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Supreme Court Considers Why Patent Trolls Favor Texas Courts
- microcolonel 10y ago> That decision said defendants in patent cases, as in other cases, may be sued essentially anywhere they do business. If this is the case, it seems like it would make sense to simply stop doing commerce in hostile jurisdictions. It might constitute a short term loss for some vendors, but it might kill the cottage industry of plaintiff-slanted patent hearings.
- emiliobumachar 10y agoTerms of service forbidding user in East Texas?
- deleted 10y ago[deleted]
- saosebastiao 10y agoI've been mulling over putting in a TOS clause in my product prohibiting its use within the jurisdiction of the Eastern District of Texas. And if I'm understanding this right, not only would it be impossible to sue me there, it would also be possible to bring both criminal and civil complaints against any East Texas patent trolls accessing my site for violation of the CFAA.
- AndrewKemendo 10y agoWould this actually work?
- georgemcbay 10y agoI am certainly no lawyer but I suspect it wouldn't work just based on the fact that if it did it would be standard procedure for tech companies. For a lot of companies, losing business in that one region would be worth the trade (again.. if it actually worked to shield you from patent trolls).
- ajmurmann 10y agoI like this very much. Would there be any negative legal ramifications?
- rtpg 10y agowell let's say your product is on Amazon, and Amazon sells nationwide, even if you do no work in TX. Does Amazon get sued then? Then you get into weird Commerce-y issues. Amazon will probably pull your product rather than be a legal proxy for you
- wyldfire 10y agoYou can control your downstream distribution channels, if that's what it takes. First sale is probably the only real commerce you have to control. But eliminating retailers like Amazon would be a big loss for most producers.
- c3534l 10y agoIt's not the defendent's place f business it's the plaintiff's. People will actually do things like arrange the sale of an item in <your district of choice> in order to qualify. But that's not really necessary anymore because doing commerce online is usually enough.
- rhino369 10y agoIt is actually the defendants place of business that matters, but doing business for jurisdiction purposes is pretty widely defined. If you sell your stuff to Amazon and Amazon sells it nationwide, you are going to be subject to nationwide jurisdiction.
- nathancahill 10y agoWas hoping for a cameo appearance of Lee Cheng, the (edit: former) Chief Legal Officer for Newegg. He's a force to be reckoned with when it comes to patent trolls in East Texas.
- sandipc 10y agoformer chief legal officer for Newegg... http://www.law.com/sites/almstaff/2016/10/03/outspoken-patent-critic-lee-cheng-leaves-newegg/?slreturn=20170227214412 http://www.law.com/sites/almstaff/2016/10/03/outspoken-paten...
- nathancahill 10y agoThanks. Can't read the article, but hopefully he's continuing to fight the good fight.
- rayiner 10y agohttps://www.musicrow.com/2016/10/legal-executive-lee-cheng-joins-gibson-brands-as-cooevp https://www.musicrow.com/2016/10/legal-executive-lee-cheng-j.... NorCal to Nashville. I approve.
- rayiner 10y agoThe case is a good example of why popular reporting about how the Supreme Court works often misses the mark. The case really isn't about patent trolls--the policy question of balancing patent rights versus other consideration is squarely in Congress's wheelhouse. Instead, this is a dispute about what Congress has already said. Specifically, what it has said about "venue" in patent cases. "Venue" is the idea that several courts may have the power to hear a case (i.e. they have jurisdiction over the case and over the defendant), but that for various reasons we may want to funnel the litigation to particular courts. Venue rules are set forth in federal law. 28 U.S.C. 1400(b) states: "Any civil action for patent infringement may be brought in the judicial district where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business." That's a venue provision specific to patent cases. It tends to limit where venue is proper (i.e. where lawsuits can be brought), because ordinarily "residency" for a corporation is defined pretty narrowly. There is also a more general venue provision, 28 U.S.C. 1391(a)-(c), which provides for venue in, among other places, wherever a corporate defendant is subject to personal jurisdiction. That tends to permit venue in more places, because corporations can be subject to personal jurisdiction almost everywhere they have a substantial business presence (under the theory that if you do business somewhere, you can't complain about being taken to court there). The Supreme Court held in 1957, in Fourco Glass v. Transmirra Products, that in patent cases, only section 1400 applies, not the more general venue provision in section 1391. That is, until the Federal Circuit determined that subsequent amendments to section 1391 had the effect of making the more general venue provision of section 1391 applicable to patent cases too. Now, whatever you think of patent trolls, you kind of have to handicap the case in favor of Kraft (the party arguing for broader venue). The text of the current version of section 1391 is pretty clear: an action may be filed in "a judicial district in which any defendant resides," where the "residency" of corporate defendants is defined as "any judicial district in which such defendant is subject to the court’s personal jurisdiction with respect to the civil action in question," for "all venue purposes." Kraft argued at the Supreme Court the definition of "residency" in 1391(c) applies "for all venue purposes," including for purposes of section 1400. Thus, even if section 1400 is the exclusive venue provision in patent cases, it incorporate's 1391(c)'s broad definition of where a corporate defendant "resides." Undoubtedly, many pages will be spent arguing about the effect of one reading of the statutory text versus the other vis-à-vis patent trolls. Some justices will care about that, because they view statutory interpretation through the lens of policy decisions. Others will not care. Not because they do or do not like patent trolls, but because to them statutory interpretation is a matter of what the words on the page say, not policymaking.
