On June 19th, 2017 patent holder, Cascades Projection LLC, urged a Federal Circuit panel to decide whether the America Invents Act’s inter partes reviews are constitutional. An Inter partes review is an adversarial process used by the Patent and Trademark Office to analyze the validity of existing patents. Cascades Projection LLC argued that the United States Supreme Court’s decision in June 2017 to decide the question means that the panel can decide the question as well. The Supreme Court granted writ of certiorari last week for the separate case of Oil States Energy Services v. Greene’s Energy Group, on whether inter partes review violates the United States Constitution by extinguishing private property rights through a non-Article III forum without a jury.
Cascades states that the America Invents Act is in violation of separation of powers under the United States Constitution by granting the Patent Trial and Appeal Board the authority to find patents invalid. Back in February of 2017, Cascades attempted to appeal to the Federal Circuit in hopes they would reconsider the precedent ruling in MCM Portfolio v. Hewlett-Packard, which states patents are public rights. Three months later, the court denied to hear the case. In response to denying the case, three United States Circuit Judges agreed that the ruling in MCM Portfolio v. Hewlett-Packard was valid.
Oil States Energy Services v. Greene’s Energy Group is arguing that federal courts only, and not executive branch tribunals, can decide whether a patent is valid or not. They continue to argue that patents are private property rights and not public rights, which under Article III of the United States Constitution, can only be revoked by a federal court. We will post an update when the case is decided by the United States Supreme Court.
The U.S. Supreme Court has made a ruling in May 2017 limiting the places a U.S. company can be sued. This could generate a myriad of legal conflicts in the future, while creating various limitations for patent owners. According to federal law, patent venue laws state that lawsuits can be filed at either the location where the defendant lives or where the defendant performs business at. In TC Heartland v. Kraft Food Brands Group, the Supreme Court determined in May 2017, deciding the word “resides” means the place of incorporation. Supreme Court justices also announced that their finding is only applicable to domestic corporations.
Nothing should change for foreign defendants as of now, but in the long run, challenges may arise for venue rules concerning foreign defendants. Experts are speculating that plaintiffs may attempt to target only the foreign parent of a company when a foreign potential defendant has a subsidiary in the United States.
Due to venue controversies, impacts on company decisions are highly anticipated. It is recommended that all growing businesses in the U.S. have a set place of business. The Federal law pertaining to patent venue says that wherever a defendant resides, a lawsuit can be filed. As well as anywhere an infringement has taken place, and a business has an established and regular place of operation. Now that U.S. companies are limited on where they can be sued, there may be many challenges to come for non- U.S. defendants.
In an 8-0 opinion regarding the case TC Heartland LLC v. Kraft Foods Group Brands LLC, on May 22, 2017 Justice Thomas delivered the opinion of the Supreme Court. The judgment was reversed and the case was remanded. All members joined, except Justice Gorsuch, who took no part in the decision of this case. The Supreme Court issued this highly-anticipated decision and reversed the Federal Circuit. The Supreme Court ruled that 28 U.S.C. 1400(b) remains the only applicable patent venue statute. Secondly, that 28 U.S.C. 1391(c) did not modify or amend 1400(b) or the Court’s 1957 ruling in Fourco Glass Co. V. Transmirra Products Corp. The Supreme Court also ruled that the term “residence” in 28 U.S.C. 1400(b) means only the state in which a company is incorporated.
Patent owners will no longer be able to sue an infringing defendant in a district court where the defendant is subject to personal jurisdiction. Patent infringement lawsuits will only be able to be filed in districts within states where the infringing defendant is incorporated. As well as in districts where there has been an act of infringement and the defendant has an established place of business.
The Supreme Court also determined In TC Heartland, that Congress did not intend to change the meaning of 1400(b), or to overrule the decision in Fourco Glass. The Supreme Court relied and referred to the 2011 changes that added “otherwise provided by law” as some evidence that Congress must have wanted 1400(b) to apply.
Foreign corporations and other types of domestic entities can still presumably be sued mostly anywhere. The Supreme Court’s decision did not directly address this, but it was clearly stated in footnotes 1 and 2. While this decision is not favorable to patent owners, patent venue has been the target of patent reform debates in Congress for many years. This ruling is expected to increase cost, complexity and continue to create uncertainty for small entities.