1 00:00:00,320 --> 00:00:03,360 Speaker 1: The federal judicial district in Eastern Texas is a magnet 2 00:00:03,400 --> 00:00:06,279 Speaker 1: for patent litigation. More than a third of all infringement 3 00:00:06,320 --> 00:00:09,559 Speaker 1: cases are filed there. Critics say that's because patent holders 4 00:00:09,560 --> 00:00:12,879 Speaker 1: know they stand an especially good chance of winning. For 5 00:00:13,119 --> 00:00:16,280 Speaker 1: the biggest patent verdicts in US history have been delivered 6 00:00:16,280 --> 00:00:19,600 Speaker 1: in that district. Well, the magnetism of the Eastern District 7 00:00:19,640 --> 00:00:22,479 Speaker 1: of Texas may be coming to a sudden end. The U. S. 8 00:00:22,480 --> 00:00:24,799 Speaker 1: Supreme Court yesterday agreed to take up a case that 9 00:00:24,800 --> 00:00:28,440 Speaker 1: would sharply limit the ability of patent holders to choose 10 00:00:28,480 --> 00:00:31,560 Speaker 1: their favorite court when they file suit. At issue is 11 00:00:31,600 --> 00:00:34,400 Speaker 1: whether under federal law, a patent suit can be pressed 12 00:00:34,440 --> 00:00:37,960 Speaker 1: anywhere the defendant regularly does business, as is the case now, 13 00:00:38,520 --> 00:00:41,560 Speaker 1: or only in the state where it is incorporated. Here 14 00:00:41,560 --> 00:00:43,800 Speaker 1: to talk about that case and what it will mean 15 00:00:43,880 --> 00:00:48,000 Speaker 1: for the vulnerabibility of big companies to patent suits. Is 16 00:00:48,040 --> 00:00:49,640 Speaker 1: the person I always go to when I have a 17 00:00:49,680 --> 00:00:53,080 Speaker 1: patent law question. Bloomberg News is patent reporters Susan Dekker 18 00:00:53,560 --> 00:00:58,200 Speaker 1: and Michael Smith, a patent lawyer at Seeberg Semen, siedman Burg, 19 00:00:58,320 --> 00:01:02,520 Speaker 1: Phillips and Smith. He practices in Marshall, Texas at in 20 00:01:02,560 --> 00:01:06,720 Speaker 1: the Eastern district's busiest patent courthouse. So let me start 21 00:01:06,760 --> 00:01:09,399 Speaker 1: with you tell us just who is involved in this 22 00:01:09,560 --> 00:01:13,240 Speaker 1: Supreme Court case. Well, the case actually technically has nothing 23 00:01:13,240 --> 00:01:15,959 Speaker 1: to do with Texas. It is a case that Craft 24 00:01:16,000 --> 00:01:19,160 Speaker 1: had filed in Delaware against a rival maker of water 25 00:01:19,240 --> 00:01:23,880 Speaker 1: flavorings named TC Hartland. TC Hartland said they're based in 26 00:01:23,880 --> 00:01:27,360 Speaker 1: Indiana and the suit should be there. The judge said, nope, 27 00:01:27,400 --> 00:01:29,319 Speaker 1: case stays in Delaware. It went to the U. S. 28 00:01:29,319 --> 00:01:31,360 Speaker 1: Court of Appeals for the Federal Circuit, which handles all 29 00:01:31,360 --> 00:01:34,200 Speaker 1: patent appeals. And from the beginning, even though it was 30 00:01:34,240 --> 00:01:38,520 Speaker 1: about Delaware versus Indiana, was set up as an issue 31 00:01:38,560 --> 00:01:41,160 Speaker 1: of how to deal with all the patent suits in Texas. 