The Supreme Court's recent TC Heartland v. Kraft Foods Group Brands opinion is relatively simple to understand—the word “resides” in the patent venue statute (28 U.S.C. Section 1400) refers to the state where an accused infringer is incorporated. TC Heartland's ramifications, however, may be dramatic.

• The face of patent litigation is changing.

As a quick background, patent owners—for the last 27 years—had many options for where they could file suit. Many chose small towns in the Eastern District of Texas, which offered fast times to trial and other benefits considered by many as favoring patent owners. This phenomenon stemmed from the VE Holding v. Johnson Gas Appliance opinion, which interpreted Section 1400's “resides” in terms of where an accused infringer is subject to personal jurisdiction. This was a significant change; personal jurisdiction can examine where the accused products are sold, which today, is often nationwide. VE Holding paved the way for the Eastern District of Texas to have the nation's largest patent docket, increasing from only a handful of patent cases to 2,500-plus cases more recently.

Post-TC Heartland, the face of patent litigation has changed. The Eastern District of Texas has already fallen from having 37 percent of all nationwide patent cases, to only 14 percent. In contrast, Delaware, where many businesses are incorporated, is now the top spot for patent filings, increasing its docket from having 10 percent to 23 percent of nationwide filings. California has also seen an increase given the large number of businesses incorporated and located there.

• Patent litigation expenses are shifting.

Litigation expenses are a significant issue in all patent cases. These costs are shifting post-TC Heartland.

For patent owners, the pre-TC Heartland landscape offered efficiencies in allowing a suit against many accused infringers in a single district, with pre-trial consolidation also available to further reduce costs. These efficiencies are less likely to realize post-TC Heartland. The recent Coding Technologies litigations are a good example. There, the patent owner was forced to assert its patent in 46 cases spread over seven districts. The expenses in litigating these cases nationwide, on disparate timelines, and requiring analysis of each court's specific rules and procedures, and potentially engaging local counsel if necessary or required (e.g., Delaware L.R. 83.5), are significant.

For accused infringers, litigation expenses are also changing, and potentially for the better. For example, some view the Eastern District of Texas practice as tending to increase litigation expenses as compared to certain other districts. The statistics show that the Eastern District of Texas is more reticent to grant early summary judgment motions and end a case before significant expenses accrue. The Eastern District of Texas grants 16.42 percent of summary judgments motions whereas the Northern District of California grants nearly double that at 31.66 percent. Obtaining a litigation stay pending Patent Office post-grant proceedings (a much cheaper process than litigating in Federal Courts) is also less likely, with Eastern District of Texas denying 42 percent of requests and Northern District of California denying only 24 percent. Travel-related costs may also decrease as more cases are filed closer to where accused infringers are incorporated or located.

• Delay and uncertainty may increase.

Delay and uncertainty in resolving patent litigations may also increase in the near term as more patent cases are filed in districts with little patent experience. Consider, for example, having to file a patent litigation in the Western District of New York which only had nine patent litigations last year and where the time to trial took over 34 months.

In contrast, love it or hate it, the Eastern District of Texas offers speed in resolving patent litigations. In one past case where one of the authors was involved—Abstrax v. Hewlett-Packard—the court scheduled trial to start 15 months after the case was filed. This timing was far less than the 25-28 month average timing offered by other major patent districts such as Delaware and the Northern District of California.

Other factors may also increase resolution delay. Delaware has recently seen a massive influx of patent cases, but is short-staffed following Judge Sue Robinson's retirement and Judge Gregory Sleet's decision to take senior status. This congestion has led many to speculate that the timing to trial in Delaware will increase. Many also view the district as more receptive to Section 1404 “convenience” based venue transfer requests, a process that includes delays pending resolution of the request. Also, venue transfer motions are not cheap, and we expect those costs to increase as more parties seek venue discovery with regards to what constitutes Section 1400's “regular and established place of business” prong under the guidance of the recent In re Cray Inc. opinion.

The Eastern District of Texas also offers some level of certainty, for both patent owners and accused infringers. The district has its own local patent rules that require early mutual disclosure of contentions. In contrast, many districts, including Delaware, do not. Additionally, some consider the Eastern District of Texas as more predictable with respect to issues such as Markman, Daubert and summary judgment, based upon the significant body of jurisprudence developed over the last several years when the Eastern District of Texas held the top spot for patent litigations. Early predictability of result, even when an unfavorable result is predicted, is itself a benefit in assessing risk as patent litigation issues can be complex and the damages significant (such as Merck's recent $2.54B verdict).

