If your company is being sued for patent infringement, there’s an awfully good chance you’ll need to get familiar with Marshall, Tex., population around 25,000.
The Eastern District of Texas is where a stunning number of patent cases are born — nearly 45 percent of the nation’s total, according to an amicus brief filed at the Supreme Court.
One U.S. district judge, Rodney Gilstrap, who presides over the federal courthouse in Marshall, received about one-quarter of all the patent cases initiated between 2014 to 2016 — more than were assigned to all federal judges in California, New York and Florida combined, according to Mark A. Lemley, a Stanford law professor who filed the brief on behalf of himself and other professors.
The Supreme Court on Monday debated whether such forum-shopping is what Congress intended to happen with patent litigation — and whether there was anything wrong with it.
Briefs in the case are “filled with this thing about a Texas district which they think has too many cases,” said Justice Stephen G. Breyer, adding “I don’t know whether that’s good, bad, or indifferent.”
James W. Dabney, a New York lawyer representing a company called TC Heartland, said, right or wrong, it was contrary to a Supreme Court ruling that is 60 years old. He contends that a patent suit must be filed in the place where the alleged infringer is headquartered or where it has a regular and established place of business.
Instead, the Indiana-based Heartland was sued in Delaware, the district with the second highest number of patent suits, about 10 percent. Kraft Heinz alleges that Heartland’s liquid water enhancers infringe on Kraft’s MiO.
Companies like to sue in places such as East Texas and Delaware, because those courts are seen as “patent-friendly,” with rules on speed, discovery and dismissal of claims that favor patent-holders. Critics say they also encourage costly litigation and settlements.
Kraft’s lawyer at the Supreme Court, William M. Jay, told the court that Congress is looking at the situation. But if there’s a problem, he said, it is not one that should be settled with his company’s case.
The justices acknowledged that their case from 1957 seemed definitive. The problem is that Congress has altered the law about legal venues twice since then, and the U.S. Court of Appeals for the Federal Circuit has basically rewritten the rules from what the Supreme Court set.
Justice Elena Kagan noted the unusual nature of the case. Usually when the Supreme Court rules, “we can be pretty confident that Congress is acting against the backdrop of that decision,” she said. “But I think that that would be an odd thing to say in this case, given that for 30 years the Federal Circuit has been ignoring our decision and the law has effectively been otherwise.”
Under the Federal Circuit rules, patent lawsuits can be filed wherever a company has even minimal sales of its products. Heartland, for instance, shipped a relatively small portion of its water enhancer for sale in Delaware, but two lower courts ruled that was enough to keep the case there, rather than transferred to Indiana.
Dabney told the court there was no reason to adhere to the Federal Circuit’s ruling. “This court has again and again and again stood up for its authority to declare what the law is,” he said.
The case is TC Heartland v. Kraft Foods Group Brands.