32 00:01:42,040 --> 00:01:48,240 Speaker 1: And Mike explain the issue here, Well, the issue is 33 00:01:48,400 --> 00:01:51,280 Speaker 1: whether the issue the courts looking at is whether the 34 00:01:51,320 --> 00:01:56,360 Speaker 1: Statute the Congress past setting venue in patent cases one 35 00:01:56,440 --> 00:01:59,760 Speaker 1: prong of it limits cases to being filed just where 36 00:01:59,800 --> 00:02:03,320 Speaker 1: a defendants is incorporated, or whether it can be where 37 00:02:03,520 --> 00:02:07,000 Speaker 1: where the Statute Congress is written says that it can 38 00:02:07,040 --> 00:02:10,639 Speaker 1: be filed anywhere where they essentially do business. So the 39 00:02:10,760 --> 00:02:12,760 Speaker 1: question is whether the court whether the court is going 40 00:02:12,800 --> 00:02:15,440 Speaker 1: to narrow that prong of the statute town to just 41 00:02:15,520 --> 00:02:20,600 Speaker 1: where a defendant is incorporated sue. How much of a 42 00:02:20,639 --> 00:02:25,240 Speaker 1: difference will it make if if a plaintiff can't choose 43 00:02:25,400 --> 00:02:28,239 Speaker 1: the courthouse, How how important is it to be able 44 00:02:28,240 --> 00:02:30,400 Speaker 1: to sue in that federal district in Texas or in 45 00:02:30,440 --> 00:02:34,880 Speaker 1: the federal district in Delaware. Well, the problem there is 46 00:02:34,919 --> 00:02:36,840 Speaker 1: that the case is only directed at one of the 47 00:02:36,880 --> 00:02:40,880 Speaker 1: two prongs under the statute. If that prong has changed 48 00:02:40,960 --> 00:02:43,640 Speaker 1: the way that that Hartland is asking it be changed, 49 00:02:43,960 --> 00:02:47,160 Speaker 1: plaintiffs would be very limited in terms of being able 50 00:02:47,240 --> 00:02:51,280 Speaker 1: to sue an infringer in in a court that they 51 00:02:51,320 --> 00:02:53,639 Speaker 1: think is more efficient or is more favorable to them. 52 00:02:54,080 --> 00:02:56,040 Speaker 1: So what the problem is, what I think they're gonna 53 00:02:56,080 --> 00:02:57,680 Speaker 1: do is they're going to go to the other prong, 54 00:02:57,760 --> 00:03:01,359 Speaker 1: which says that you can also to a case wherever 55 00:03:01,440 --> 00:03:05,720 Speaker 1: there is infringement and the defendant has a facility. And 56 00:03:05,800 --> 00:03:08,200 Speaker 1: my concern is that that's going to cause pliniffs to 57 00:03:08,200 --> 00:03:11,840 Speaker 1: stop suing a manufacture that they think is infringing, and 58 00:03:11,880 --> 00:03:15,080 Speaker 1: they'll start filing what we call customer suits. They'll start 59 00:03:15,080 --> 00:03:22,160 Speaker 1: suing retailers and customers for example, UH actme UH explosive 60 00:03:22,200 --> 00:03:26,520 Speaker 1: devices to borrow a wildie coyote UH defendant. They may 61 00:03:26,520 --> 00:03:29,200 Speaker 1: be located in Idaho, and I may not be able 62 00:03:29,240 --> 00:03:31,640 Speaker 1: to get venue on them in in the Eastern District 63 00:03:31,680 --> 00:03:35,040 Speaker 1: of Texas if this, if the court does restrict it 64 00:03:35,200 --> 00:03:37,640 Speaker 1: under that prong. But what I can do is I 65 00:03:37,680 --> 00:03:40,640 Speaker 1: can go down and sue Low's and Walmart and Best 66 00:03:40,640 --> 00:03:44,120 Speaker 1: Buy and everybody who carries their products. Or I can 67 00:03:44,160 --> 00:03:48,840 Speaker 1: sue distributors. I generally represent um UH some of the 68 00:03:48,880 --> 00:03:53,080 Speaker 1: smaller defendants, the distributors, the retailers like that, and they 69 00:03:53,120 --> 00:03:56,520 Speaker 1: have a much more difficult time defending cases. So my 70 00:03:56,600 --> 00:03:59,480 Speaker 1: concern is this isn't going to reduce the number of cases. 