• Declaratory judgment actions will likely decrease.

Declaratory judgment (DJ) actions are anticipated to decrease post-TC Heartland.

DJ actions are less necessary now post-TC Heartland, given that 28 U.S.C. Section 1406 allows a court to either dismiss or transfer a litigation in response to a venue challenge. In practice, accused infringers are already achieving similar benefits by simply requesting their preferred venue in a TC Heartland motion (e.g., Symbology Innovations v. Lego Systems). Early indications have shown that at least some courts are willing to grant the accused infringer's choice, even when there are other venues available that the patent owner prefers.

Recent opinions out of Alabama and Kentucky further illustrate this point and demonstrate that patent venue concerns may trump concerns of personal jurisdiction. In Blazer v. Chrisman Mill Farms, the Alabama court faced a TC Heartland challenge and transferred the patent case to Kentucky, despite the fact that the Kentucky court had previously opined that it lacked personal jurisdiction over the patent owner in a separate DJ action by the same accused infringer. The Alabama court noted that this result was “ironic,” and observed patent owner's objection of a “perpetual game of jurisdictional ping-pong,” but nevertheless found the transfer warranted under TC Heartland. In hindsight, the accused infringer had no need to file a Kentucky DJ action—the patent litigation was headed there regardless.

Of course, DJ actions remain a viable consideration for many corporations that maintain a physical places of business in strategically undesirable venues. Consider for example Apple's recent attempt to dismiss a Delaware litigation under Section 1400 in Prowire v. Apple, where the court found that Apple's single retail store in Delaware was enough for proper venue. Section 1404 “convenience” transfer motions are also viable considerations for these nationwide companies, such as in MEC Resources v. Apple, where litigation was transferred when Apple's single retail store in Delaware was the only connection to the venue.

Michael Rueckheim is a partner in the Silicon Valley office of Winston & Strawn. He is a patent litigator with a high-level background in technology. He can be reached at [email protected]. Matthew McCullough is an associate in the Silicon Valley office of the firm. He can be reached at [email protected].

Winston & Strawn

The Supreme Court's recent TC Heartland v. Kraft Foods Group Brands opinion is relatively simple to understand—the word “resides” in the patent venue statute (28 U.S.C. Section 1400) refers to the state where an accused infringer is incorporated. TC Heartland's ramifications, however, may be dramatic.

• The face of patent litigation is changing.

As a quick background, patent owners—for the last 27 years—had many options for where they could file suit. Many chose small towns in the Eastern District of Texas, which offered fast times to trial and other benefits considered by many as favoring patent owners. This phenomenon stemmed from the VE Holding v. Johnson Gas Appliance opinion, which interpreted Section 1400's “resides” in terms of where an accused infringer is subject to personal jurisdiction. This was a significant change; personal jurisdiction can examine where the accused products are sold, which today, is often nationwide. VE Holding paved the way for the Eastern District of Texas to have the nation's largest patent docket, increasing from only a handful of patent cases to 2,500-plus cases more recently.

Post-TC Heartland, the face of patent litigation has changed. The Eastern District of Texas has already fallen from having 37 percent of all nationwide patent cases, to only 14 percent. In contrast, Delaware, where many businesses are incorporated, is now the top spot for patent filings, increasing its docket from having 10 percent to 23 percent of nationwide filings. California has also seen an increase given the large number of businesses incorporated and located there.

• Patent litigation expenses are shifting.

Litigation expenses are a significant issue in all patent cases. These costs are shifting post-TC Heartland.

For patent owners, the pre-TC Heartland landscape offered efficiencies in allowing a suit against many accused infringers in a single district, with pre-trial consolidation also available to further reduce costs. These efficiencies are less likely to realize post-TC Heartland. The recent Coding Technologies litigations are a good example. There, the patent owner was forced to assert its patent in 46 cases spread over seven districts. The expenses in litigating these cases nationwide, on disparate timelines, and requiring analysis of each court's specific rules and procedures, and potentially engaging local counsel if necessary or required (e.g., Delaware L.R. 83.5), are significant.

