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Patent Trolls Must Now Sue in Place Your Company is Incorporated: Heartland v. Kraft Food Group Brands

In Heartland v. Kraft Food Group Brands decided May 22, 2017 (read the full opinion here) the Supreme Court struck down a major tool used by "patent trolls."  In the past (circa. 1998 - 2006 or so) the U.S. Patent Office issued an exceedingly large number of "bad patents."  These were patents for things that read on any sort of wireless network card in a computer, process of tracking products shipped, and so forth.  While patents are supposed to advance technology and innovation by giving the inventor an incentive to publish his idea, even long after a handlful of Supreme Court decisions have struck down the category of patents using "general purpose processors" many individual such patents remain in force until litigated.

Owners of patents have a right to sue others for damages.  The "patent troll" problem often stems from the obtaining of such patents, not for the purposes of advancing technology, but for the sole purpose of suing as many people as possible to seek financial gain.  It's a numbers game and simply extortion.  To maximize the extortion (minimize costs of the troll), typically many companies are sued at one time in one place - the Eastern District of Texas where the docket is fast and mostly rural area has been made rich through the influx of lawyers and lawsuits.  A patent troll will then sue everyone and demand anywhere from about $25,000 to $150,000 to "settle" while suing with a patent which shouldn't be enforceable.  Some of our clients elected to fight, others elected to pay.  While we've extracted $0 settlements in cases where client's have elected to fight, the sad truth is that they almost always spend more on lawyers doing so then had they negotiated a settlement early on.  With a clearly "bad patent" the going rate for settlement can be as low as $10,000.  If you want to fight it to the end and get the troll's patent cancelled, it will easily cost you ten times this amount as patent litigation is extremely expensive.

Today, the Supreme Court's ruling puts a large dent in the patent troll game.  No longer can a troll buy a bad patent and shake down twenty companies for money in one place at one time.  Should you wish to sue Honeywell, 3M, Dell, Dupont, and Pfizer you have to hire a lawyer in each of Pennsylvania, Minnesota, Texas, Delaware, and New Jersey.  Companies cannot be held hostage in masse, but if there's a serious case of infringement you can still sue.  While this may mean it's more inconvenient for plaintiffs, the fact is that the "run to court" to see who sues first often leads to cases that wouldn't have been filed in the first place but for avoiding having to go to another state.  The certainly is, our view, ultimately a good thing for business and the people who make up these businesses.

The Heartland case adds another wrinkle - Justice Thomas, who wrote the opinion held by the entire court, states that this case does not effect foreign companies doing business in the United States.  This is very "Trumpian" as foreign businesses are at a disadvantage in the United States compared to those who have their headquarters here.  Want to sue Burger King?  Well, they moved their headquarters to Canada so it seems you can sue them in any state.  If their headquarters is moved back here, you can only sue them in the state with their headquarters.

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