The year 2016 and the last few months of 2017 have been characterized by many notable developments in a busy U.S. Supreme Court and Court of Appeals for the Federal Circuit, causing sea changes in intellectual property law that shift litigation strategies more than ever. While the changes have been far reaching, this article will focus on those which most impact litigation strategies, such as venue, laches, patent exhaustion, patent damages, and extraterritoriality, and provide practical suggestions for strategies to employ, along with real-world examples of successful approaches to navigate this new landscape.

Limitation of Patent Venue

In a bid to address forum shopping by patentees, on May 22, 2017, the Supreme Court in TC Heartland v. Kraft Food Brands Group limited where patentees can commence patent infringement proceedings. TC Heartland, an Indiana-based company sued by Kraft Foods, an Illinois-based company, in Delaware, argued for transfer to its home base of Indiana. The lower courts refused to transfer the case to Indiana and, last year, the Federal Circuit held that patent suits can be filed in any district where the defendant makes a sale. The Supreme Court overturned the Federal Circuit and held that patent infringement lawsuits can only be filed in the district within the state where the defendant is incorporated, or the district where it has committed acts of infringement and has a “regular and established place of place of business.”

TC Heartland seems to favor bringing suits where defendants are located. The biggest effect of this decision will be in the Eastern District of Texas, where more than 40 percent of patent lawsuits were filed last year due to patentee-friendly juries and local rules which allow for fast trials. On the other hand, Delaware, where a substantial number of businesses are incorporated, and the Northern District of California, where many technology companies targeted with patent litigation are based, will likely see an increase in patent case filings. Thus, defendants unhappy about finding themselves in Texas could try to move the case to their place of incorporation. Conversely, this ruling also presents an opportunity for plaintiffs and courts in Texas to address what “regular and established place of business” means, and to try to construe that phrase favorably to keep cases in Texas.

Judge Rodney Gilstrap of the Eastern District of Texas wasted no time in interpreting the Supreme Court's ruling by denying defendant's motion to transfer for improper venue in Raytheon Company v. Cray. On June 29, Judge Gilstrap found that the employment of a sales representative within the Eastern District of Texas was sufficient to provide for a “regular and established place of business.” In finding venue to be proper, the court held that defendant's representations regarding its business in the district, benefits received from the district, and targeted interactions within the district were sufficient to satisfy the four-factor approach it employed.

Expansion of Patent Exhaustion Doctrine

The long-standing doctrine of patent exhaustion provided that the initial authorized sale of a patented item terminates all subsequent patent rights to that item, including any rights to assert infringement. On May 30, 2017, in Impression Products v. Lexmark International, the Supreme Court addressed: (1) whether a “conditional sale” that transfers title to the patented item while specifying post-sale restrictions on the article's use or resale avoids application of the patent exhaustion doctrine; and (2) whether the exhaustion doctrine applies to authorized sales of a patented article that take place outside of the United States. In expanding the doctrine, the court held that “a patentee's decision to sell a product exhausts all of its patent rights in that item, regardless of any restrictions the patentee purports to impose” on the resale of that item. The court noted that “[p]atent exhaustion reflects the principle that, when an item passes into commerce, it should not be shaded by a legal cloud on title as it moves through the marketplace.” The court also concluded that “[a]n authorized sale outside the United States, just as one within the United States, exhausts all rights under the Patent Act.” The court distinguished licenses from post-sale restriction noting, “[b]ecause the patentee is exchanging rights, not goods, it is free to relinquish only a portion of its bundle of patent protections.”