The U.S. Supreme Court recently issued a unanimous decision that will limit the controversial practice of “venue shopping” by plaintiffs who pick court locations they believe will be more favorable to their case, and who unnecessarily drag defendants into patent disputes in a faraway venue in the process. The decision has important implications for businesses that rely on patents to protect their innovation.
For many years, plaintiffs have relied upon a more general venue law that allowed a lawsuit to be filed where the defendant resides or does any business, which led to a disproportionate number of patent filings in the Eastern District of Texas.
The Eastern District of Texas had long been the venue of choice for many plaintiffs because its local practices favor patentees and the district’s rapid litigation timetable can put pressure on defendants to settle. In the past two years, about 40 percent of all U.S. patent suits were filed in the Eastern District of Texas, with 90 percent of those cases filed by “patent trolls,” or companies that hold patents but do not manufacture or produce anything.
Now, with the recent U.S. Supreme Court decision, plaintiffs will be able to bring patent suits only “where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business” under the patent venue statue, 28 U.S.C. § 1400(b). As applied to domestic corporations, the term “resides” refers only to the state of incorporation.
The recent decision will likely limit the ability to “shop” for friendly courts – meaning that no longer will defendants be forced to defend patent suits in distant locales adding to cost, complexity, and unpredictability.
Although this decision may minimize the number of filings in the Eastern District of Texas, it may cause an increase of filings in the District of Delaware since many companies are incorporated there. Nevertheless, the decision is an important step to bring balance back in patent litigation and funnel cases back to the defendants’ home jurisdiction.