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For those of us who don't understand how these things work, does someone know the answer to these questions: 1. So does this mean that almost all patent suits

For those of us who don't understand how these things work, does someone know the answer to these questions: 1. So does this mean that almost all patent suits will be filed in Delaware? 1a. If that is correct, does someone know the TL;DR of the rules that make it a better choice than other places. (I mean, juries are juries). 2. Will tech companies now incorporate in non-Delaware states because there are even better rules somewhere else? Thanks for helping us understand the context.

rayiner 9y ago
The patent venue statute, 28 U.S.C. 1400, says: "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." This case holds that a corporate defendant "resides" where it is incorporated. But the second clause is still operative--you can still sue the company where it has a "regular and established place of business." As for Delaware, I don't think it's particularly plaintiff friendly so much as its not defendant friendly. If you sue a tech company in N.D. Cal. you're in the position of telling locals that a business that generates jobs and tax revenues for them did something wrong. Delaware, being the hub of all sorts of business litigation, sees things at a more abstract level. You're less likely to get a judge or jury in Delaware that comes in with a particular preconceived notion of X or Y being bad. They're going to look at the facts and they're going to look at the law and make a decision. That manifests itself in some practical ways. For example, some Delaware judges are loathe to permit summary judgment motions (decisions on the case before it goes to a jury). Many infringement questions are, according to the law, jury questions, but judges grant summary judgment anyway to save defendants the time and expense of a jury trial. Delaware judges don't really care about that.
- inputcoffee 9y ago
  Wow, so if they can still be sued in a "regular and established place of business", does that dissuade startups from moving to, or starting in, Austin? Is Dell a target now because of the plaintiff-friendly juries. (That is what I hear, I don't know the details). Does this mean that startups should actually stay in Delaware to reduce the footprint of places they can get sued in? Doesn't sound like it changes much for the large tech companies who are all over the place anyway.
  - rayiner 9y ago
    Austin is in the Western District of Texas, which doesn't have the same plaintiff-friendly reputation.
    - inputcoffee 9y ago
      I didn't realize that within a state, the court choice was still by district. Thanks for clarifying, and for taking the time with the other answers.
    - staticautomatic 9y ago
      Austin itself is actually known for being quite plaintiff-friendly, at least for certain kinds of cases.
  - tzs 9y ago
    Rayiner has already pointed out that Austin is not in the so-called plaintiff friendly Eastern District of Texas (EDT). Also, it's not clear that EDT is actually plaintiff friendly. Defendants win plenty of cases there, and last time I saw stats it didn't seem particularly outstanding. There were several that had significantly higher plaintiff win rates. The numbers can change dramatically from year to year, though, so what I saw may be outdated. (Update: 2016 plaintiff won 36% of patent trials in EDT. 2015 was 50%, 2014 was 67%, and 2013 was 33%. These are lower than the overall national plaintiff patent win rate, I think [1] [2] [3]). A big reason plaintiffs choose EDT is that it is fast and experienced (the former partly due to the latter). Patent suits are civil cases heard in Federal district courts. Federal district courts also deal with criminal cases, and criminal cases have higher priority. In some districts where there is a heavy load of criminal cases the civil cases can end up move very slowly. EDT doesn't have much crime, so there aren't many criminal cases there. They have plenty of time for civil cases. Patent cases are among the more technically complicated cases. They will go a lot smoother if handled by a judge who is experienced with them. Once a judge gets experience with a few patent cases, that can attract plaintiffs to that district. Some judges like patent cases, and so whenever one is filed in the district they serve in, they ask to have it assigned to them. That in turn makes the them even more attractive to future plaintiffs. Patent cases are often "big". What I mean by that is that they often involve a lot of people attending the trial or accompanying those who attend the trial. Each party will have patent lawyers (often more than one) and trial lawyers (often more than one) on