Large Businesses Pleased With Supreme Court Ruling on Forum Shopping For Patent Lawsuits

On May 22, 2017, the U.S. Supreme Court made a unanimous decision that is being hailed by large technology companies and other patent holders, who have arguably been victimized over the years by what are known as “patent trolls,” or smaller companies that purchase patents only in order to demand royalties and sue for damages (instead of using those patents, for example). This particular type of activity was significantly interfering with the ability for these businesses to effectively run their business models.

Companies referred to as “patent troll” companies would allegedly target very specific courts in which to sue for damages—a practice known as forum shopping—because these remote federal courts had a reputation for friendliness towards plaintiffs, or the suing party. For example, more than 40 percent of all patent lawsuits were filed in federal court in East Texas, even though no major manufacturers are based there. As a result, one judge oversaw about a quarter of all patent cases filed nationwide.

Determining Forum for Business Lawsuits

Ultimately, the topic at issue in the case involved the important legal question of where a business can be sued (i.e. “where proper venue lies for patent infringement lawsuit brought against a domestic corporation”). In other words, can a business essentially be sued anywhere that they do business, or do patent suits have to be filed in the judicial district where the defendant resides? On this question, the U.S. Supreme Court pointed out that, according to precedent established by a 1957 U.S. Supreme Court case, a domestic corporation resides only in the state of its incorporation.

Decision Will Reduce Costs of Defending Patent Litigation

The decision will change the “litigation landscape” for patent suits moving forward. As some have pointed out, as a result of the decision, “forum shopping” is essentially over in these types of cases. The many patent cases previously (and purposely) filed in East Texas will now have to shift to other places, including Florida, and this will effectively reduce the overall costs of defending patent litigation for businesses.

Companies are, for the most part, grateful for the decision, especially those based in Silicon Valley, as they were allegedly often targeted by patent owners who used the threat of litigation in order to extract royalties.

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Resources:

nytimes.com/2017/05/22/business/supreme-court-patent-lawsuit.html

supremecourt.gov/opinions/16pdf/16-341_8n59.pdf