The future patent litigation landscape may be shaped by the Supreme Court’s future review and decisions on two notable patent cases: TC Heartland LLC v. Kraft Food Brands Group LLC and Impression Products, Inc. v. Lexmark International, Inc.
In a recent client alert, Gibson Dunn delivers an in-depth summary of these two cases. The global law firm asserts that the Supreme Court’s decisions “may have broad implications for the licensing and distribution of patented goods, domestically and internationally,” the “potential to narrow the range of venues available to patent plaintiffs” and may “broaden the geographic scope of the exhaustion defense for patent defendants.” Implications and potential, indeed.
As outlined in the summary, the Supreme Court granted certiorari in these two cases at the end of 2016. The issue at the center of Heartland is location, location, location:
“[W]hether plaintiff may sue a corporation for patent infringement in any district where the defendant is subject to personal jurisdiction (as the United States Court of Appeals for the Federal Circuit has long held), or only in the districts where the defendant is incorporated, or has committed acts of infringement and has a regular and established place of business (as the petitioner and several amici have argued).”
Staying put on location for a moment: Have you ever wondered why so many patent cases are in the Eastern District of Texas and the District of Delaware? Venue selection for patent cases is all about where the corporate defendant “resides,” and there’s a history of statutes and case law that has defined just what “resides” means. Amendments in 1988 and the VE Holding case in 1990 broadened the patent-specific definition from where a company was incorporated or where it had established business and committed infringement to where the defendant was subject to personal jurisdiction. Since most corporations sell products on a national scale, then any district becomes a venue option in which plaintiffs may initiate their patent suit. After VE Holding, plaintiffs began gravitating to districts like the Eastern Texas and Delaware, where local rules work in their favor and are perceived as “plaintiff-friendly.”
The case before the Supreme Court petitions to clarify whether 2011 amendment changes replace the 1990 decision and make the patent venue specific to defendant incorporation/place of business or leave it broadly defined at the anywhere they are subject to personal jurisdiction level.
The Supreme Court’s interpretation of the jurisdictional statute, therefore, could have a significant effect on the location suits are filed in. Per Gibson Dunn:
“If the Supreme Court reverses the Federal Circuit, then patent plaintiffs may not be able to file as often in their preferred districts. That may mean that new patent cases will be spread more evenly across a broader range of districts. But it may also encourage the concentration of cases in certain districts. For example, the District of Delaware is already a popular venue for patent cases, but it may become even more so … as many potential defendants are incorporated in Delaware even if they do not maintain regular places of business there.”
Lexmark is also, to some extent, about location. Specifically, the case is about patent exhaustion: “a doctrine that limits a patentee’s rights regarding activities that occur after the initial authorized sale of a patented item.” Per Gibson Dunn, there are two issues in this review: Whether the patent exhaustion doctrine applies to foreign sales and whether a patentee can avoid this same doctrine through a “conditional sale,” which transfers the patented item title while also specifying post-sale restrictions on use or resale. Specifically, with regard to the first issue, Gibson Dunn cites the case Kirtsaeng v. John Wiley & Sons, Inc., 133 S. Ct. 1351, 1363 (2013), in which the Supreme Court held that the first-sale doctrine applies to copyrighted items applies to both items made or sold in the United States and abroad. As expected, the results of this decision could affect international business interests.
Because the future decisions on these two cases will affect “courts, rights-holders, defendants and all participants in the intellectual property economy,” the entire in-depth summary is a recommended read.