United States: National
Having issued judgments thick and fast, the Supreme Court of the United States has fundamentally remodelled US patent litigation in recent years. In TC Heartland v Kraft Foods Group Brands the top court changed the law on venue, restricting it to jurisdictions in which the defendant resides or in which the infringing act was committed, or where the defendant has a regular and established place of business. This, inevitably, gave rise to litigation over what constitutes a ‘regular and established place of business’, and in Raytheon Company v Cray Judge Gilstrap of the Eastern District of Texas ruled that Cray maintained such a place of business on the basis that one of its remotely working employees had a private residence in the district; this was overruled by the Court of Appeals for the Federal Circuit, which also adhered strictly to the physical meaning of ‘place’ and the definition of ‘regular’ as frequent. The TC Heartland decision has, therefore, had a negative effect on patent litigation filings in districts perceived as plaintiff friendly and has fuelled a notable increase in filings elsewhere – for example, in the District of Delaware – which has made life difficult for non-practising entities (NPEs). On the subject of Supreme Court involvement, its 2014 decision in Alice Corp v CLS Bank International still reverberates; while some commentators feel that the pendulum has swung as far as it is going to in terms of restricting patentable subject matter under Section 101 of Title 35 of the United States Code, the general consensus is that it is still a quagmire out there for companies looking to obtain and enforce software and business method patents.
The introduction of inter partes reviews and other post-grant mechanisms for invalidating patents under the America Invents Act has also had a transformative effect on patent litigation. The proceedings took off immediately, being seen as a quicker and cheaper alternative to litigation; that the US Patent and Trademark Office’s Patent Trial and Appeal Board has invalidated a majority of the claims that it has reviewed has also fuelled their popularity as a route for those accused of infringement to take. There has been much debate around the extent to which all this has weakened the US patent system, but the Oil States Energy Services v Green’s Energy Group case requiring the Supreme Court to determine the constitutionality of adjudicating patent validity before an administrative body, as opposed to a federal court, has dominated the headlines of late. On April 24 2018, the Supreme Court issued its decision upholding the constitutionality of inter partes review.
The difficulties now faced by NPEs and, in particular, the rise of inter partes reviews have all contributed to a conspicuous decline in district court patent litigation filings in the United States in the past few years. The effect this will have on the legal services market is not yet clear but, especially when factoring in an apparent drop in the cost of patent litigation and a move away from the billable hour fee model, one thing is certain – life is harder now than in the past for a lot of firms. However, those at the very top end of the market appear to still be in good health, aided by the commencement of big competitor-on-competitor suits which do not seem to have abated; highly specialised patent litigation boutiques of compact size – many of them having spun off from big firms in recent years – also appear to be in a strong position. One bright spot in terms of filing volume is the International Trade Commission (ITC), which in 2017 handled nearly the same number of cases as it did at the height of the smartphone wars. The ITC is receiving some share of the cases that TC Heartland has moved out of Texas and is benefiting from the more limited interplay between Section 337 investigations and inter partes reviews. On top of that, some of the recently employed administrative law judges are hitting their stride now, which is helping to improve and expedite the ITC process, leading to more reliable results and getting people excited about the near-term prospects of the forum. Unsurprisingly, firms with established ITC patent litigation practices are reporting increased competition in this segment of the market.
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