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.
I'm not trolling, I just don't get the argument.
Could somebody explain this point in detail? Surely the law is the law regardless of where in the country a case is heard.
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
I am curious what jurisdiction you have experience with where the law is applied so evenhandedly. We could learn from them.
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.
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.
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.
Thanks for clarifying, and for taking the time with the other answers.
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   ).
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.
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?
> 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.)
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.
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.)
Given that I don't see how it's a positive thing at all.
Sounds like it would be a good idea to embargo East Texas.
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'.
Patent cases are federal matters, so I don't think it applies there.
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.
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.
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.
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.
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?
When you're an early-stage, cash-strapped business entity, doing business in TX probably seems like an acceptable risk.
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.
Actually that limit is $1.11m.
"Franchise tax is based on a taxable entity’s margin."
What really needs to happen is anyone's guess. Every system someone comes up with will likely have a flaw to be exploited.
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
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.
So yes, less fundamental, but in these cases, venue and jurisdiction will now mostly be the same again (IE minimum contacts, etc)
Hello patent lawsuits in Delaware instead of east Texas!
-- 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.
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.
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.
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.
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.
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.
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.
Yes, or -you know- incorporate in another country.
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?
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.
The last line in the article.
Scalia incarnate I suppose.
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?
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?
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).
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.)
Couldn't happen to a nicer hive of scum and villainy.
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.
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.
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.
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.
> 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.
> 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.
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.
Better would be to reform the patent law, maybe create short term 5 year patents or something.
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
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. 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.
Edited to fix typo.
its == possessive form of pronoun "it"
it's == contraction of "it is" or (rarely) "it has"
As an aside, using indentation as you did makes the text difficult to read, particularly on mobile, due to the side-scrolling it necessitates.
>greatness of size, scope, extent, or influence; immensity:
The enormity of such an act of generosity is staggering.
> 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.
EDIT: Ah I read it wrong, it's the defendant's incorporation location that takes priority. Thanks for the clarifications.
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]
EDIT: added "allegedly"
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.
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.