Patent trolls are almost as plentiful and harder to kill than cockroaches. Give the Supreme Court credit for taking a big step last week to put them in their place.
The court, in a unanimous decision, ruled that patent lawsuits can only be filed in a court where a defendant is incorporated or has a “regular and established place of business.” The ruling should mean the end of patent trolls shopping for plaintiff-friendly district courts across the nation that have a reputation for handing trolls a better chance of winning.
It’s a major win for the tech industry that should be celebrated throughout Silicon Valley.
Patent trolls are the bane of tech companies everywhere. They acquire patents, usually from small firms or inventors, and then look for companies they can aggressively sue for infringing them. The shakedown artists costs the tech industry an estimated $30 billion every year. And it’s not just the tech giants — Apple, Oracle, Facebook and Google — that suffer.
Two eye-popping studies show the impact on the startup companies that are the future of the tech industry.
A 2013 study by Robin Feldman, a professor of innovation law at the University of California’s Hastings College of the Law, found that one in three startup companies and 70 percent of venture capitalists are targeted by patent trolls.
A 2014 study by researchers at the University of Texas and Harvard University found that firms that were forced to pay patent trolls through a lawsuit or out-of-court settlement spent an average of $211 million less on research and development than the firms who won lawsuits against patent trolls.
It’s no big surprise, since the average cost of fighting a patent challenge is about $500,000.
For the better part of the last two decades, patent trolls’ practice of shopping for “friendly” federal courthouses has gone beyond absurd. The town of Marshall, Texas, with a population of just over 20,000 near the Louisiana border, routinely handles more than one-quarter of the patent challenge cases every year.
The situation would be comical if it wasn’t so costly and detrimental to tech firms. Samsung, for example, went so far in an effort to build goodwill in Marshall — and with potential jurors — that it sponsored an outdoor ice skating rink next to the courthouse. Attorneys for practically every tech titan in the United States know the restaurants and where they can obtain office accessibility in Marshall at a moment’s notice.
The Supreme Court ruling should change all that. The case, TC Heartland vs. Kraft Foods, interestingly enough, didn’t involve a tech firm. Kraft sued TC Heartland, charging that it had stolen a liquid drink patent. TC Heartland, which is based in Indiana, objected to having the case tried in Delaware, and the Supreme Court agreed that was unreasonable.
The ruling won’t exterminate patent trolls altogether, but it’s a good step toward putting them in their rightful place.
