logically valid interpretations (though there may be only one that parses correctly.) A programmer may go to the store, see the eggs, and buy 6 loaves of bread, or he may buy a loaf of bread and 6 eggs.

If the 4th and 6th circuits decide differently, then those precedents are binding within those circuits and in lower circuits, so other cases using similar logic are also binding.

Because it usually takes two circuit courts to disagree (a circuit split) before the Supreme Court will be inclined to hear a case like this, then it means at least two people need to be sued for getting the wrong thing, appeal, and appeal again. Court cases take years, and finding the exact right cases with the exact right plaintiffs takes even longer. Because of that, Circuit A can interpret a statute completely differently than Circuit B for a very long time indeed, and so long as there's some sound, logical underpinning, be completely okay in doing so (though the necessity for soundness is debatable.)

But because the federal circuit has a monopoly on patent cases, there can never be a circuit split, and so they can get away with murder in most cases since the supreme court doesn't have the capacity to review every one of their decisions (the ones they do review, they generally disagree with the federal circuit decisions).

They really do. All they need to do is follow the money trail and see how it leads to their friends and family.

SCOTUS continues its extreme smack-down of the Court of Appeals for the Federal Circuit.

Couldn't happen to a nicer hive of scum and villainy.

It seems inevitable that "specialist courts" become biased towards that specialization.

Patent courts become biased towards patents, spy courts become biased towards spying, trade courts become biased towards more trade/less punishment for companies, and so on.

Interesting. I bet it runs the same way in criminal court -- courts specializing in a particular type of crime would be more likely to rule in favor of the prosecutor in cases concerning that type of crime. (Or did I misunderstand what you were saying?)

Reminds me of an essay written by a civil lawyer who got peripherally involved in a criminal proceeding. tl;dr: Criminal court is a total farce which would be funny except the people going to jail.

Since the Fed Circuit has jurisdiction over the whole country, it makes sense that the SCOTUS overturns it so often. SCOTUS takes cases mostly to either overturn bad decisions or to settle Circuit splits (disagreements between Circuit courts). The later doesn't apply to the Fed. Circuit (very often). SCOTUS wouldn't take a case just to confirm the Fed. Cir.

There is a history here. The CAFC is (or was) staffed by a bunch of former patent attorneys who never met a patent they didn't like. They're also the bumbling fools who made the idiotic ruling in the Oracle v Google case.

They ignored supreme court precedent in a series of rulings that made patenting abstract concepts possible, something SCOTUS struck down recently. Those CAFC rulings were largely responsible for the "but do it on a computer" patents favored by patent trolls. See Alice/Banks, KSR v Teleflex, and several others.

> They ignored supreme court precedent in a series of rulings that made patenting abstract concepts possible

Oh come on. Have you read that line of cases? They're internally inconsistent and largely nonsensical. The fact that Alice was unanimous is pretty strong evidence that the Supreme Court doesn't know what the fuck they're talking about when it comes to patent law.

I have read those cases. They're nowhere near as inconsistent as you believe them to be. Diamond v. Diehr was a ruling in the time-honored tradition of "let's overturn precedent while extolling how much we're not overturning precedent," but its actual text only pushed the boundaries a little, basically saying "having software doesn't make the thing unpatentable."

It was the CAFC's State St. decision that turned everything to rubbish, basically saying that patentability was a creative writing exercise in showing that you could tie the patent to something concrete, no matter how tenuous that part is to the core patent. In Bilski, SCOTUS went well out of its way to trash State St. at every opportunity. Alice reiterated that decision by making it clear that the machine part can't be an incidental afterthought but must be rather fundamental to the process, reinforcing rather than overturning the ideas in Diamond v Diehr.

Please explain to me how "abstract idea" has anything to do with prior art? Because that's what the Alice analysis actually looks like.

Nonetheless, in the matter of patent law, it seems to have been ignoring SCOTUS a lot.

Courts uphold decisions. The Court of Appeals was upholding a previous SCOTUS decision which it has now changed. Nothing smack down about it. They changed their mind. Which is good because now that judge in Texas and his sons can go diddle themselves.

That's not what I got from the article. It says the U.S. Court of Appeals for the Federal Circuit based its decision in this case on the precedent set by one of its own previous decisions in 1990, which apparently ran contrary to the last Supreme Court decision on the matter back in 1957. The Supreme Court has now confirmed that the 1957 ruling still stands and the Court of Appeals was wrong.

