Supreme Court fails to close key avenue for patent trolls

The Supreme Court has rebalanced and improved the U.S. patent system in several recent cases. But with some improvements there are unintended consequences. Case in point: The court’s recent decision curtailing forum shopping in the federal courts may unfortunately cause more abusive patent cases to be filed at the U.S. International Trade Commission (ITC).

In May, the Supreme Court issued a landmark opinion in TC Heartland v. Kraft Foods, restoring rational venue rules for patent cases in U.S. district courts. The ruling will limit cases brought in magnet districts, such as the U.S. District Court of the Eastern District of Texas, which is a very good outcome that had been sought in the courts and in Congress by reform supporters.

{mosads}But the ruling does not apply to patent cases brought at the ITC. The rules at the ITC remain unchanged and, in relative terms, make the ITC a more attractive venue, particularly for non-practicing entities, also colloquially referred to as patent trolls. Thus, the unintended consequence of TC Heartland may be to drive more patent cases at the ITC.  

Previous interpretation of the patent venue laws had allowed for cases to be filed in practically any district in the country. Creative lawyers, often representing the patent trolls, gravitated to the districts where they knew outcomes were likely to be most favorable. The result was nearly half the patent cases in the country being filed in the Eastern District of Texas. It was clearly not a rational way to deal with venue in patent cases.

The outcome of TC Heartland was that patent cases must now be brought in a more narrowly-defined set of courts. Generally speaking, the plaintiff may only file in a federal district court where the defendant is incorporated or where the defendant has a regular place of business. The practical impact of this is less forum shopping in patent cases and ultimately fewer cases filed in the Eastern District of Texas. The patent system will be better off as a result. 

Despite this important case, patent trolls are not going away anytime soon. No doubt their creative lawyers will continue to seek the best forums they can to find the financial leverage they seek. 

The ITC is unaffected by the TC Heartland case. This matters because, in recent years, the ITC has become a popular venue to bring patent cases because of its powerful remedies, quick process and perception of having patent-holder-friendly practice and procedures. As lawyers looking to monetize patents, they will seek the venue that maximizes their leverage post-TC Heartland. The ITC today is no doubt a more attractive venue than before.

At a recent hearing of the House Judiciary Committee, Rep. Blake Farenthold (R-Texas) asked a panel of experts what the impact of TC Heartland would be on the ITC. The patent litigation attorney on the panel noted that he had already begun to see patent plaintiffs look at the ITC as an alternative to the Eastern District of Texas. It is common sense that, like water, the cases will flow along the easiest path, and that potentially means more ITC patent cases.

A simple solution exists: The bipartisan Trade Protection Not Troll Protection bill (HR 2189) introduced recently by Rep. Tony Cardenas (D-Calif.) and Rep. Farenthold provides measured steps to modernize the ITC. The bill updates the definition of a domestic industry to ensure that parties don’t abuse the ITC process.

Likewise, it empowers the ITC to use its public interest authority to ensure the commission’s power is used to promote American jobs. The legislation also codifies little-used ITC rules to allow for early disposition of abusive cases in the first 100 days. The legislation would not impact any party’s ability to file a case in federal court. 

The sum of these legislative changes is very similar to the outcome in TC Heartland, bringing a more rational standard to who can file cases at the ITC to avoid abusive practices and strengthen the patent system.

The ITC can be an effective mechanism for expanding the U.S. economy and protecting U.S. jobs through fair application of the trade laws. Bad actors co-opting our trade laws to play legal games for profit not only waste precious government resources, but they undermine the trade laws. Updating the ITC to keep this unnecessary flood of cases out of the commission would strengthen the ITC in its core mission to protect U.S. trade and American jobs. 

Matt Tanielian is the executive director of the ITC Working Group, a coalition of companies, including Apple, Intel Corp. and Ford Motor Co., focused on preventing abusive patent litigation before the International Trade Commission. He’s also a cofounder of the Franklin Square Group, a government relations and strategic communications firm.

The views expressed by contributors are their own and not the views of The Hill.