71 00:03:59,680 --> 00:04:01,960 Speaker 1: It's just going to cause plaintiffs to go after more 72 00:04:02,120 --> 00:04:06,400 Speaker 1: vulnerable defendants. And we have a problem with shakedown suits 73 00:04:06,440 --> 00:04:08,440 Speaker 1: now and I'm afraid this is gonna make it worse. 74 00:04:09,920 --> 00:04:14,960 Speaker 1: There's also the issue of where will the cases end up. UM. 75 00:04:15,000 --> 00:04:16,480 Speaker 1: You know a lot of the cases if they are 76 00:04:16,560 --> 00:04:18,839 Speaker 1: tech company versus tech company, will end up in Northern 77 00:04:18,880 --> 00:04:22,719 Speaker 1: District of California. UM. Delaware is already one of the 78 00:04:22,720 --> 00:04:27,960 Speaker 1: most popular courts. Will that mean even more cases in Delaware? Um, 79 00:04:28,080 --> 00:04:32,040 Speaker 1: the lawyers patent owners tend to gravitate towards courts where 80 00:04:32,360 --> 00:04:34,960 Speaker 1: the judges don't hate patent cases. A lot of judges 81 00:04:35,000 --> 00:04:38,479 Speaker 1: don't like to take patent cases. UM, So they're going 82 00:04:38,520 --> 00:04:42,720 Speaker 1: to try and find ways to go to those courts. UM. 83 00:04:42,839 --> 00:04:45,480 Speaker 1: So you'll still see some of the busiest courts in 84 00:04:45,560 --> 00:04:50,120 Speaker 1: Northern California, Central California, New Jersey, Chicago, Delaware will still 85 00:04:50,240 --> 00:04:54,039 Speaker 1: be very popular. Mike tell us, Mike tell us about 86 00:04:54,080 --> 00:04:57,640 Speaker 1: your your courthouse. There is it as isn't as plaintive 87 00:04:57,720 --> 00:05:01,680 Speaker 1: friendly as its reputation. Uh says that that it is. 88 00:05:02,160 --> 00:05:04,040 Speaker 1: I love I love it when people ask me that 89 00:05:04,160 --> 00:05:06,880 Speaker 1: My last verdict across the street was earlier this year, 90 00:05:06,920 --> 00:05:10,640 Speaker 1: we got a defense verdict for a mouse manufacturer, and 91 00:05:10,640 --> 00:05:12,440 Speaker 1: at the time we got it, we were the sixth 92 00:05:12,560 --> 00:05:15,640 Speaker 1: defense verdict in a row. The next day upstairs, the 93 00:05:15,640 --> 00:05:18,719 Speaker 1: string got broken. So I felt like Dak Prescott after 94 00:05:18,760 --> 00:05:21,200 Speaker 1: the game the other night. But no, it's it's not. 95 00:05:22,560 --> 00:05:25,800 Speaker 1: Defense verdicts are more common than planeffs verdicts, UM. And 96 00:05:25,920 --> 00:05:28,080 Speaker 1: my experience has been you talked about some of the 97 00:05:28,200 --> 00:05:31,960 Speaker 1: larger verdicts. Well, of course those tend to get set aside, 98 00:05:32,000 --> 00:05:35,279 Speaker 1: but also most of the verdicts I see the planeiff 99 00:05:35,320 --> 00:05:38,279 Speaker 1: is only getting a fraction of what they're asking for. 100 00:05:38,440 --> 00:05:41,440 Speaker 1: I had to back to back a few years back 101 00:05:41,800 --> 00:05:44,440 Speaker 1: where the planeiff got about ten percent of what they 102 00:05:44,480 --> 00:05:47,360 Speaker 1: were asking for. Where you see the large numbers are 103 00:05:47,400 --> 00:05:51,279 Speaker 1: where you have enormous sales, or