- ridgeguy 10y agoThis is such a widely known situation in legal circles. The United States District Court for the Eastern District of Texas described by the NYT is known as the "rocket docket" and the go-to forum for patent trolls. A friend who is a patent litigator in a major US IP law practice, recently was moved to TX to be near the Court's location. Relocation driven by the disproportionate economic activity surrounding that jurisdiction. Hope the Supremes will do something to mitigate the disproportionate influence of the Eastern District Court in patent matters.
- Spivak 10y agoThe counterargument being that having a high concentration of cases in a given area means that the law is well developed and there will be few surprises when bringing a suit. It's the reason that a lot of businesses are incorporated in either Deleware or Nevada.
- moultano 10y agoIf the location is determined by the plaintiff, the only incentive is to be friendly to plaintiffs, not to produce accurate and reliable judgments.
- lhopki01 10y agoYes. A well developed legal field is completely why lots of companies incorporate in Deleware. It's got nothing to do with highly favourable tax regimes. I'm sure it's the same reason Ireland and Luxembourg are so favourable.
- whafro 10y agoAnecdata: the well-developed legal field is the prime reason why my corporate attorney always pushes his clients to incorporate in Delaware. He and his firm know what to expect throughout the process, and can offer much more reliable advice than when you incorporate elsewhere or in your home state (even California). Delaware residents certainly have a favorable tax situation, with zero sales tax and very low property taxes, but that's mostly because they get tons of income from the franchise taxes applied to corporations registering there. And if you're a first-time founder getting your first Delaware franchise tax bill, you're not going to consider the process favorable by any means.
- jimrandomh 10y agoQuotes in the article suggest that the justices want to consider only legislative intent, and not deal with the issue of forum shopping or of East Texas in particular. This may technically be legally correct, but it is a serious mistake. East Texas has a reputation for unfairness, and that reputation is undermining the credibility of the US legal system as a whole.
- deleted 10y ago[deleted]
- lostboys67 10y agoMaybe industry as a whole needs to boycott Texas
- BearGoesChirp 10y ago>that reputation is undermining the credibility of the US legal system as a whole. Once someone studies the impact of wealth on outcome of court cases, such as the difference between hiring a good lawyer and getting a public defender, is there anyone who still thinks of the US legal system as credible? I think of it as a pay to win system with a monopoly on violence that is a threat to anyone caught up in it. I've seen poor people completely destroyed for far lesser crimes that what rich people are allowed to walk with. Once you count in stacking charges to force plea deals, and the rate at which plea deals happen, how can anyone defend seeing any credibility left in the system?
- redm 10y agoWe (MediaFire) were part of the Amici brief submitted to the Supreme Court regarding the eastern district of Texas. [1] It is a serious issue. Being a Texas company, we have been sued numerous times primarily because we are in Texas and it allows the other defendant's cases to be tried in the Eastern District of Texas. The patents are always baseless, but it matters little. In almost all cases, the board of directors wants to settle the case quickly instead of fighting it out, even (in many cases) if the CEO or inside counsel wants to fight. It's cheap(ish) to settle and very expensive and time-consuming to fight; in short, it's a big distraction, one that can be solved with money. Since most of the plaintiffs are shell companies run by lawyers, there is little cost to them even if they loose and no value to the defendant if they win. The exception to all this being Lee Chang at NewEgg who always fights. That works if you have a CEO and board who is willing to spend the time and money to establish a reputation but that is seemingly rare. Newegg also signed onto this Amici. [2] This problem has been going on for a long time (8 years for us), and while we keep hoping for some reform, Congress is yet to act in a meaningful way. On a side note, our former patent defense attorney, who clerked for the patent judge in Marshall, TX, left defense a few years ago and became a plaintiff's attorney. His reasoning? Much more profitable. [1] http://www.scotusblog.com/wp-content/uploads/2017/02/16-341-pet-amicus-48-Internet-Companies.pdf http://www.scotusblog.com/wp-content/uploads/2017/02/16-341-... [2] https://blog.newegg.com/lee-cheng-holds-reddit-ama-explains-fights-patent-trolls/ https://blog.newegg.com/lee-cheng-holds-reddit-ama-explains-...
