Until now, a company suing another company over patent infringement in the United States had a lot of leeway as to where the case could be filed, leading many patent holders to bring lawsuits in districts where the local laws and courts are more likely to rule on their side.
Why it matters that patent trolls won’t be able to force their cases in Texas
In 1999, 14 patent cases were filed in the Eastern District of Texas. By 2015, that number grew to more than 2,500.
Aaron P. Bernstein / Getty
It’s a practice called “venue shopping,” and in the U.S., the Eastern District of Texas quickly became particularly notorious for hearing patent cases after a local judge changed the laws in a way that’s favorable to patent holders. In 1999, the Texas district only had 14 patent cases filed. By 2015, that number grew to 2,540.
But now, after a ruling issued from the Supreme Court yesterday, patent holders have less room to move when suing corporate defendants. In TC Heartland v. Kraft Foods, the Supreme Court ruled in a unanimous decision that patent cases can only be brought in districts where infringement actually happened, or in places where the defendant has an established business.
This change could have a positive effect on the tech industry, where startups have long been vulnerable to the threat of “patent trolls” — businesses that hold multiple patents or broadly worded patents, that they monetize by suing other businesses that are making similar products or services. These patent holders are called “trolls” because the practice is often their main source of income. Trolls regularly push defendants to settle, at times even putting them out of business entirely.
This ruling will particularly matter for small businesses that can’t afford long, drawn-out legal fights in distant parts of the country, where the court battle may already be unfavorable to them. Software companies are especially prone to patent trolling, since the language of software patents is often broad and vague enough to cover all kinds of software applications.
Now cases will likely be heard in more locations, where the cards may be less stacked in favor of trolls.
This article originally appeared on Recode.net.
See More:
