Any business that uses cutting-edge technology could be affected by a Supreme Court ruling that is due out this summer. And two Santa Clara University law professors are in the thick of the issues behind the case, TC Heartland v. Kraft Foods.
The underlying concern is that a large number of companies across the country have been sued by patent holders for allegedly infringing rights to a wide array of technologies, including various aspects or applications of e-commerce, cloud computing, wireless data transmission, GPS, and the Internet of Things. The patent holders demand that the companies using those technologies pay royalties, and bring suit if the businesses balk.
Santa Clara Law’s influential patent-law professor, Colleen Chien, has spent years quantifying the impact of patent assertion entities (PAEs)—also known as trolls)—on small businesses. She also pursued patent reform during her 2013-2015 stint at the White House as a senior adviser on intellectual property and innovation. In her work, she found that the majority of those filing patent suits)—far from being proud inventors)—were not utilizers of the patented technology, but were using the patents to extract money from them. She also found that their suits disproportionately targeted small businesses.
The case before the Supreme Court involves a quirk in the law that in effect allows these PAEs)—or anyone else seeking to sue for patent infringement)—to pick whichever court jurisdiction nationwide they believe to be most advantageous to their side of the case. In the case of PAEs, they’ve found a clear favorite venue: the Eastern District of Texas.
“To many people in the patent world, the Eastern District of Texas is a place that has resisted progress that has led to balance in other jurisdictions, and that’s contributed to a lopsided way of doing things,” said Chien.
In fact, in 2015, nearly 45 percent of all patent lawsuits in the country were filed in this district – 25 percent of them before a single judge, Judge Rodney Gilstrap.
Santa Clara Law’s intellectual-property expert and co-director of the High Tech Law Institute, Brian Love, co-authored a study of this district in the Stanford Technology Law Review. The study analyzed why PAEs flock there, including how the court’s procedure’s tend to favor PAEs by raising the cost of defending patent suits filed there. Senator Orrin Hatch, a senior member of the Judiciary Committee, cited the study in an op-ed in WIRED urging the district loophole be closed. He has vowed to act if the Supreme Court does not.
Chien’s work was also stamped all over TC Heartland. Both sides cited her co-authored study, forthcoming in the Maryland Law Review, that quantified how case distributions would change should the Supreme Court change the law. Her study found that a rule change would have dramatic effect. One side cited her study to show that closing the loophole represented by East Texas would give relief to 68 percent of small- and medium-sized businesses, who find themselves on the receiving end of patent lawsuits filed there. The opposing side, however, stressed her study’s finding that such changes would be widespread and blunt – causing not only PAEs to have to refile but everyone to have to refile. They favored different Congressional proposals outlined in her study.
Love and Chien also were among the four leaders of an amicus brief signed by 61 law and economics professors decrying the “rampant forum shopping” that the current law allows, and urging the Supreme Court to remedy the “dubious interpretation” that allows this to happen.