> The Federal Circuit denied the transfer by relying on one of its precedents from 1990, which loosened the geographic limits on patent cases. Heartland urged the Supreme Court to overturn that decision, arguing that the high court's own precedent from 1957 held that patent suits are governed by a specific law allowing suits only where defendants are incorporated.

> On Monday, the Supreme Court agreed with Heartland. Writing the opinion for the court, Justice Clarence Thomas said that, contrary to the Federal Circuit's rationale, the U.S. Congress did not change the rules over where patent suits may be filed since the 1957 decision.

Not according to this article (which I guess could be wrong):

> The Federal Circuit denied the transfer by relying on one of its[i.e., the Federal Circuit's] precedents from 1990.

> ...the high court's own precedent from 1957 held that patent suits are governed by a specific law allowing suits only where defendants are incorporated.

SCOTUS didn't change its mind. It overturned/"smacked down" the Appeals Court's 1990 decision.

For anyone looking for an ~20 minute intro to why this is a big deal and the impact it has on small tech companies: https://www.youtube.com/watch?v=sG9UMMq2dz4

tl;dw: There are some over-broad patents on usage of very common technologies (using wifi or selling on the google play store are two egregious examples) that are being used as a bludgeon against small and medium sized firms that can't afford to defend themselves. It costs about $3 million to defend against such a suit, and the Eastern district is known for refusing to force plaintiffs to pay defendant's attorney's fees even if the suit is ultimately dropped.

just wanted to thank you for providing this summary.

Unfortunately, there's a lot of misinformation and half-truth in that video.

I'd be very interested in specifics on this.

I work in the field, and on both sides of patent litigation. As far as I can see, there is no misinformation or half-truths in that video. What he's talking about is entirely real and relatively common, but it is not categorically true of all trolls.

Sue the Eastern District for unequal application of the law. It's easily provable with the current track record.

Sounds great, but it seems like something Newegg or Costco's lawyers would have started on already if it were feasible.

Costco's golf ball case was filed in the state where it's headquartered: Washington.

Only because Costco pre-emptively sued the patent holding company in order to choose the venue.

True, but the point was, Costco doesn't have cause to do anything in East Texas.

Can you even sue a court? Seems too good to be true.

Not in this case. You would need to have standing and a relevant claim to sue any person or firm. I would think it would pretty difficult to show sort of generalized claim about the injustices of the patent system. That is a political question, not a legal question.

Class action by victims of patent trolls?

Could a tech company, as a potential futute patent holder, sue?

Yes, there are ways to sue the courts themselves, but not for something like this. The suit would generally be in the form of what's called a Writ of Mandate. It's basically a lawsuit for when you have no other legal recourse for something. For example, if you went to a courthouse and asked for a copy of a statutorily public document but they refused to give it to you, you could file a such a writ. It would force the court to at least give you a hearing before a judge, who you'd ask to compel the court personnel to give you what you asked for.

no - the best you can do is get it appealed to a higher court.

I dunno, I think it will just introduce more variability and stretch out the cases. East Rural texas was actually pretty good at litigating patents because they knew a lot about it since they did so many.

Better would be to reform the patent law, maybe create short term 5 year patents or something.

They did so many because of their notorious pro-patent holder stance made them the favorite place to file.

The enormity of this ruling cannot be overstated. East Texas is a patent troll haven and its economy is very reliant on that business. Short of abolishing software patents this is the next best thing.

You might want to see the definition of "enormity"

Interesting -- I didn't know that enormity originally meant something very large _and_ bad or morally wrong -- but the GP's meaning is generally accepted today.

Thereby giving us another synonym for enormousness, vastness, immensity, titanic ... And at the same stroke, purging the English language of its sole word with just that one distinctive, moral connotation.

But we may yet hope to slow the slide down to Newspeak. At least one dictionary is willing to keep at the prescriptive mission: https://www.ahdictionary.com/word/search.html?q=enormity

And millions of illiterates think that "literally" means something other than "literally", too, but that doesn't make it correct, clear, or acceptable.

Words mean things.

Words mean things.

