Patent litigation may be on the verge of trending downward in 2017 and beyond, possibly giving businesses, especially in the consumer products industry, new hope for relief. On Dec. 14, 2016, the U.S. Supreme Court decided to review an obscure matter of patent law that could have significant ramifications to every business in danger of seeing themselves dragged into an unfamiliar jurisdiction to defend against patent infringement.
The Supreme Court has decided to hear TC Heartland LLC vs Kraft Foods Group Brands LLC to resolve the issue of whether a specific patent venue statute controls patent litigation issues or whether patent litigation should continue to be controlled by the general venue statute. How the court decides this issue may not only result in a decline in the patent troll economy in the Eastern District of Texas but may eventually contribute to an overall general decline in patent litigation if patentees are required to enforce patents on the “home court” of defendants.
In the matter of TC Heartland vs. Kraft, Kraft brought suit in the U.S. District Court for the District of Delaware, alleging TC Heartland’s liquid water enhancer products (allegedly, Refreshe Fruit Punch Drink Enhancer) infringed three of Kraft’s patents. TC moved to dismiss or transfer the case out of Delaware, since TC is a limited liability company organized and existing under the laws of Indiana.
Meanwhile, Kraft is a limited liability company organized under Delaware law, having a principal place of business in Illinois. TC wanted the case transferred out of Delaware and challenged the transfer all the way to the Supreme Court.
The statistics on patent litigation in the U.S. reveal a telling story about the winners and losers in patent disputes. PricewaterhouseCoopers reported in its 2016 Patent Litigation Study the median damage award in 2015 was $10.2 million. The 2015 median award represents the highest point in awards in over 10 years.
The PWC report also found that 10 industries account for 90% of all identified decisions. The top 10 are: consumer products (15%), biotech/pharma (11%), computer hardware/electronics (8%), industrial construction (8%), software (6%), medical devices (6%), telecommunications (4%), business/consumer services (4%), automotive (3%) and chemicals (4%).
As for where patent plaintiffs choose to sue, the top five venues, ranked by patentee success rate and median plaintiff verdict, include:
• Eastern District of Texas (54% win rate, $9.4 million median verdict)
• Middle District of Florida (52% win rate, $226,000 median verdict)
• Northern District of Texas (47% win rate, $4.8 million median verdict)
• District of Delaware (40% win rate, $17 million median verdict)
• Western District of Wisconsin (37% win rate, $8 million median verdict)
As noted, the statistics tell an interesting story. For even the smallest advantage, a patent plaintiff is likely to forum shop and choose to sue in a jurisdiction most favorable to the plaintiff, which is usually not where the defendant resides. The Supreme Court may be jumping in to stave off the perceived advantages patent plaintiffs have in districts like the Eastern District of Texas, pejoratively known to favor “patent trolls.” But the downside to turning venue on its head, is that districts like the courts in the District of Delaware are widely respected for having developed a deep expertise in handling patent matters that only comes from volume and experience. When patent cases are tried in a more disbursed way throughout district courts in the U.S., consistency and efficiency may suffer in the short run.
As business owners you may be able to impact the Supreme Court’s decision. Most businesses have joined national or regional trade organizations, such as the NRF (National Retail Federation), PhRMA (Pharmaceutical Research and Manufacturers of America), U.S. Chamber of Commerce, etc. One way to have an impact is request your trade organization in which you are a member to take a position in this matter.
Take a position, otherwise it could cost you.
Angela Grayson is the principal of Precipice IP PLLC, a legal firm in Bentonville. She is a registered patent attorney and is admitted to the U.S. Supreme Court Bar. She can be reached at 479-259-2966 or [email protected] The opinions expressed are those of the author.