- clamprecht 10y agoThis video from Austin Meyer (creator of X-Plane) is pretty eye-opening: https://youtu.be/sG9UMMq2dz4 https://youtu.be/sG9UMMq2dz4 Apparently there are TWO judges in the district, BOTH of whose own sons are lawyers in the same district. And BOTH sons handle a lot of the patent litigation, in front of their own fathers, the judges. Pretty incredible. Watch the video starting at about 5 minutes to see it.
- devoply 10y agosounds like a plot of a movie. brother vs brother in front of their father.
- hexane360 10y agoWell the brothers are always the ones prosecuting.
- optimuspaul 10y agoWith their long lost half sister is on the jury and their mother is the Bailiff. I'd watch that if there was nothing else on.
- haikuginger 10y agoHell, I'd watch that even if there was other stuff on.
- corysama 10y agoMore info from the same person http://www.thepatentscam.com http://www.thepatentscam.com
- ptaipale 10y agoIs that legal in the United States? I am astonished.
- AnimalMuppet 10y ago
- droithomme 10y ago> a few companies urged the justices to retain the current rules, saying there was a value in letting cases be considered by courts that have developed expertise in patent matters. Fair enough, let's have an IQ and competency test for Judge T. John Ward and see if this claim by various corporations that he is truly the century's most brilliant jurist on the topic of IP or not.
- talmand 10y agoThat "developed expertise in patent matters" excuse is biggest pile of bullshit I've ever heard of concerning patent issues.
- rodionos 10y agoWhat this article fails to emphasize and report on is the amount of settlement payments and related legal expenses produced by cases filed with the EDT court. I wouldn't be surprised if they would dwarf whatever remedies are awarded by the court to the plaintiffs.
- prance 10y ago> That could lead to overcrowding in the federal court in Delaware, he said, given the large numbers of corporations incorporated in the state. Wouldn't that actually be fair? As it is now, it seems that Delaware can give all those tax breaks, and not bear any consequences.
- jaredklewis 10y agoWhat Delaware tax breaks? To my knowledge incorporating in Delaware doesn't have any tax advantage. You'll be taxed wherever you operate, not where you incorporate.
- lazyasciiart 10y ago> Delaware today regularly tops lists of domestic and foreign tax havens because it allows companies to lower their taxes in another state — for instance, the state in which they actually do business or have their headquarters — by shifting royalties and similar revenues to holding companies in Delaware, where they are not taxed. In tax circles, the arrangement is known as “the Delaware loophole.” https://mobile.nytimes.com/2012/07/01/business/how-delaware-thrives-as-a-corporate-tax-haven.html https://mobile.nytimes.com/2012/07/01/business/how-delaware-...
- RangerScience 10y agoHuh. If you block IP addresses from this part of Texas, can you claim to not to business there, and thus cannot be tried there? Edit: Actually... Could you have one company make the product, and one company resell the product, and pick where the first company does business to be advantageous to themselves during patent litigation? Or can the reseller be sued for patent infringement?
- tyingq 10y agoNot a lawyer, but I know you can force resellers to destroy patent infringing inventory. Not the same as being sued for damages, but ends your business model anyway.
- anonymousDan 10y agoSo if I'm starting a new company today, what's the best place to incorporate to avoid patent trolls, both in the US and/or globally? What other strategies are there to avoid patent trolls (e.g. never do business in the state of Texas?).
- viggity 10y agosome people ITT have said incorporating in Ireland (etc) will prevent you from getting sued. I'm not sure that I buy that. AFAICT, It may make it a little bit harder, but if you refuse to defend your company in the US the default judgement means that you'd be unable to sell your product in the US.
- driverdan 10y agoIf you're starting a new company you should be thinking about building a product and finding customers, not patent trolls.
- nomercy400 10y agoHow about moving the specialized court to the US Patent Office area (not same building), and have both the 'anywhere' and the 'incorporated' part solved? The specialism is around the corner, the government can set up the court basics and scale to demand. Incorporated Delaware isn't overloaded. And finding the best court to go to for trolls disappears.
- hugenerd 10y agowe're just talking about the lower courts here. that exists for appeals. http://www.cafc.uscourts.gov/ http://www.cafc.uscourts.gov/