U.S. Supreme Court ruling on patent plaintiffs has loopholes

Tech companies who were seen doing the victory round will have to better study the judgement to see its legal implications.

Although many companies are buoyed by a ruling from the U.S. Supreme Court which set a limit on where they can be sued for patent infringement, a few intellectual property lawyers opine that due to loopholes in the ruling, patent lawsuits will continue to be filed in plaintiff-friendly jurisdictions.

On Monday, the Supreme Court ruled that patent infringement cases can only be heard in a court situated either in the region where the defendant is headquartered or where an act of infringement has occurred and the defendant has a “regular and established place of business.”

According to legal experts, the sale of a product is sufficient grounds for an act of infringement; furthermore the definition of a regular and established place of business is broad enough for companies to be sued in a jurisdiction where they have stores, warehouses and even remote employees.

“I saw a lot of anti-patent people doing a victory dance yesterday without really understanding what this decision means,” said David Pridham, chief executive of Dominion Harbor Group, a Texas-based company that buys patents and seeks to license them to other companies.

Monday’s ruling has gone down particularly well with tech companies, who saw it as a means of combating plaintiffs, including patent holding firms who they often deride as “trolls.”

As per PricewaterhouseCoopers, 39% of all patent lawsuits in financial year 2016-2017, were filed in Eastern District of Texas, a largely rural district, which borders but does not include Dallas, home to several Fortune 500 companies.

“The overall effect of the ruling will be to limit cases in the district,” said Q. Todd Dickinson, the former director of the U.S. Patent and Trademark Office who now does private practice at Polsinelli, a law firm. “But it’s not a panacea. There are ways to get around it.”

Going by the Supreme Court’s definition of “regular and established place of business”, a retail store could very well fit that description, said patent lawyer Michael Smith, who practices with Siebman, Burg, Phillips & Smith in Marshall, Texas and often represents defendants.

He went on to add that Apple Inc, a frequent target for East Texas patent lawsuits, has stores in Frisco and in Plano, two Dallas suburbs that fall within the district.

Monday’s decision did not address many other potential loopholes that are unrelated to the language used in the “place of business”, said Matthew Rizzolo, an IP lawyer with Ropes & Gray who represents both defendants and plaintiffs.

He noted that the Supreme Court ruling did not address patent issues with limited liability companies or foreign companies which makes companies vulnerable to lawsuits in the Eastern District.

“Now you are going to see a lot of fights over those issues,” said Rizzolo.

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