United States: E.D. Texas's Loss Should Prove ITC's Gain

The Supreme Court's recent ruling in TC Heartland LLC v. Kraft Foods Group Brands LLC, 137 S. Ct. 1514, 122 U.S.P.Q.2d 1553 (2017), has quickly and dramatically reshaped the landscape for personal jurisdiction and venue in U.S. patent cases. As a result, the U.S. International Trade Commission, with its unique jurisdictional requirements, should now become an even busier forum for fast moving patent disputes.

In TC Heartland, the Supreme Court considered where proper venue lies for a patent infringement lawsuit brought against a domestic corporation. Id. at 1514-15. For many years, the U.S. Court of Appeals for the Federal Circuit has broadly construed the patent venue statute, 28 U.S.C. § 1400(b), incorporating into its definition the general venue statute's broader statutory definition of corporate residence. 28 U.S.C. § 1391(a), (c); see also VE Holding Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574, 16 U.S.P.Q.2d 1614 (Fed. Cir. 1990). The result has been a gradual widening reach of the patent venue statute to draw corporate defendants into patent suits in jurisdictions favorable to plaintiffs—such as, famously, the U.S. District Court for the Eastern District of Texas—but to which the defendant corporation often has a tenuous connection. In TC Heartland, the Supreme Court found that the Federal Circuit's broad construction of corporate residency does not square with Congress's mandate in 28 U.S.C. § 1400(b), and that corporate "residency" for purposes of the patent venue statute is limited to the state of incorporation. 581 at 1514, citing Fourco Glass Co. v. Transmirra Products Corp., 353 U.S. 222, 226, 113 U.S.P.Q. 234 (1957).

But if TC Heartland sounds the death knell for plaintiff-friendly venues such as the Eastern District of Texas, it also has the potential to balloon the court dockets in states with large numbers of corporate residents, such as Delaware and California. The District of Delaware and the Northern District of California, for example, already see large numbers of patent cases filed each year, and those numbers will likely grow even higher.

For many savvy and well-positioned plaintiffs, however, the alternative will be very clear. The ITC's jurisdiction for investigating patent infringement (and other unfair trade practices) derives not from the patent venue statute, but from the ITC's own governing statute, Section 337 of the Trade Act of 1930, codified at 19 U.S.C. § 1337. Whereas the patent venue statute is directed to determining personal jurisdiction over defendants, Section 337 investigations at the ITC are based upon subject matter jurisdiction, reaching anyone who has imported, sold for importation, or sold after importation, an article that infringes a valid and enforceable U.S. patent, regardless of where that person or corporation resides. 19 U.S.C. § 1337(B).

This is not the first time a high court decision will turn the gaze of patent owners away from district courts and toward the ITC. In 2006, the Supreme Court's decision in eBay Inc. v. MercExchange, LLC, 547 U.S. 388, 78 U.S.P.Q.2d 1577 (2006), raised the bar on plaintiffs seeking injunctive relief in district courts based on patent infringement. Not coincidentally, filings of new complaints in the ITC increased steadily in years following eBay as patent owners sought the equitable relief of exclusion orders available under the ITC's governing statute.

Another recent phenomenon—the extensive use of inter partes review proceedings before the Patent Trial and Appeal Board at the U.S. Patent and Trademark Office—has also likely contributed to a more recent rise in ITC filings. The ITC, unlike most federal district courts, does not typically stay Section 337 investigations pending the completion of IPR proceedings, even if the same patents and claims are at issue. In district court, the fast-moving IPR proceedings typically outpace the district court's schedule, leading busy district court judges to wait for the results of IPR proceedings before dedicating valuable time to complex patent cases. In contrast, the ITC has cited its statutory mandate to speedily resolve unfair trade issues as the basis for refusing to stay the rapid pace of Section 337 investigations in most situations. As a result, the ITC has become an even more attractive forum for patent owners wishing to keep pressure on potential infringers without having to await the results of IPR proceedings.

The ITC also allows a patentee to assert claims of infringement against a number of respondents in a single investigation. This feature became unique when the America Invents Act limited the joinder rules in district court. After TC Heartland, this feature becomes a distinct advantage because a patentee can pursue multiple infringers in a single ITC investigation, rather than filing district court complaints in several different district courts.