their team. Those will all have secretaries and paralegals. They will have witnesses, which on the plaintiff side will at least include the inventor(s) and probably others who were involved with the invention, and on the defendant side will include the people who developed the technology that defendant used that is accused of infringing. There will be expert witnesses both sides have hired to explain the patent and the technology, both as used by plaintiff and by the accused infringer. Both sides will also probably have a damages expert. Both sides will have rented at least one large conference room at their hotel, and will have brought along an IT team that will arrange high speed internet in that conference room and have set it up as a nearly complete office, complete with workstations, printers, phones, FAX, and so on. There will be a multimedia team that makes graphics and animations for presentation during the trial. The trial itself might last a week or two, but most of the above team will be there for two to four weeks before the trial starts. What that means is that you might be looking at needing 30ish hotel rooms, plus a big dedicated meeting room, and probably several smaller dedicated meeting rooms, for four to six weeks, and you want this reasonably close to the court. Keep in mind both sides are doing this, so you are looking at 60+ people staying at good hotels, renting expensive meeting facilities, using the services of many local businesses (restaurants, car rental, office equipment rental, cleaners, clothing stores, barbers and stylists) for a month or more. This can bring in a pretty good amount of money to the local economy. District judges generally live in the districts in which they serve, and are aware that these big cases are good for their districts. They sometimes take steps to encourage such cases to come to their districts, such as adopting local rules to make handling particular types of cases more efficient. EDT has done that with patent cases. I recall reading of a few other districts that do similar, but for specialities other than patents, but cannot recall specifics. [1] http://mcsmith.blogs.com/eastern_district_of_texas/2016/08/2016-edtx-patent-trials-update-36-win-rate-for-plaintiffs.html http://mcsmith.blogs.com/eastern_district_of_texas/2016/08/2... [2] https://www.pwc.com/us/en/forensic-services/publications/assets/2016-pwc-patent-litigation-study.pdf https://www.pwc.com/us/en/forensic-services/publications/ass... [3] https://www.thenaplesroundtable.org/wp-content/uploads/2016/12/AIPLA-Patent-Stats-2017-Mid-Winter-Paper.pdf https://www.thenaplesroundtable.org/wp-content/uploads/2016/...
- froindt 9y ago
  >Delaware, being the hub of all sorts of business litigation, sees things at a more abstract level. You're less likely to get a judge or jury in Delaware that comes in with a particular preconceived notion of X or Y being bad. There are also some problems which come from so much being litigated in Delaware. I have been working with a bankruptcy attorney looking at venue laws which run into similar issues as patents. As many patent lawsuits have been filed in Eastern Texas, many bankruptcies are filed in Delaware even if there is no functional basis for the company there outside of the state of incorporation. By running everything through Delaware, you're often taking the chance of reasonable representation away away from defendants (or creditors in the case of bankruptcy). If a company who only has facilities in Iowa goes belly up, there are likely dozens of companies who they owe money to, many of which are in the surrounding communities. Now the hundreds of farmers who are owed money have to fly to Wilmington Delaware if they want any chance of representation. Delaware Bar will require that a local attorney introduce whatever attorney from Iowa was hired to represent the farmers (if the Iowa attorney is competent, the Delaware attorney is literally introducing them and reviewing some documents before submission). Local council adds another expense for small businesses on the short end of a bankruptcy. The geographic difference adds significant expense in terms of travel. The VeraSun grain elevator case had a company headquartered in South Dakota with no operations east of Indiana and they filed in Delaware. There are other cases with even larger geographic differences out of California and Hawaii. Marsh supermarkets is headquartered in Indianapolis, Indiana and recently filed for bankruptcy in Delaware. They have thousands of employees, but only about 250 are salaried, the rest are hourly, largely store employees. Many of them are owed money from working their normal shifts. It will be very hard for the employees to feel like they had a chance at getting fair representation if they have to go