Insights

The Patent Landscape Post TC-Heartland

Firm Thought Leadership

Where should we file this lawsuit?  A consequential question asked prior to commencement of every litigation.  In May of 2017, when the Supreme Court handed down its decision in TC Heartland[1] interpreting the venue statute for patent cases, this question became an even more important one for patent litigants.  Almost two and a half years later, we look at how this decision has affected the patent litigation landscape.

TC Heartland Summary
28 U.S.C. § 1400(b), the patent venue statute, states that “[a]ny civil action for patent infringement may be brought in the judicial district where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business.”  (emphasis added).  The Supreme Court had previously held that a corporate defendant resides, for § 1400(b) purposes, only in the jurisdiction in which it is incorporated.[2]  However, the Federal Circuit found that a subsequent 1988 congressional amendment to 28 U.S.C. § 1391(c) applied equally to § 1400(b): corporate defendants would be deemed to reside in each district that could exercise personal jurisdiction over the defendant at the time the suit was commenced.[3]  For almost the next 30 years, this opinion set the standard for determining whether venue was proper.  Then, in 2017, the Supreme Court disagreed, and clarified that the 1988 amendment to 28 U.S.C. § 1391(c) did not apply to 1400(b) and therefore “a domestic corporation ‘resides’ only in its State of incorporation for purposes of the patent venue statute.”[4] 

This decision shifted patent litigants’ focus to the second portion of § 1400(b): “where the defendant has committed acts of infringement and has a regular and established place of business.”  Parties and courts are still in the process of defining a “regular and established place of business” for venue purposes. 

How Has TC Heartland Affected the Patent Litigation Landscape?
After TC Heartland, there has been a noticeable shift in the distribution of patent cases amongst the various district courts.  For example, between 2014-2016, there was a total of 5,638 patent cases filed in the Eastern District of Texas compared to 1,943 cases filed in Delaware during the same time period.[5]  Since 2017, however, the new case load has flipped with 1,634 cases being filed in the Eastern District of Texas compared to 2,466 filed in Delaware.[6]  As of the date of this article, 2019 has seen more patent cases filed in Delaware than in the next three most active jurisdictions combined.[7]          

The increase in case filings in Delaware is not surprising since 67.2% of all Fortune 500 companies are incorporated in Delaware.[8]  However, what other metrics have been affected?  What about the length of time from filing a complaint to trial?  Based on the available data, the time to trial in patent cases has actually decreased since TC Heartland, with an average time of one year and eight months.[9]  Prior to the decision, between 2009 and 2017, the average time to trial was roughly two years and eleven months.[10]  The time to reach other case milestones has also decreased.  For example, the average time from filing of a complaint to claim construction was roughly one year and ten months prior to TC Heartland (between 2009 and 2017) but since the decision, the time has decreased to roughly one year and three months.  A recent report by the American Intellectual Property Law Association also indicates that the cost of general patent litigation has decreased since 2015, a reduction from $2 million to $1.5 million for cases with $1-$10 million at risk and a reduction from $3.1 million to $2.7 million for cases with $10-$25 million at risk.[11]  Legal analysts have suggested that the decrease is due, at least in part, to improvements in technology as well as judge-implemented case management strategies.[12]  Concentration of patent cases in districts with significant patent expertise such as Delaware could be a significant factor in that result.

Although there has been a gradual decrease in patent case filings since TC Heartland, it is difficult to say whether the case has had any impact in that regard, or if that decrease has been more driven by post-grant PTO proceedings or other factors.  However, based on the available data, it seems there has been an effect on litigations initiated by non-practicing entities or NPEs.  The percentage of NPE-initiated patent cases has decreased since the TC Heartland ruling (in 2016, roughly 55% of all patent litigations were initiated by NPEs, but in 2019, the number dropped to roughly 49%), suggesting that the case may have made it more difficult for these entities to bring suit in a preferred forum, particularly against multiple defendants.[13]

Conclusion
Based on the current data, TC Heartland has made Delaware the busiest patent docket in the country and has likely led to a reduction in NPE case filings.  Other metrics such as time to trial and general patent litigation costs have decreased since the decision, although the causal link to those trends is less clear.  In years to come, we will continue to see how this decision has reshaped the patent litigation landscape.  


[1] TC Heartland LLC v. Kraft, 137 S.Ct. 1514 (2017).

[2] Fourco Glass Co. v. Transmirra Products Corp., 353 U.S. 222, 229 (1957).

[3] VE Holding Corp. v. Johnson Gas Appliance Co., 917 F. 2d 1574, 1584 (1990).

[4] TC Heartland LLC v. Kraft, 137 S.Ct. 1514, 1517 (2017).

[5] Statistics obtained from Lex Machina (October 16, 2019).

[6] Id.

[7] Id.

[8] https://corp.delaware.gov/stats/.  Also, as of 2018, there were nearly 1.4 million legal entities incorporated in Delaware.

[9] Statistics obtained from Docket Navigator (October 16, 2019).

[10] Id.

[13] Statistics obtained from Unified Patents Inc. (October 18, 2019).

 

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