patent litigation

Federal Circuit Further Clarifies Patent Venue in Three Decisions

Patent litigation can be very burdensome for companies big and small − and a major issue in these cases is where the case will be litigated. 

 Last year, in T.C. Heartland LLC v. Kraft Foods Group Brands LLC, 137 S.Ct. 1514 (2017), the Supreme Court overturned 20 years of Federal Circuit precedent, narrowing the legal construction of part of the patent-venue statute, 28 U.S.C. § 1400(b).  But that decision left open a number of issues.

 This past month, the Federal Circuit issued three opinions resolving open issues in determining venue: (1) the patent-venue statute does not apply to foreign corporations; they may be sued anywhere in the United States; (2) the burden of showing venue is proper is on the plaintiff; and (3) in a multi-district state, venue is proper in only one district, generally where the defendant has its headquarters.

 Taken together, for domestic corporations, the available districts to be sued have been further narrowed.  As we pointed out in a prior post concerning patent venue, this can shift the negotiating leverage towards parties accused of infringement (putative defendants), since would-be plaintiffs now have less options of where to sue.

Apple v. Samsung Verdict Affirms Importance of Design Patents but Leaves the Law of Damages Murky

The second Apple v. Samsung damages trial ended in a remarkable result:  $533 Million verdict for infringement of Apple’s design patents, but only $5.3 Million for infringement of Apple’s utility patents.  The big (and obvious) takeaway:  design patents are no longer the weak sister of the IP world.  Long considered obscure and of marginal importance, the verdict shows that they can be a powerful and invaluable business tool.

Yet the verdict has other lessons for those involved in IP.  The original verdict against Samsung was for $399 Million.  Samsung appealed that all the way up to the Supreme Court – and was victorious there – only to return a second time to trial and be hit with a  verdict a third higher!  Samsung may have had good reason to appeal anyway, but the result highlights the need for caution and strategic thinking – Samsung may well now regret appealing and winning.

The verdict leaves the law of design patent damages murky.  In contrast to utility patents, for design patents the Patent Act allows the plaintiff to recover the infringing defendant’s profits gained from sale of any “article of manufacture” on which the design is used.  35 U.S.C. 289.    What if the design patent covers only a component of a total item that was sold?  The Supreme Court sided with Samsung and held that the profits might only be for a component portion.  But it failed to provide any standards as to how to determine what the “article of manufacture” is in any particular case, leaving it to the lower courts to work out.  The jury apparently decided that Samsung was on the hook for the entire profits.

Determining the “profits” to be awarded in a design patent case remains unpredictable, especially since in some cases it will be left up to the jury to determine how much of the item’s profits are awardable.  This tilts the playing field in any settlement negotiation in favor of design patent owners and away from accused infringers.

Patent Venue Restricted and Settlement Balance Shifted in Patent Disputes

Two key recent cases have shifted the balance of negotiation leverage in patent disputes between patent owners and accused infringers.  The cases restrict the venues where patent cases against corporations can be brought.  This change will tilt the balance away from patent owners and more in favor of accused infringers.

The decisions limit venue forum shopping as to a corporate defendant to

  • The defendant’s state of incorporation; or
  • A district where the defendant has a physical location, a regular and established place of business which is operated by the defendant, and where an alleged act of infringement must have occurred.

Companies facing threats of patent litigation from trolls and others should be aware that such litigation just got harder for those asserting infringement.  The choice of possible venues has now been considerably narrowed, and for many companies, those districts which meet the new criteria are often both more friendly and more convenient

Aspex Eyewear: Warning on Dismissal of Patent Cases on Estoppel Grounds

In May, the Federal Circuit decided Aspex Eyewear, Inc. v. Clariti Eyewear, Inc., 605 F.3d 1305 (Fed.Cir. 2010).  The decision serves as a warning to patent and other intellectual property owners and their counsel – once one contacts a putative infringer, there must be follow through in some fashion or risk losing all rights with respect to that infringer. 

The Aspex Eyewear decision affirmed (over the dissent of one Circuit judge) the dismissal on summary judgment of a patent infringement case by then-District Judge Denny Chin of the Southern District of New York based on the affirmative defense of equitable estoppel.    The estoppel was based on the patent owner corresponding with the defendant and claiming infringement, and then delaying suit for over three years.  Although the original demand letter was not as assertive as is often sent in such cases, and although the prejudice was relatively light, there was enough to sustain an estoppel defense, which completely barred the patent claims.

The Independence of the Patent Office and the Courts

Patent litigation may have replaced polo as the sport of kings because of its costly nature and drain on a party’s resources.  However, once engaged in a patent litigation, like any dispute, if a party too intensely focuses on any one front, it may lose the opportunity to win the war. 

In the recent decision In re Trans Texas Holdings Corp., 498 F.3d 1290 (2007), the Court of Appeals for the Federal Circuit (CAFC) provided a useful reminder that the Patent and Trademark Office (PTO) is an independent governmental body that is not secondary in importance to the courts, and any client that finds itself engaged in a patent dispute or potential patent dispute would be remiss if it did not keep in mind the powerful, but often under-used reexamination procedures that the PTO offers the public to challenge the validity of patents. 

In particular, the PTO is not bound by a prior court ruling on a patent’s meaning and scope, but rather is free to reach its own, perhaps contrary interpretation.

The Increasingly Long Arm of U.S. Patent Law

In order to escape the reach of U.S. patents, a number of companies have tried to satisfy foreign markets by exporting from the U.S. some or all of the components of their products and assembling them overseas.  In response and with help of a statute enacted by Congress over twenty years ago, patent holders have aggressively tried to prevent these activities. 

On July 13, 2005, in AT&T Corp. v. Microsoft, 414 F.3d 1366 (2005), the Court of Appeals for the Federal Circuit (CAFC) expanded the rights of patent holders in these situations, by allowing a patent to be asserted with respect to foreign activities when the components themselves were merely derived from a master copy that was exported from the U.S.

 As companies consider how they will form global patent strategies, and in light of the teachings of AT&T v. Microsoft, clients (and lawyers) are well advised to pay attention to these developments so that they can more efficiently make use of their own patents and avoid infringing the rights of others.