to Delaware to see court proceeding happening. It could just as well have been held in Indianapolis with local attorneys representing hourly employees at a more reasonable total expense. Finally, a disproportionate amount of power in deciding bankruptcy or patent cases should not lay in the hands of a few judges. We've already seen what happens when a single judge has vastly different views on a given topic than pretty much anyone else with the mess of patent trolls in Eastern Texas. That one judge cost companies hundreds of millions to billions of dollars in cases which would have seen a different result if heard by a variety of judges from across the country. By running everything through Delaware, the concept of various opinions from across the nation being debated through many cases and going to appeals where needed goes out the window. A handful of judges in Delaware will decide what happens in the nations most significant bankruptcy and patent cases.
- kevin_thibedeau 9y ago
  > you can still sue the company where it has a "regular and established place of business." Sounds like it would be a good idea to embargo East Texas.
- PatentTroll 9y ago
  Also note that it's not like DDEL or NDCAL don't have any patent experience, if memory serves me they are still among the top patent venues even at the height of the EDTX phenomenon.
jdmichal 9y ago
For (1a), the reasoning I've heard behind Delaware is that a larger amount of company-based law has been tested there. So from a legal perspective, it's more predictable (for lack of a better word) what the outcome of any particular issue could be.
- staticautomatic 9y ago
  Depends. Delaware is also known for having a better jury pool for defendants. It's not a bad place to be a plaintiff, either, but it's no East Texas.
- Spooky23 9y ago
  They have a dedicated state court for business issues, and a deep well of case law. The judges focus on these sorts of cases. Patent cases are federal matters, so I don't think it applies there.
yazan94 9y ago
Why will almost all patent suits be filed in Delaware specifically? Are most tech companies incorporated there?
- ykler 9y ago
  Yes, but not all. For instance, Microsoft and Apple aren't.
  - kbutler 9y ago
    Interestingly, Microsoft was: Q.What year and where was Microsoft incorporated? A.Microsoft was incorporated in the state of Washington on June 25, 1981; reincorporated in the state of Delaware on September 19, 1986; and reincorporated in the state of Washington on November 1, 1993. https://www.microsoft.com/en-us/Investor/FAQ.aspx#section_2 https://www.microsoft.com/en-us/Investor/FAQ.aspx#section_2
- kbutler 9y ago
  Half of US public companies, 64% of fortune 500. It's generally recognized as a corporation-friendly location. https://technical.ly/delaware/2014/09/23/why-delaware-incorporation/ https://technical.ly/delaware/2014/09/23/why-delaware-incorp...
- spangry 9y ago
  It's a tax haven that doesn't tax earnings derived from 'intangible assets' (e.g. licensing fees that "Widget Co. California" pays to "Widget Co. Delaware" for using the trademarked Widget Co. logo).
spangry 9y ago
On Delaware, because many corporations incorporate there (or incorporate a subsidiary there). It's strange this hasn't been mentioned yet, but the primary reason Delaware is so popular is because it's a domestic & international tax haven [0][1][2]. It's one of the reasons the US is ranked 3rd (of 102) on the Tax Justice Network's "Financial Secrecy Index' (behind Switzerland and Hong Kong). Interestingly, Delaware should be especially attractive to 'IP heavy' companies, and other companies that have large amounts of 'intangible capital' (e.g. tech companies), as Delaware doesn't tax earnings generated from 'intangible assets'. So if you're a large multi-state / multi-national corporation, you set up a subsidiary (or incorporate your HQ) in Delaware, dump all your intangible assets there, and then charge your related entities fees when they use these intangible assets (e.g. IP & trademark licensing fees). These fees can then be claimed as deductions in the State / Country the related entity happens to be in (unless the jurisdiction has strong transfer pricing laws that outlaw the more egregious instances of this practice). As with all tax-havens, it's the 'beggar-thy-neighbour' approach to attracting 'capital investment'. [0] http://www.nytimes.com/2012/07/01/business/how-delaware-thrives-as-a-corporate-tax-haven.html http://www.nytimes.com/2012/07/01/business/how-delaware-thri... [1] https://www.theguardian.com/us-news/2016/apr/06/panama-papers-us-tax-havens-delaware https://www.theguardian.com/us-news/2016/apr/06/panama-paper... [2] https://en.wikipedia.org/wiki/Corporate_haven#North_America https://en.wikipedia.org/wiki/Corporate_haven#North_America

