Supreme Court can drive patent trolls out of East Texas

According to statistics, 40% of all patent lawsuits in the United States are considered in one single court - in the Federal Court of the Eastern District of Texas. This court has a reputation as plaintiff-friendly , which is understandable: judges and lawyers are often tied by kinship ties , and even former judges after retirement go to work in private law firms that specialize in patent law. This is a real core business in East Texas, a kind of local mafia, so to speak.

Surprisingly, in a “stronghold of world democracy” such a situation is possible in principle, when a single judge in a small town considers 25% of all patent proceedings in a country - more than all the judges of California, Florida and New York taken together! But this is exactly what happened in recent years. Now the East Texas anomaly has been raised in the US Supreme Court in an unrelated case. The court decides whether to limit the geography of places where you can attract the defendant in a patent case, writes the New York Times.

According to statistics for 2015, patent trolls filed 90% of all patent lawsuits in the US related to IT. It uses highly dubious patents of extremely broad spectrum. For example, a patent for a digital document flow with a proposal to companies to issue a perpetual license at the rate of $ 1,000 dollars for each employee who uses a scanner in their office. There were similar patent claims against WiFi hotspot owners and corporate SSL users .

Most respondents prefer not to enter the court proceedings in order not to waste time and huge sums to pay lawyers - it is easier to pay compensation, buy a “license to use technology” and forget about it as a nightmare. Only a few particularly important companies like Newegg and Kaspersky Labs give the trolls surrender , defeating them in court and seeking the revocation of patents. After defeating the patent troll in 2013, Kaspersky Lab reported that it was the only one of 35 companies who did not make a deal with trolls and fought to the end in court. “We won the trial against a very powerful multi-level trolling system,” said Yevgeny Kaspersky. Then he showed that patent trolls can and should be fought.
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Patent trolls literally terrorize technology companies. Those who came to terms with this as an inevitable evil and often follow the path of least resistance: they prefer to pay a modest amount of licensing fees, just not to get involved with them. East Texas court has become an integral part of these frauds. Obviously, the situation is abnormal and needs to be changed.

The decision of the Supreme Court in the case now being considered can play an important role if the court forbids unreasonably calling companies from other states to consider the case in another jurisdiction. Although this process has no relation to patent trolls, it will directly affect them. It's all about geography.

The case of TC Heartland v. Reached the highest court . Kraft Foods Group Brands, No. 16-341 . We will explain the essence. Heartland has its headquarters in Indiana. Kraft is registered in Delaware, but its main business is in Illinois. So, Heartland sold its Water Enhancers products (with low-calorie sweeteners), including in Delaware, supplying them there by contract. As a result, Kraft filed a lawsuit against Kraft for similar products with Heartland. The trick is that Kraft filed a lawsuit with the Delaware Federal District Court. Heartland replied that claims should be denied because it is not registered in Delaware, does not have an office there and is not going to conduct business in the future.

In accordance with the precedent of the US Court of Appeals for the Federal District of 1990 , in patent cases, the defendant’s place of residence covers several jurisdictions. But this precedent conflicts with the decision of the Supreme Court in the case of Fourco Glass Co. v. Transmirra Products Corp. in 1957 , which determined that the case should be considered only in the jurisdiction of the defendant.

Apparently, in this case, Heartland lawyers are trying to abolish the jurisdictional exception made for patent defendants. If this exception is canceled, then claims to technology companies will be treated as expected - in California, where most of these companies are located. It was there that the presence of all the accused, witnesses and experts in such cases was maximally simplified. Patent trolls will have to forget about their little “patent ghetto” in East Texas. By the way, now during the hearings of Heartland and Kraft, there was an argument about bias in East Texas. A number of technology and Internet companies supported Heartland ’s claim and sent supporting materials to the Supreme Court, stating their arguments against the patent trolls.

True, there are other IT companies that have advocated the preservation of existing rules , so that patent cases are tried in courts that specialize specifically in such cases. Pharmaceutical companies have also expressed that it is more convenient for them to judge all small violators in a crowd in one court.

Yesterday, one of the judges of the Supreme Court, Elena Kagan, expressed surprise that the US Court in the federal district for the past 30 years has ignored the decision of the Supreme Court of 1957, which makes it clear that the defendant should be tried in his jurisdiction, and nowhere else . Since 1990, this decision has not been respected in patent cases. Apparently, now the Supreme Court is finally ready to restore order.

If this happens, then East Texas will have to look for a new specialization for the many law firms that work there.

The trial continues. Lawyers for the plaintiff believe that such an important decision should be submitted to the Congress.