Michael C. Smith of Marshall’s Siebman, Burg, Phillips & Smith said that if patent owners are no longer able to sue large manufacturers in the Eastern District of Texas, they might choose instead to sue the retailers who sell infringing products at stores in the district.
That’s because the Supreme Court has returned to a statutory framework that has two prongs. The first is that venue is proper where a defendant is incorporated. For many large companies that means Delaware. But under TC Heartland, venue will also be proper in a district where a defendant has a regular and established place of business and infringement occurs.
So if Apple or Cisco or HP is selling infringing products at the Best Buy, Wal-Mart or Costco in Plano, for example, patent owners could sue the retailers there and still litigate the case in the Eastern District, said Smith, who maintains a blog on the Eastern District.
“Plaintiffs are going to respond by moving from suing manufacturers to sellers,” he said. Foreign-based companies such as Asian cellphone makers might also remain fair game in the Eastern District because TC Heartland applies only to U.S.-based corporations, he said.
Malcolm Whittaker of Houston’s Whittaker Law Firm said he expects to see more cases filed in Delaware. But for those who want to file in the Eastern District, “it certainly seems like the way patent holders are going to try to get around it is to sue retailers,” said Whittaker, who filed an amicus brief in the case.
Michael Sacksteder of Silicon Valley’s Fenwick & West, who typically represents defendants, noted that manufacturers could try to short-circuit that strategy by filing declaratory judgment actions and seek to stay the actions against their customers.
Weil, Gotshal & Manges partner Edward Reines, also in Silicon Valley, cautioned that the law of “regular and established place of business” has been lying mostly dormant since the Federal Circuit’s 1990 decision that the Supreme Court overruled Monday. Corporate headquarters would certainly qualify, he said, and probably other locations where companies maintain a brick-and-mortar presence. “It’s been quiescent for decades, so it’s an area of the law that’s going to require a lot of development,” he said.
Michael Hawes, a partner in the Houston office of Baker Botts, agreed. “We likely will also see many courts deciding what counts as a ‘regular and established place of business’ in the context of patent cases as lawyers get creative in identifying such ‘places,’” he said.
In the meantime, Reines expects some companies with minor presences in Eastern Texas to exit the district if they’re regular targets of patent infringement actions there.
Siebman Burg’s Smith said the ruling will pose challenges for operating companies that like to bring competitor lawsuits in their home jurisdictions. Whirlpool, for example, consolidates all its suits over infringement of washing machine parts in the Eastern District of Texas. Now it will have to spread out that litigation to wherever the parts manufacturers are located, Smith said. “So it’s going to cause plaintiffs to reprogram how they file their cases,” he said.
There’s the more immediate concern of dealing with cases already pending in the Eastern District. Smith said he’d already received calls today about keeping existing cases in the Eastern District. The Supreme Court’s decision has caused “an absolute fruit basket turnover,” he said. He believes some existing motions to transfer will now be harder to win, if the moving party sought transfer to a venue where it doesn’t have a regular and established place of business.
Harrington said TC Heartland is the latest in a long line of patent-unfriendly decisions from the Supreme Court. “Honestly,” he said, “it just seems like every time the Supreme Court touches patent law, they get it wrong.”