Back in December, the Supreme Court accepted a petition in the case of TC Heartland v. Kraft Foods, one of the few patent-centric cases recently taken up by the Court. Interestingly, for this review, the case does not focus on the claims or scope of a particular patent, but instead on a fundamental question in patent litigation: that of venue. The implications for this case are vast. Currently, the Eastern District of Texas is a desired district for litigating patent cases. Should the Supreme Court overturn the Federal Circuit’s ruling on patent venues, which states that patentees can bring suit in a district even if they do not have a business presence in that district, the redistribution of patent litigation could be both swift and unpredictable.
Kraft Foods had previously sued TC Heartland in Delaware over the alleged infringement of three patents related to liquid water enhancer products (i.e., flavored liquid beverage concentrates and packaging). Heartland moved to transfer the suit to the Southern District of Indiana (where the company is based). Heartland cited several reasons why the case should be transferred, including Heartland’s lack of presence in Delaware and their lack of contracts in the region. The District Court of Delaware denied the motion to transfer the case citing precedent in venue. At this point Heartland brought the case to the Federal Circuit requesting transfer of the case to another venue or dismissal altogether. The Federal Circuit, however, rejected this request in April 2016. The venue case is now before the Supreme Court.
The impact of overturning the Federal Circuit’s decision will likely be far reaching. Under the current framework, litigants have quite a bit of flexibility in selecting venue. The U.S. District Court for the Eastern District of Texas has emerged as the premier center for patent litigation, followed, somewhat distantly, by the District of Delaware. In 2015, the Eastern District of Texas saw almost 45% of all federal patent cases, most likely because the Court has shown itself to be pro-plaintiff, moves cases quickly on the docket, and has continued to gain a reputation as an appropriate venue for patent litigation as it develops more experience in the area.
The development of the Eastern District of Texas as this center for patent litigation could be described as accidental and even unexpected. Historically, and seemingly unrelated, this District has had a very low percentage of criminal cases. However, criminal cases can often supplant other cases, such as patent litigation, further down the docket leading to unpredictable delays in the hearing of non-criminal cases. Texas Instruments, located in Dallas, was one of the first companies that sought to have their cases heard in the Eastern District after encountering these unpredictable delays in their home territory of the Northern District of Texas. Texas Instruments surmised (correctly) that a docket with fewer criminal cases such as the Eastern District of Texas could result in their patent cases being heard more quickly. This finding was also attractive to other companies seeking to settle their patent litigation suits in a shorter amount of time and with less uncertainty.
As the initial patent cases began trickling into the Eastern District in the late 1990s and early 2000s, Judge T. John Ward instituted additional measures in his courtroom to streamline the process of hearing patent cases. Adopting the Northern District of California’s patent case rules, he had hoped to simplify the hearings of future patent cases. These rules contained tight timeframes for filing and completing paperwork, among other procedural requirements. Although Ward sought to simplify patent hearings and to make them feature less prominently in his proceedings, he unwittingly helped to further turn the Eastern District of Texas into an attractive venue for those seeking a patent litigation forum. The 1990 Federal Circuit decision in VE Holding validated the rush to Eastern Texas: patent suits can currently be brought in a district, as long as it is a district where the defendant makes sales.
The redistribution of patent cases that could result, should the Supreme Court overturn the earlier decision in TC Heartland v. Kraft Foods, could be immense. It is hard to predict exactly where these cases would be heard, but an increase in the case volume for the District of Delaware, where many companies are incorporated, would not be completely unexpected. This case has the potential to establish a new working order in patent litigation. While many are predicting that the Court will, in fact, rule in favor of Heartland, we may not have a better read until oral arguments are heard.