you have medical devices 104 00:05:51,320 --> 00:05:54,599 Speaker 1: an Apple, Microsoft or a medical device. That's where you 105 00:05:54,640 --> 00:05:59,119 Speaker 1: see the big numbers. Uh. Let me ask you about 106 00:05:59,160 --> 00:06:02,920 Speaker 1: the Federal circle. The Federal Circuit set in that suits 107 00:06:02,960 --> 00:06:06,360 Speaker 1: can be filed wherever the defendant regularly does business. And 108 00:06:06,400 --> 00:06:10,120 Speaker 1: we've seen the Supreme Court regularly reversing. The Fed Circuit 109 00:06:10,240 --> 00:06:14,279 Speaker 1: lately is taking this case an indication that it will reverse. 110 00:06:15,160 --> 00:06:18,320 Speaker 1: That's what pretty much everyone expects. The Just as you mentioned, 111 00:06:18,320 --> 00:06:20,360 Speaker 1: the Supreme Court um and the Federal Circuit have an 112 00:06:20,360 --> 00:06:24,440 Speaker 1: interesting relationship. UM. Usually the Federal Circuit does what it 113 00:06:24,480 --> 00:06:26,560 Speaker 1: does in the Supreme Court says no, you went too 114 00:06:26,560 --> 00:06:30,440 Speaker 1: far UM. So there's pretty much no one expects the 115 00:06:30,480 --> 00:06:33,359 Speaker 1: Supreme Court to uphold the Federal circuit um. What it 116 00:06:33,560 --> 00:06:36,520 Speaker 1: may do. In addition to that is there's been a 117 00:06:36,520 --> 00:06:39,920 Speaker 1: push here in Washington for legislation to change the venue 118 00:06:39,960 --> 00:06:43,719 Speaker 1: statute UM. If the Supreme Court does, as expected overturned 119 00:06:43,720 --> 00:06:47,800 Speaker 1: the Federal circuit, that movement, which would have other things 120 00:06:48,000 --> 00:06:51,520 Speaker 1: about patent litigation, would pretty much lose all of its steam. 121 00:06:51,560 --> 00:06:53,800 Speaker 1: That means we will have more topics to discuss here 122 00:06:53,839 --> 00:06:57,400 Speaker 1: on Bloomberg Law. I want to thank our guests Susan 123 00:06:57,440 --> 00:07:00,720 Speaker 1: Decker Bloomberg Newses UH patent porter here with me in 124 00:07:00,760 --> 00:07:05,680 Speaker 1: our studios in Washington, and Michael Smith, a patent lawyer 125 00:07:05,680 --> 00:07:09,680 Speaker 1: in Marshall, Texas, home of the Eastern disor one of 126 00:07:09,680 --> 00:07:12,760 Speaker 1: the courts in the Eastern District of Texas where UH 127 00:07:12,880 --> 00:07:16,920 Speaker 1: roughly of all patent suits are filed. UH. Some people 128 00:07:16,960 --> 00:07:19,760 Speaker 1: think that the Supreme Court case could limit the business 129 00:07:19,840 --> 00:07:23,320 Speaker 1: down there and and mean that patent holders will have 130 00:07:23,400 --> 00:07:27,600 Speaker 1: to sue elsewhere around the country. Coming up on Bloomberg Law, 131 00:07:27,880 --> 00:07:31,600 Speaker 1: Wells Fargo fails a big regulatory test. We'll talk about 132 00:07:31,640 --> 00:07:34,600 Speaker 1: what that means for its future and whether the Trump 133 00:07:34,640 --> 00:07:39,400 Speaker 1: administration UH might affect how banks are regulated in this country. 134 00:07:39,680 --> 00:07:42,040 Speaker 1: And we'll talk about a prior restraint order from a 135 00:07:42,120 --> 00:07:46,160 Speaker 1: judge against the newspaper in New Jersey. That's all coming up. 136 00:07:46,760 --> 00:07:47,880 Speaker 1: This is Bloomberg