Page 6 - Litigation

S6 | MONDAY, JULY 17, 2017 | Litigation
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How to Shift Your Litigation Strategies For the New IP Landscape
Judge Rodney Gilstrap of the Eastern Dis- trict of Texas wasted no time in interpreting the Supreme Court’s ruling by denying defen- dant’s motion to transfer for improper venue in Raytheon Company v. Cray. On June 29, Judge Gilstrap found that the employment of a sales representative within the Eastern District of Texas was sufficient to provide for a “regular and established place of business.” In finding venue to be proper, the court held that defendant’s representations regarding its business in the district, benefits received from the district, and targeted interactions within the district were sufficient to satisfy the four-factor approach it employed.
Expansion of Patent Exhaustion Doctrine
The long-standing doctrine of patent exhaustion provided that the initial autho- rized sale of a patented item terminates all subsequent patent rights to that item, includ- ing any rights to assert infringement. On May 30, 2017, in Impression Products v. Lexmark International, the Supreme Court addressed: (1) whether a “conditional sale” that transfers title to the patented item while specifying post-sale restrictions on the article’s use or resale avoids application of the patent exhaus- tion doctrine; and (2) whether the exhaus- tion doctrine applies to authorized sales of a patented article that take place outside of the United States. In expanding the doctrine, the court held that “a patentee’s decision to sell a product exhausts all of its patent rights in that item, regardless of any restrictions the patentee purports to impose” on the resale of that item. The court noted that “[p]atent exhaustion reflects the principle that, when an item passes into commerce, it should not be shaded by a legal cloud on title as it moves through the marketplace.” The court also con- cluded that “[a]n authorized sale outside the United States, just as one within the United States, exhausts all rights under the Patent Act.” The court distinguished licenses from post-sale restriction noting, “[b]ecause the patentee is exchanging rights, not goods, it is free to relinquish only a portion of its bundle of patent protections.”
The court’s ruling will impact a wide range of industries, both global and domestic, and many contractual relationships. Companies should creatively structure transactions as licenses rather than sales, to avoid exhaus- tion of patentee rights under Impression. The distinction will depend on the technology at issue. For example, products such as iPhones or cameras, which can be reused repeatedly, can be structured as use licenses as opposed to outright or restricted sales. On the other hand, that may not be feasible for products such as pharmaceuticals which, once con- sumed, cannot be reused in the same way. The decision also complicates the enforcement of patent rights, since any challenge will have to take into consideration the structure of a particular transaction and its real intent. While the court expanded the doctrine of pat- ent exhaustion, it left many significant issues open to future interpretation.
Elimination of Laches as a Defense
The equitable doctrine of laches was avail- able for decades as a defense to limit damages
BY SAPNA W. PALLA AND ANDREW BOCHNER
The year 2016 and the last few months of 2017 have been characterized by many notable developments in a busy U.S. Supreme Court and Court of Appeals for the Federal Circuit, causing sea changes in intellectual property law that shift litigation strategies more than ever. While the changes have been far reaching, this article will focus on those which most impact litigation strate- gies, such as venue, laches, patent exhaustion, patent damages, and extraterritoriality, and provide practical suggestions for strategies to employ, along with real-world examples of
SAPNA W. PALLA is a partner and ANDREW BOCH- NER is an associate in Wiggin and Dana’s intellectual property practice.
successful approaches to navigate this new landscape.
Limitation of Patent Venue
In a bid to address forum shopping by pat- entees, on May 22, 2017, the Supreme Court in TC Heartland v. Kraft Food Brands Group limited where patentees can commence pat- ent infringement proceedings. TC Heartland, an Indiana-based company sued by Kraft Foods, an Illinois-based company, in Dela- ware, argued for transfer to its home base of Indiana. The lower courts refused to transfer the case to Indiana and, last year, the Federal Circuit held that patent suits can be filed in any district where the defendant makes a sale. The Supreme Court overturned the Federal Circuit and held that patent infringement law- suits can only be filed in the district within the state where the defendant is incorporated, or the district where it has committed acts
of infringement and has a “regular and estab- lished place of place of business.”
TC Heartland seems to favor bringing suits where defendants are located. The biggest effect of this decision will be in the Eastern District of Texas, where more than 40 percent of patent lawsuits were filed last year due to patentee-friendly juries and local rules which allow for fast trials. On the other hand, Dela- ware, where a substantial number of busi- nesses are incorporated, and the Northern District of California, where many technology companies targeted with patent litigation are based, will likely see an increase in patent case filings. Thus, defendants unhappy about finding themselves in Texas could try to move the case to their place of incorporation. Con- versely, this ruling also presents an oppor- tunity for plaintiffs and courts in Texas to address what “regular and established place of business” means, and to try to construe that phrase favorably to keep cases in Texas.
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