Perspectives From In-House Counsel: Patent Rights — Who Decides?

At the District of Delaware’s Bench & Bar Conference last week, patent law was a prominent topic — and this came as no surprise. First, Delaware is a hot spot for IP litigation. Second, the Federal Circuit Bar Association was a co-sponsor of the conference, alongside the Delaware Chapter of the Federal Bar Association.

Intellectual property got lots of time in the limelight during the opening plenary session, featuring perspectives from a panel of prominent in-house lawyers. It then received additional attention during a panel on TC Heartland v. Kraft Food Brands Group, the major Supreme Court case that reshaped the legal landscape for venue in patent cases.

When it comes to the validity of patent rights, who should decide? Based on the discussions from both panels, here’s a breakdown of the question. (As I mentioned in my first post about the conference, the conference was conducted pursuant to the Chatham House Rule, so I won’t attribute specific remarks to specific speakers.)

U.S. law versus foreign law

The general consensus among the in-house panelists seemed to be that despite its flaws, the U.S. approach to IP rights is much better than most of the alternatives. There’s actual enforcement of IP rights, for starters — which sadly isn’t the case in lots of other nations.

And there are pluses about the domestic IP litigation regime that many of us probably take for granted. For example, one nice thing about U.S. litigation is the transparency of the dockets; you can hop on PACER and pretty much learn everything about the current state of a case. In many other countries — even rather advanced ones, such as Germany — it can be hard to tell the status of a case or even whether a case has been filed.

District court versus the U.S. Patent and Trademark Office (PTO)

What do folks think of inter partes review (IPR), a relatively new way of going before the PTO to challenge the validity of a patent? IPR proceedings, enacted in 2012 as part of the America Invents Act, have been controversial — and the panelists disagreed about them as well.

On the plus side, IPR proceedings are often more efficient and cost-effective than standard IP litigation, and they’re doing a decent job of clearing out some patents that never should have issued.

On the minus side, IPR proceedings have wound up being an add-on rather than an alternative to litigation, and they often come late — forcing a company to defend (and potentially lose) a patent after it has made a considerable investment. Also, the limited discovery can prevent defendants from telling their full story.

Judge versus jury

An advantage of the IPR process cited by the in-house lawyers is that trained judges make the calls. Patent trials require the decision-maker to absorb extensive technical knowledge, and laypeople serving on juries often aren’t terribly good at that. And patent trials can often be long and boring, which isn’t very fun for the jurors either.

But one of the audience members, a sitting federal judge, chastised the panelists for this view and mounted a full-throated defense of the Seventh Amendment. In this jurist’s experience, juries almost always get it right. In his many years on the bench, he’s had only two IP cases where he had to disturb the jury verdict.

“This is a subliminal argument for specialty courts, which I reject,” he said. “We don’t have ERISA courts, criminal courts, or antitrust courts. We have a Seventh Amendment.”

The judge was very eloquent, and his remarks would have made a great Law Day speech, but personally I side with the panelists. First, we already do have specialty tribunals for patent issues, such as the Patent Trial and Appeal Board and the Federal Circuit, so we’ve already crossed that line. Yes, the Federal Circuit isn’t perfect, and it gets reversed a lot (but of course it’s going to get reversed a lot, since it’s the only circuit handling patent appeals). Second, think about the poor jurors! I’ve enjoyed my own experiences with jury service, but I’ve never sat through a hypertechnical patent case dragging out over many weeks or even months, which sounds excruciating (no offense, IP litigators).

Which district court?

If you do wind up litigating a patent in district court, which district court do you want to be in? At the TC Heartland panel, the joke — although it wasn’t completely a joke — was that you want to be where your opponent does not.

For many years, plaintiffs in patent cases wanted to be in the Eastern District of Texas, perceived as a district favorable to patent owners. But after the Supreme Court’s landmark ruling in TC Heartland in May 2017, everything changed, and now a U.S. corporation sued for patent infringement can be sued only (1) where it has committed acts of infringement and has a regular and established place of business or (2) in its state of incorporation — which for so many major American corporations means Delaware. (We’ve written quite a bit about TC Heartland in these pages, so consult our prior coverage for more information.)

The TC Heartland panel at the conference, moderated by Texas IP litigator Clyde Siebman, offered a wealth of insights into the background of the case. It featured two lawyers who worked on the litigation — James Dabney of Hughes Hubbard and Reed, who represented TC Heartland (the ultimate victor), and John Luken of Dinsmore & Stahl, who represented Kraft — and the two Delaware judges who presided over the case — Magistrate Judge Christopher Burke and Chief Judge Leonard Stark.

Because the venue issue at the time was governed by Federal Circuit precedent that had been in place for some 25 years before the Supreme Court overturned it, the challenge raised by TC Heartland was viewed as a long shot at the start of the case. Magistrate Judge Burke wrote a report and recommendation totaling about ten pages that rejected TC Heartland’s venue argument, and Judge Stark adopted the R&R in a single page. Neither judge had any idea that the case would eventually wind up before SCOTUS. (Judge Stark noted humorously that he’s had two cases go up to the Supreme Court, and SCOTUS ruled against his position unanimously both times — “so I’m 0 for 17 before the Court.”)

TC Heartland appealed the venue issue by seeking a writ of mandamus from the Federal Circuit — which many judges would view as a bit of an insult, and possibly hold against TC Heartland on remand. But TC Heartland was comfortable with the move because of the high regard in which its legal team held Judge Stark, an excellent and fair-minded judge who would not hold the mandamus petition against the company if and when the case returned to him.

The case eventually did return to Judge Stark, after the unanimous Supreme Court’s ruling holding venue proper in Delaware. What happened next? After the big trip up to SCOTUS, the case’s conclusion was anticlimactic: settlement.

As with any major Supreme Court ruling, TC Heartland raises more questions than it answers. The panelists identified venue for foreign corporations, venue for non-corporate defendants, and what constitutes a “regular and established place of business” under 28 U.S.C. § 1400 as issues that will see — and are already seeing — more litigation.

Since TC Heartland, patent filings in the District of Delaware have increased dramatically. This presents opportunities and challenges for Delaware lawyers and for its federal bench. Given the high quality of both its bench and bar, the District of Delaware stands ready to face them.

District of Delaware Bench & Bar Conference [Delaware Chapter of the Federal Bar Association]

Earlier: Perspectives From In-House Counsel: Answers To 5 FAQs From Outside Counsel

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David Lat is editor at large and founding editor of Above the Law, as well as the author of Supreme Ambitions: A Novel. He previously worked as a federal prosecutor in Newark, New Jersey; a litigation associate at Wachtell, Lipton, Rosen & Katz; and a law clerk to Judge Diarmuid F. O’Scannlain of the U.S. Court of Appeals for the Ninth Circuit. You can connect with David on Twitter (@DavidLat), LinkedIn, and Facebook, and you can reach him by email at [email protected].