rayiner 9y ago

The patent venue statute, 28 U.S.C. 1400, says: "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." This case holds that a corporate defendant "resides" where it is incorporated. But the second clause is still operative--you can still sue the company where it has a "regular and established place of business." As for Delaware, I don't think it's particularly plaintiff friendly so much as its not defendant friendly. If you sue a tech company in N.D. Cal. you're in the position of telling locals that a business that generates jobs and tax revenues for them did something wrong. Delaware, being the hub of all sorts of business litigation, sees things at a more abstract level. You're less likely to get a judge or jury in Delaware that comes in with a particular preconceived notion of X or Y being bad. They're going to look at the facts and they're going to look at the law and make a decision. That manifests itself in some practical ways. For example, some Delaware judges are loathe to permit summary judgment motions (decisions on the case before it goes to a jury). Many infringement questions are, according to the law, jury questions, but judges grant summary judgment anyway to save defendants the time and expense of a jury trial. Delaware judges don't really care about that.

inputcoffee 9y ago
Wow, so if they can still be sued in a "regular and established place of business", does that dissuade startups from moving to, or starting in, Austin? Is Dell a target now because of the plaintiff-friendly juries. (That is what I hear, I don't know the details). Does this mean that startups should actually stay in Delaware to reduce the footprint of places they can get sued in? Doesn't sound like it changes much for the large tech companies who are all over the place anyway.
- rayiner 9y ago
  Austin is in the Western District of Texas, which doesn't have the same plaintiff-friendly reputation.
  - inputcoffee 9y ago
    I didn't realize that within a state, the court choice was still by district. Thanks for clarifying, and for taking the time with the other answers.
  - staticautomatic 9y ago
    Austin itself is actually known for being quite plaintiff-friendly, at least for certain kinds of cases.
- tzs 9y ago
  Rayiner has already pointed out that Austin is not in the so-called plaintiff friendly Eastern District of Texas (EDT). Also, it's not clear that EDT is actually plaintiff friendly. Defendants win plenty of cases there, and last time I saw stats it didn't seem particularly outstanding. There were several that had significantly higher plaintiff win rates. The numbers can change dramatically from year to year, though, so what I saw may be outdated. (Update: 2016 plaintiff won 36% of patent trials in EDT. 2015 was 50%, 2014 was 67%, and 2013 was 33%. These are lower than the overall national plaintiff patent win rate, I think [1] [2] [3]). A big reason plaintiffs choose EDT is that it is fast and experienced (the former partly due to the latter). Patent suits are civil cases heard in Federal district courts. Federal district courts also deal with criminal cases, and criminal cases have higher priority. In some districts where there is a heavy load of criminal cases the civil cases can end up move very slowly. EDT doesn't have much crime, so there aren't many criminal cases there. They have plenty of time for civil cases. Patent cases are among the more technically complicated cases. They will go a lot smoother if handled by a judge who is experienced with them. Once a judge gets experience with a few patent cases, that can attract plaintiffs to that district. Some judges like patent cases, and so whenever one is filed in the district they serve in, they ask to have it assigned to them. That in turn makes the them even more attractive to future plaintiffs. Patent cases are often "big". What I mean by that is that they often involve a lot of people attending the trial or accompanying those who attend the trial. Each party will have patent lawyers (often more than one) and trial lawyers (often more than one) on their team. Those will all have secretaries and paralegals. They will have witnesses, which on the plaintiff side will at least include the inventor(s) and probably others who were involved with the invention, and on the defendant side will include the people who developed the technology that defendant used that is accused of infringing. There will be expert witnesses both sides have hired to explain the patent and the technology, both as used by plaintiff and by the accused infringer. Both sides will also probably have a damages expert. Both sides will have rented at least one large conference room at their hotel, and will have brought along an IT team that will arrange high speed internet in that conference room and have set it up as a nearly complete office, complete with workstations, printers, phones, FAX, and so on. There will be a multimedia team that makes graphics and animations for presentation during the trial. The trial itself might last a week or two, but most of the above team will be there for two to four