Yes, they do. And language changes, as your parent points out. One of my pet peeves is those who use "steep learning curve" to mean something difficult to learn as opposed to its original meaning of something that's easily learned based on a skill vs time chart.[0] If I were to continually point it out when it's misused, people would get annoyed with me and the amount of change I would accomplish approaches zero. The language moves on.

[0] https://en.wikipedia.org/wiki/Learning_curve

Edited to fix typo.

If experience is the x axis and learning is the y axis, and the learning curve is "steep," that might not mean it's easy to learn. It might mean that it's impossible to even get valid experience at first because it's so hard to learn, but if you manage to succeed anyhow, then there's not much more learning to do. That seems to match the common usage. In other words, climbing the y axis costs energy which must be expended to travel to the right.

  its == possessive form of pronoun "it"
  it's == contraction of "it is" or (rarely) "it has"

Indeed. Thanks for the correction!

As an aside, using indentation as you did makes the text difficult to read, particularly on mobile, due to the side-scrolling it necessitates.

I'd also prefer a stricter definition of "literally", but here we are and there's little chance we can turn back the clock. According to Merriam-Webster, most dictionaries, including the OED, recognize the "metaphoric or intensifying sense of the word literally"[1], and this is not even a recent development. (The situation for enormity is similar.)

[1] https://www.merriam-webster.com/words-at-play/misuse-of-lite...

Seems fitting to me.

>greatness of size, scope, extent, or influence; immensity: The enormity of such an act of generosity is staggering.

Perhaps off-topic (but that's kind of the point I'm getting at): The image and caption displayed alongside the article doesn't appear to have anything directly to do with the article, does it? Here's the caption:

> The application icons of Facebook, Twitter, and Google are displayed on an iPhone next to an earphone set in this illustration photo taken in Berlin, June 17, 2013. *

I've read the article twice. I can tangentially see the use of a general tech photo as the article talks about tech companies being targeted by patent trolls. If that were the case, however, I would expect the caption to tie the two together, something like "Patent trolls often file suit against tech companies such as Apple, Google, Twitter, and Facebook in sympathetic jurisdictions." Including the earphone set just makes it even more weird.

* Another meta tidbit: The caption is part of the image in the mobile version. The web version (http://www.reuters.com/article/us-usa-court-kraft-heinz-idUS...) has the caption as text.

If the lawsuits have to be started in the appropriate jurisdiction, then why has the Supreme Court recently allowed the FBI to hack anyone in the country by modifying Rule 41? Why couldn't it follow the same jurisdiction-based logic?

It will be interesting to see if the patent trolls have now been incentivized into relocating to East Texas. This is definitely a step in the right direction, just curious to see what new unintended consequences might arise.

EDIT: Ah I read it wrong, it's the defendant's incorporation location that takes priority. Thanks for the clarifications.

I thought you have to sue where the defendant is incorporated. Otherwise, why would the tech company get excited by the rule?

See from the article: "The justices sided 8-0 with beverage flavoring company TC Heartland LLC in its legal battle with food and beverage company Kraft Heinz Co, ruling that patent infringement suits can be filed only in courts located in the jurisdiction where the targeted company is incorporated." [emphasis added]

My read of the article is that they have to be incorporated where the (allegedly) infringing ("targeted" in the article) company is incorporated, so it wouldn't matter where the NPE is located.

EDIT: added "allegedly"

Most of the trouble in the Eastern District of Texas was from one law firm, and one lawyer.

A problem with weakening patents is that now, everybody wants to keep their technology secret. That leads to messy problems, such as the Waymo/Google lawsuit, when secrets leak. It also encourages overreaching employee non-compete agreements. With patents, what's proprietary technology is out there for everyone to see. With trade secrets, nobody knows what's going on.

  > With patents, what's proprietary technology is out there
  > for everyone to see.
No, not in the modern era, and not for anything that relies on software. Disclosures in software patents are worse than useless.

In the software realm the only thing that gets patented are obvious improvements on the state of the art that anybody familiar with the academic literature would stumble upon were they facing the same business problem. The real secret sauce is always in the implementation, which much of the time can't even be _divorced_ from the implementation because software is so complex. No company in their right mind would voluntarily disclose their implementing software. Even when it does leak it's usually difficult to repurpose and integrate anyhow.

Reliance on trade secrets is going to become increasingly common because of the nature of the technology, regardless of patent policy.

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