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Congress, commentators and a wide variety of industry leaders
have long noted that the patent system was broken. Besieged by a
tide of weak patents and baseless patent troll litigations, these
stakeholders argued that the current patent climate incentivized
the weaponization of patent rights, thereby raising operational and
legal costs and stifling innovation.
In 2017, the Supreme Court responded by taking aim at some of
the worst abuses of the patent system in two landmark cases. The
first, TC Heartland v. Kraft Foods, addressed the issue of
venue. Hoping to limit the aggressive forum shopping of plaintiffs
– which often led to an outsized number of cases in
plaintiff-friendly places like the Eastern District of Texas
– the Supreme Court held that venue is only proper in a
patent case in the state where the defendant is incorporated or
where it has a regular and established place of business. In
narrowing the proper avenues for bringing suit, the Court reduced
any home-field advantage for patent trolls.
In Impression Products v. Lexmark Int'l, the
Supreme Court rejected Lexmark's efforts to prohibit purchasers
of printer ink cartridges from refilling and reselling them. The
Supreme Court found these restrictions to be a violation of the
"first sale" doctrine, which protects downstream users of
a product by exhausting a patent owner's rights in a product
after it is first sold, thereby narrowing the field of legitimate
patent defendants, and giving peace of mind to retailers and
consumers.
A series of other decisions also made life more difficult for
patent plaintiffs. In Life Technologies v. Promega, the
Supreme Court weakened the rules prohibiting patent infringement
overseas, and in Helsinn Healthcare v. Teva
Pharmaceuticals and University of Maryland v.
Presens, the Federal Circuit made it easier to invalidate
patents by showing that the invention at issue was previously on
sale or that it would have been obvious to someone working in that
field.
These cases have helped curb the most abusive patent litigation
tactics and seemingly forced many patent trolls to reconsider their
tactics. Indeed, 2017 had the fewest number of new patent filings
in nearly a decade. In addition, the number of cases in the Eastern
District of Texas has sharply decreased, and these cases have been
redistributed to less plaintiff-friendly districts in Delaware and
California, altering the balance of power in patent litigations. It
is clear that the Supreme Court is listening carefully to claims
about abusive patent litigation tactics and is prepared to
intervene to correct distortions in patent law that hurt consumers
and stifle innovation. Whether it continues this trend will be the
patent story to watch in 2018.
Key Takeaways:
Companies should combat patent
infringement risk by establishing a comprehensive risk management
strategy that includes filing for and enforcing patents,
identifying and clearing patent risks, instituting contractual
strategies for risk-shifting and defending allegations of patent
infringement.
After years of pro-patent troll
decisions at the Federal Circuit, the Supreme Court got deeply
involved in 2017 by strictly limiting plaintiff forum-shopping and
prohibiting the use of patent law to control downstream users of a
product.
Patent filings dropped in 2017, with
fewer cases filed in plaintiff-friendly districts and more cases
redistributed to other jurisdictions.
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.
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