TC Heartland Decision and its impact on NPE Litigation Trend

 In IP Analytics

On May 22nd of 2017, the Supreme court of the US issued its landmark ruling on TC Heartland LLC V Kraft Foods, the decision being credited to have changed the law on venue for patent cases. Few months later in mid-November,  the US court of appeals confirmed the same, holding that the TC Heartland decision was in fact “an intervening change in the law that excuses waiver”.

The Supreme court’s TC Heartland decision is quoted by many as a game-changer, with potential to serve as a huge blow to the Eastern District of Texas  ̶  the long-favored venue for plaintiffs – and impact NPE litigation trend.

How far did those predictions prove true?

Did the TC Heartland decision have any solid impact on the number of cases filed in EDTX? Did it have an impact on NPE litigation numbers?

We’re about to find out.

The Impact of TC Heartland on District Court Filing Trends

Fried, Frank, Harris, Shriver & Jacobson LLP published a report depicting the effect of TC Heartland on patent cases filed over the period of 120 days following the ruling.

According to the report, more than 1000 new patent infringement suits have been filed since the decision. However, a significant drop is noticed in the overall number of filings over the last 120 days when compared to the same time period in 2016. A stark 15% decrease.


Further, the number of cases filed by “high-volume plaintiffs” took a plunge too, from 714 in 2016 to 332 in 2017 for the same 120-day period.

For those unaware, the terminology “High-volume plaintiffs” is used to refer to parties that have filed at least 10 patent cases within a 365-day period. Does that mean NPEs- whose business model is raging as many lawsuits as possible to generate income – activity has plummeted since TC heartland?

Maybe. Maybe not. In few minutes, you would have an accurate answer.

But first, let’s have a look at how TC Heartland turned the tide in district court filings.

District Court Filing Trends post TC Heartland

Consistent with 2016, the top ten districts by the number of filings still account for 75% of all patent cases filed- post TC Heartland. The relative share of new cases among these districts though has shifted dramatically.

The tables have turned against the plaintiff-friendly jurisdiction – Eastern District of Texas – where the number of new infringement cases filed has reduced more than half, from 39.61% in 2016 to 15.04% in 2017.

Meanwhile, for courts like the district of Delaware, a dramatic rise has been noticed, mainly due to the fact that most companies are based out of or majorly operate in Delaware. Other popular courts like Northern district of California and central district of California have seen huge upticks too, mainly because some battles ought to be fought in the valley.

Revisiting the question, did TC Heartland have any impact on the number of cases filed in Eastern District of Texas?

A huge impact by every means. The data suggests that the era of forum shopping in patent cases might finally be over, which would, in turn, reduce wasteful litigation. But, would it?

Or let’s ask a better question- Did It?

The Impact of TC Heartland on NPE Litigation

Not really.

According to the Q3 patent dispute report released by unified patents, out of 864 patent infringement cases filed in the third quarter of 2017, approximately 60% of the cases were filed by NPEs.

 

Out of these 497 NPE cases, 210 cases were filed in August whereas 101 new cases were filed in September, according to RPX Monthly NPE report- September issue. Breaking down the filings month-wise, a declining curve could be noticed in this quarter, hinting that the number of NPE related litigation have drastically reduced.

What about Quarter 4?

Well, though there is still more than a month left before Q4 ends, we were curious to figure how NPE litigation played this quarter till current date.

We had a look at the cases filed starting October 1 till November 22 and came up with following conclusions.

  • 598 patent infringement cases are filed till date in Q4, 373 filed in October alone.
  • IP Edge is the largest filer in Q4 with 80 cases, followed by popular inventor cum NPE Leigh M. Rothschild with 44 cases.
  • The top six plaintiffs combined for this semi-quarter filed 217 cases, each of them having the reputation of an NPE.

Top Six Plaintiffs for Semi-Q4

  • Out of these 217 NPE cases, 134 cases were filed in the month of October alone. These numbers do not include any other cases filed by NPEs other than the top six mentioned above.

Based on the above pointers, it could be concluded that TC Heartland did not have much impact on NPE litigation. In Q4 as well, cases filed by NPEs was consistent with numbers from previous quarters, an approximate of 60%.

Conclusion

Not all predictions come true.

In the case of TC Heartland, though it clearly impacted the number of cases handled by Eastern District of Texas, it had little or no impact on NPE litigation. While it is true that the plaintiff-friendly court would be out of bounds for a lot of cases, it does not deter NPEs from practicing its business model to churn profits.

EDTX was the shortcut to generating high profits in a much lesser time, but now that it is out of reach, it is only a matter of time before NPEs figure out a different yet much quicker route to continue generating their rightful income. In all these years, we have learned one thing- Every time a window closes, NPEs carve out a door fit for their need.

It ain’t a bad thing either. Often referred to as trolls by media, NPEs are not as bad as they are portrayed to be. In fact, research suggests that NPEs are good for economy and promote innovation. Intrigued? Well, I have covered the other side of the story in this detailed piece, linked for your perusal – Patent trolls are good.

Authored by: Anjali Chopra, Senior Business Analyst, Market Research. 

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