For accused infringers, litigation expenses are also changing, and potentially for the better. For example, some view the Eastern District of Texas practice as tending to increase litigation expenses as compared to certain other districts. The statistics show that the Eastern District of Texas is more reticent to grant early summary judgment motions and end a case before significant expenses accrue. The Eastern District of Texas grants 16.42 percent of summary judgments motions whereas the Northern District of California grants nearly double that at 31.66 percent. Obtaining a litigation stay pending Patent Office post-grant proceedings (a much cheaper process than litigating in Federal Courts) is also less likely, with Eastern District of Texas denying 42 percent of requests and Northern District of California denying only 24 percent. Travel-related costs may also decrease as more cases are filed closer to where accused infringers are incorporated or located.

• Delay and uncertainty may increase.

Delay and uncertainty in resolving patent litigations may also increase in the near term as more patent cases are filed in districts with little patent experience. Consider, for example, having to file a patent litigation in the Western District of New York which only had nine patent litigations last year and where the time to trial took over 34 months.

In contrast, love it or hate it, the Eastern District of Texas offers speed in resolving patent litigations. In one past case where one of the authors was involved—Abstrax v. Hewlett-Packard—the court scheduled trial to start 15 months after the case was filed. This timing was far less than the 25-28 month average timing offered by other major patent districts such as Delaware and the Northern District of California.

Other factors may also increase resolution delay. Delaware has recently seen a massive influx of patent cases, but is short-staffed following Judge Sue Robinson's retirement and Judge Gregory Sleet's decision to take senior status. This congestion has led many to speculate that the timing to trial in Delaware will increase. Many also view the district as more receptive to Section 1404 “convenience” based venue transfer requests, a process that includes delays pending resolution of the request. Also, venue transfer motions are not cheap, and we expect those costs to increase as more parties seek venue discovery with regards to what constitutes Section 1400's “regular and established place of business” prong under the guidance of the recent In re Cray Inc. opinion.

The Eastern District of Texas also offers some level of certainty, for both patent owners and accused infringers. The district has its own local patent rules that require early mutual disclosure of contentions. In contrast, many districts, including Delaware, do not. Additionally, some consider the Eastern District of Texas as more predictable with respect to issues such as Markman, Daubert and summary judgment, based upon the significant body of jurisprudence developed over the last several years when the Eastern District of Texas held the top spot for patent litigations. Early predictability of result, even when an unfavorable result is predicted, is itself a benefit in assessing risk as patent litigation issues can be complex and the damages significant (such as Merck's recent $2.54B verdict).

• Declaratory judgment actions will likely decrease.

Declaratory judgment (DJ) actions are anticipated to decrease post-TC Heartland.

DJ actions are less necessary now post-TC Heartland, given that 28 U.S.C. Section 1406 allows a court to either dismiss or transfer a litigation in response to a venue challenge. In practice, accused infringers are already achieving similar benefits by simply requesting their preferred venue in a TC Heartland motion (e.g., Symbology Innovations v. Lego Systems). Early indications have shown that at least some courts are willing to grant the accused infringer's choice, even when there are other venues available that the patent owner prefers.

Recent opinions out of Alabama and Kentucky further illustrate this point and demonstrate that patent venue concerns may trump concerns of personal jurisdiction. In Blazer v. Chrisman Mill Farms, the Alabama court faced a TC Heartland challenge and transferred the patent case to Kentucky, despite the fact that the Kentucky court had previously opined that it lacked personal jurisdiction over the patent owner in a separate DJ action by the same accused infringer. The Alabama court noted that this result was “ironic,” and observed patent owner's objection of a “perpetual game of jurisdictional ping-pong,” but nevertheless found the transfer warranted under TC Heartland. In hindsight, the accused infringer had no need to file a Kentucky DJ action—the patent litigation was headed there regardless.

Of course, DJ actions remain a viable consideration for many corporations that maintain a physical places of business in strategically undesirable venues. Consider for example Apple's recent attempt to dismiss a Delaware litigation under Section 1400 in Prowire v. Apple, where the court found that Apple's single retail store in Delaware was enough for proper venue. Section 1404 “convenience” transfer motions are also viable considerations for these nationwide companies, such as in MEC Resources v. Apple, where litigation was transferred when Apple's single retail store in Delaware was the only connection to the venue.

Michael Rueckheim is a partner in the Silicon Valley office of Winston & Strawn. He is a patent litigator with a high-level background in technology. He can be reached at [email protected]. Matthew McCullough is an associate in the Silicon Valley office of the firm. He can be reached at [email protected].