Patent Trolls, Texas and the Supreme Court

Wednesday, 1 of February of 2017

It is widely known that the US Congress and Administration has been trying to solve the problems generated by the so-called Non-Practising Entities or Patent Trolls. That is to say entities that don't manufacture or commercialise anything, but have a huge portfolio of patents in order to sue companies that do.

In order to implement their abusive practices patent trolls make use of two particular features of Texas as a venue for patent ligitation.

First, since decades, Eastern District Court of Texas has adopted a very flexible interpretation of the grounds of jurisdiction in this field. According to 28 U.S.C. § 1400, civil actions can be brought before the courts of the place where the defendant resides, where his business is located or where the infringement occurred. These ground was reinterpreted by the Eastern District Courts of Texas to mean that even a minimum contact, such as a web presence, would suffice for these courts to declare jurisdiction.

Second, legal cost of ligitating the Eastern District Court of Texas are high, and the court is well known from adopting decision awarding patentees huge amounts in damages.

With these two features at hand, it is quite easy for patent trolls to force technology firms to negotiation a license even if the existence of an infringement of the patent troll’s is doubtful. This is particularly so in the case of small companies (start ups) but big corporations as well

What the Congress and the Obama administration were not able to achieve is now in the hand of the Supreme Court. In case TC Heartland v. Kraft Food (SCT Docket No. 16-341), the Court has been asked to decided on the interpretation of the grounds of jurisdiction in 28 U.S.C. § 1400. It is presumed (Patently-O) that the Court will restrict the interpretation of those grounds, thus it will be more difficult for patent trolls to bring their disputes to Texas.