True, the ITC is not for everyone. There are additional threshold factors a patent holder must consider before choosing to file a complaint with the ITC. First, there must be an act of importation tied to the article accused of infringing the U.S. patent. Second, the ITC requires proof of "significant" or "substantial" investments (depending on the type of investment) in a U.S. domestic industry protected by the asserted patents. Third, although an ITC exclusion order is a powerful remedy, the ITC cannot award damages for patent infringement. Fourth, the very speed of an ITC investigation, often going to trial within nine months of filing, can make the ITC an expensive forum in which to file.

The threshold factors above are usually not insuperable barriers. For example, the vast majority of consumer electronics are imported, triggering the ITC's unique jurisdiction. Frequent defendants in the Eastern District of Texas, such as Samsung and Apple, have also appeared many times in the ITC as respondents, because the importation requirement can be easily met when the infringing product involves a global supply chain.

The domestic industry requirement is also not a major hurdle for a well-positioned patent owner with active manufacturing or research activities in the United States. Investments made in the U.S.—particularly those directed to plant, equipment, labor, engineering, and research and development tied to a product protected by the asserted patents—will typically clear the threshold test of demonstrating a domestic industry. Moreover, an increasing number of ITC complainants have chosen to rely on U.S. investments by licensees making licensed products. The Commission has recognized and accepted a complainant's reliance on investments by licensees when the investments are specifically allocated to articles practicing the patent. See, e.g., Certain Electronic Imaging Devices, Inv. No. 337-TA-850, Comm'n Op. at 3, 84-96 (April 21, 2014). As a result, many patent owners may have qualifying domestic industry investments.

The ITC is also distinguished from the district courts by the absence of damages. Under its governing statute, the ITC's principal remedy is equitable relief in the form of an exclusion order against products found to infringe a U.S. patent. An ITC exclusion order denies the maker of an infringing product access to the U.S. market, which is particularly valuable when U.S. manufacturing is not commercially feasible. The ITC will often also issue cease-and-desist orders to prevent the continued commerce in infringing products already in the U.S. While powerful as a trade tool, these equitable remedies cannot make a patentee whole for the financial damage infringement may have caused. Seeking ITC relief does not preclude seeking damages, however. Many patent holders file an ITC complaint at the same time as a district court case, to preserve a claim to damages. By statute, at 28 U.S.C. § 1659, a parallel district court case must be stayed upon request of a respondent pending a final decision in the ITC, but it preserves the ability to recover damages at a later date. While some patent owners may miss the potential for large jury verdicts sometimes available in a district court, the days of reliably plaintiff-friendly district courts may be gone with TC Heartland in any event.

Finally, the expense of an ITC case may be intimidating, particularly to small- and mid-sized companies without expansive litigation budgets. By consolidating a multi-year district court patent litigation into a 10-month period, costs can mount quickly, although they are typically less than a patentee might incur over the many years a district court case may drag on. Further, the leverage and attention that may be gained from filing in the ITC, and the expedient remedy that an administrative law judge may recommend within a year, often signal the immediate seriousness of a patent litigation in a way that a home-turf district court case may not for a defendant. While many ITC cases go all the way to trial, many also settle within the 16-month total investigation period, bringing relatively speedy resolution to matters that could otherwise drag on for years in district court.

Conversely, the ITC as an alternative forum to plaintiff-friendly district courts should not leave potential respondents despondent. Several features of ITC procedure, such as adjudication by a patent-savvy administrative law judge rather than a jury, the necessity for the complainant to prove domestic industry allegations in detail, and the participation of attorneys from the ITC's Office of Unfair Import Investigations in most investigations, may be seen as improvements over litigating in remote federal judicial districts with a reputation for patent-holder deference.

The full impact TC Heartland (and its eventual progeny) will have on the patent litigation landscape in the U.S. remains to be seen. But the friendly plains of the ITC may prove fertile ground for patent owners seeking a new and receptive forum outside the reach of the patent venue statute.

Originally published in BNA's Patent, Trademark & Copyright Journal

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Events from this Firm
2 Nov 2017, Webinar, Washington, DC, United States

Join us for a two-part webinar series exploring recent developments in machine learning and other technologies that have greatly advanced artificial intelligence (AI) since its origins more than 50 years ago.

9 Nov 2017, Webinar, Washington, DC, United States

As part of Strafford Publications’ webinar series, Finnegan attorneys Adriana Burgy, Chris Johns, and Kai Rajan will discuss the Examiner Count System and provide strategies for interacting with examiners.

15 Nov 2017, Conference, California, United States

Finnegan is a Gold sponsor of the second annual Digital Media & IP Forum, hosted by World Congress.

 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.