weeks before the trial starts. What that means is that you might be looking at needing 30ish hotel rooms, plus a big dedicated meeting room, and probably several smaller dedicated meeting rooms, for four to six weeks, and you want this reasonably close to the court. Keep in mind both sides are doing this, so you are looking at 60+ people staying at good hotels, renting expensive meeting facilities, using the services of many local businesses (restaurants, car rental, office equipment rental, cleaners, clothing stores, barbers and stylists) for a month or more. This can bring in a pretty good amount of money to the local economy. District judges generally live in the districts in which they serve, and are aware that these big cases are good for their districts. They sometimes take steps to encourage such cases to come to their districts, such as adopting local rules to make handling particular types of cases more efficient. EDT has done that with patent cases. I recall reading of a few other districts that do similar, but for specialities other than patents, but cannot recall specifics. [1] http://mcsmith.blogs.com/eastern_district_of_texas/2016/08/2016-edtx-patent-trials-update-36-win-rate-for-plaintiffs.html http://mcsmith.blogs.com/eastern_district_of_texas/2016/08/2... [2] https://www.pwc.com/us/en/forensic-services/publications/assets/2016-pwc-patent-litigation-study.pdf https://www.pwc.com/us/en/forensic-services/publications/ass... [3] https://www.thenaplesroundtable.org/wp-content/uploads/2016/12/AIPLA-Patent-Stats-2017-Mid-Winter-Paper.pdf https://www.thenaplesroundtable.org/wp-content/uploads/2016/...
froindt 9y ago
>Delaware, being the hub of all sorts of business litigation, sees things at a more abstract level. You're less likely to get a judge or jury in Delaware that comes in with a particular preconceived notion of X or Y being bad. There are also some problems which come from so much being litigated in Delaware. I have been working with a bankruptcy attorney looking at venue laws which run into similar issues as patents. As many patent lawsuits have been filed in Eastern Texas, many bankruptcies are filed in Delaware even if there is no functional basis for the company there outside of the state of incorporation. By running everything through Delaware, you're often taking the chance of reasonable representation away away from defendants (or creditors in the case of bankruptcy). If a company who only has facilities in Iowa goes belly up, there are likely dozens of companies who they owe money to, many of which are in the surrounding communities. Now the hundreds of farmers who are owed money have to fly to Wilmington Delaware if they want any chance of representation. Delaware Bar will require that a local attorney introduce whatever attorney from Iowa was hired to represent the farmers (if the Iowa attorney is competent, the Delaware attorney is literally introducing them and reviewing some documents before submission). Local council adds another expense for small businesses on the short end of a bankruptcy. The geographic difference adds significant expense in terms of travel. The VeraSun grain elevator case had a company headquartered in South Dakota with no operations east of Indiana and they filed in Delaware. There are other cases with even larger geographic differences out of California and Hawaii. Marsh supermarkets is headquartered in Indianapolis, Indiana and recently filed for bankruptcy in Delaware. They have thousands of employees, but only about 250 are salaried, the rest are hourly, largely store employees. Many of them are owed money from working their normal shifts. It will be very hard for the employees to feel like they had a chance at getting fair representation if they have to go to Delaware to see court proceeding happening. It could just as well have been held in Indianapolis with local attorneys representing hourly employees at a more reasonable total expense. Finally, a disproportionate amount of power in deciding bankruptcy or patent cases should not lay in the hands of a few judges. We've already seen what happens when a single judge has vastly different views on a given topic than pretty much anyone else with the mess of patent trolls in Eastern Texas. That one judge cost companies hundreds of millions to billions of dollars in cases which would have seen a different result if heard by a variety of judges from across the country. By running everything through Delaware, the concept of various opinions from across the nation being debated through many cases and going to appeals where needed goes out the window. A handful of judges in Delaware will decide what happens in the nations most significant bankruptcy and patent cases.
kevin_thibedeau 9y ago
> you can still sue the company where it has a "regular and established place of business." Sounds like it would be a good idea to embargo East Texas.
PatentTroll 9y ago
Also note that it's not like DDEL or NDCAL don't have any patent experience, if memory serves me they are still among the top patent venues even at the height of the EDTX phenomenon.

