The patent landscape experienced a paradigm shift with the May 2017 United States Supreme Court decision in TC Heartland v. Kraft Foods Group Brands. In TC Heartland, venue in patent cases was narrowed to either (1) the defendant’s state of incorporation or (2) the jurisdiction where the defendant allegedly committed acts of infringement and has a regular and established place of business. This ruling has led to new trends in patent cases.
Before TC Heartland, a corporation could be sued in any jurisdiction in which a defendant was subject to a court’s personal jurisdiction. The test was “minimum contacts” — a low bar. For example, courts found that venue was proper based on the sale or distribution of accused products to customers in the jurisdiction. See, e.g., Astute Tech., LLC v. Learners Digest Int’l LLC, C.A. No. 12-cv-689-WCB, 2014 WL 12596468 (Apr. 28, 2014) (finding 46 sales of the accused product in the district sufficient); IDQ Operating, Inc. v. Aerospace Communications. Holdings Co., C.A. No. 15-cv-781 2016 WL 5349488 (Jun. 10, 2016) (finding sufficient the sale of accused products to a nationwide distributor that sold the products in the district). The sale of accused products alone is no longer sufficient, however. Those sales must now be coupled with evidence that the defendant has “a regular and established place of business” in the district.
TC Heartland effectively redistributed the filing of many patent cases from the Eastern District of Texas to Delaware, a district where many technology companies are incorporated. According to Lex Machina, from January 2008 to May 2017 (under the “minimum contacts” standard), 27 percent of patent cases (9,939 of 36,344) were filed in the Eastern District of Texas, 15 percent in Delaware and 14 percent in the Central and Northern Districts of California. Since May 2017, however, the number of filed cases in the Eastern District of Texas has declined dramatically, and as of September 16, 2019 makes up 14 percent of patent cases (1,140 of 8,007). In the same period, filings in Delaware increased to 27 percent and filings in the Central and Northern Districts of California increased to 16 percent. And since 2018, there has been a 165 percent increase in patent cases in the Western District of Texas — a district where many technology companies have regular and established places of business.
At the same time, there has been an increase in the number of patent campaigns targeting defendants in multiple districts — campaigns that could previously be brought in a single jurisdiction. For example, a post-TC Heartland patent campaign against multiple defendants is likely to span multiple districts, such as the District of Delaware and the Western District of Texas, among others. Cases in Delaware and the Western District Texas proceed on starkly divergent schedules. Compare Power Feed-Thru-Systems & Connectors, LLC v. Sonic Connectors, LTD, C.A. No. 18-cv-00345-ADA, D.I. 27 (W.D. Tex.) (identifying a 17-month schedule to trial), with Edwards Lifesciences, LLC v. Boston Scientific Corp., C.A. No. 18-cv-01294-RGA, D.I. 15 (D. Del.) (identifying a 29-month schedule to trial). Their differing timeframes makes coordination on common issues (e.g., assertion of infringement based on standard essentiality, invalidity, claim construction and fact discovery) impractical for defendants in different district courts. When this kind of differential occurs, the result often is that defendants in the district with the fastest schedule bear the cost of addressing core issues long before they would be addressed by defendants on the slower schedule cases.
Multidistrict litigation is one possible response to this development. Congress authorized the transfer of “civil actions involving one or more common questions of fact . . . to any district for coordinated or consolidated pretrial proceedings.” 28 U.S.C. § 1407. Such a transfer could lower the overall cost of litigation by allowing coordination on common issues in the same jurisdiction. MDL may also lead to earlier case resolution. A plaintiff’s assertion of infringement based on standard essentiality could be resolved across all co-pending cases on an early motion to dismiss before the Judicial Panel on Multidistrict Litigation. As of September 16, 2019, there were only nine pending patent multidistrict litigations. As patent campaigns continue to be launched against defendants in divergent district courts, we could see an increase in patent defendants availing themselves of the MDL litigation process.