On March 27, 2017, the U.S. Supreme Court heard oral argument in TC Heartland v. Kraft, a case that centers on where patent infringement lawsuits can be filed.
- If the Supreme Court sides with TC Heartland, patent infringement hotbeds like the Eastern District of Texas would likely see a drastic reduction in filings because cases would be limited to the state of incorporation of the defendant, or where the defendant has committed acts of infringement and has a regular and established place of business.
- Because many corporations select Delaware as their state of incorporation, a ruling in favor of TC Heartland would likely cause a sharp increase in patent infringement filings in that district.
- Switching the heavy patent infringement case load from the Eastern District of Texas to the District of Delaware will not solve TC Heartland’s concern about one judicial district handling a disproportionate majority of patent infringement cases.
- If the Supreme Court sides with Kraft Foods, the status quo will be maintained and patent owners will have flexibility in selecting venue for infringement actions.
Today the U.S. Supreme Court issued an opinion, SCA Hygiene Products Aktiebolag v. First Quality Baby Products, LLC, in which it held that laches cannot be used as a defense to a claim of patent infringement. The opinion had been anticipated ever since the Court’s decision in Petrella v. Metro-Goldwyn-Mayer, Inc., 572 U.S. ___ (2014) struck down the defense in copyright cases, using reasoning that appeared to apply to all federal actions involving causes of action subject to statutes of limitations.
Q: Why is the technology industry following TC Heartland v. Kraft so closely?
Paul Cronin: The Supreme Court recently agreed to take up TC Heartland, a case that will address the issue of where patent infringement lawsuits can be filed. The tech industry wants the Supreme Court to end the practice of “forum shopping,” or filing lawsuits in venues that are historically favorable to patent owners. The technology industry wants the law changed so patent infringement lawsuits must be filed in the accused infringer’s state of incorporation or where its headquarters is located. If this change occurs, “home court” advantage will shift from the patent owner to the accused infringer. Software, smart phones, and other technology companies have been among the hardest hit in terms of fighting patent litigation. The industry is looking to shut down the patent-friendly venues by forcing patent owners to file suit in the home district of the accused infringer.
When would a company undergo intellectual property due diligence?
Konstantin Linnik: Any corporate transaction involving IP assets necessitates diligence: merger, acquisition, IPO, investment (such as a venture capital financing), in-license, partnering, co-development, or distribution agreements. The buyer who is evaluating the Target could be a licensee, business partner, investor, banker, or underwriter. IP due diligence analyzes patent issues, trade secrets, trademarks, copyrights, freedom to operate, IP litigation, licensing, reps, warranties, disclosures, and even employment agreements. The process will examine the Target’s IP, such as how well the existing and potential IP protects the Target, what projected revenues will be based on the exclusivity period and geographic scope, and the current and projected expenses, including prosecution, maintenance, royalties, and enforcement. Because the diligence is expensive and is typically charged off as the overall transactional cost, the diligence is conducted as close to pre-closing as possible.
Maximizing the protection and value of intellectual property assets is often the cornerstone of a business's success and even survival. In this blog, Nutter's Intellectual Property attorneys provide news updates and practical tips in patent portfolio development, IP litigation, trademarks, copyrights, trade secrets and licensing.