jdmichal 9y ago

For (1a), the reasoning I've heard behind Delaware is that a larger amount of company-based law has been tested there. So from a legal perspective, it's more predictable (for lack of a better word) what the outcome of any particular issue could be.

staticautomatic 9y ago
Depends. Delaware is also known for having a better jury pool for defendants. It's not a bad place to be a plaintiff, either, but it's no East Texas.
Spooky23 9y ago
They have a dedicated state court for business issues, and a deep well of case law. The judges focus on these sorts of cases. Patent cases are federal matters, so I don't think it applies there.

yazan94 9y ago

Why will almost all patent suits be filed in Delaware specifically? Are most tech companies incorporated there?

ykler 9y ago
Yes, but not all. For instance, Microsoft and Apple aren't.
- kbutler 9y ago
  Interestingly, Microsoft was: Q.What year and where was Microsoft incorporated? A.Microsoft was incorporated in the state of Washington on June 25, 1981; reincorporated in the state of Delaware on September 19, 1986; and reincorporated in the state of Washington on November 1, 1993. https://www.microsoft.com/en-us/Investor/FAQ.aspx#section_2 https://www.microsoft.com/en-us/Investor/FAQ.aspx#section_2
kbutler 9y ago
Half of US public companies, 64% of fortune 500. It's generally recognized as a corporation-friendly location. https://technical.ly/delaware/2014/09/23/why-delaware-incorporation/ https://technical.ly/delaware/2014/09/23/why-delaware-incorp...
spangry 9y ago
It's a tax haven that doesn't tax earnings derived from 'intangible assets' (e.g. licensing fees that "Widget Co. California" pays to "Widget Co. Delaware" for using the trademarked Widget Co. logo).

spangry 9y ago

On Delaware, because many corporations incorporate there (or incorporate a subsidiary there). It's strange this hasn't been mentioned yet, but the primary reason Delaware is so popular is because it's a domestic & international tax haven [0][1][2]. It's one of the reasons the US is ranked 3rd (of 102) on the Tax Justice Network's "Financial Secrecy Index' (behind Switzerland and Hong Kong). Interestingly, Delaware should be especially attractive to 'IP heavy' companies, and other companies that have large amounts of 'intangible capital' (e.g. tech companies), as Delaware doesn't tax earnings generated from 'intangible assets'. So if you're a large multi-state / multi-national corporation, you set up a subsidiary (or incorporate your HQ) in Delaware, dump all your intangible assets there, and then charge your related entities fees when they use these intangible assets (e.g. IP & trademark licensing fees). These fees can then be claimed as deductions in the State / Country the related entity happens to be in (unless the jurisdiction has strong transfer pricing laws that outlaw the more egregious instances of this practice). As with all tax-havens, it's the 'beggar-thy-neighbour' approach to attracting 'capital investment'. [0] http://www.nytimes.com/2012/07/01/business/how-delaware-thrives-as-a-corporate-tax-haven.html http://www.nytimes.com/2012/07/01/business/how-delaware-thri... [1] https://www.theguardian.com/us-news/2016/apr/06/panama-papers-us-tax-havens-delaware https://www.theguardian.com/us-news/2016/apr/06/panama-paper... [2] https://en.wikipedia.org/wiki/Corporate_haven#North_America https://en.wikipedia.org/wiki/Corporate_haven#North_America