C&C Insights

Cease and Desist Letters After TC Heartland—Best Practices

The Supreme Court recently reversed over 20 years of Federal Circuit precedent that allowed patent infringement suits to be filed anywhere that the court could exercise personal jurisdiction over the defendant.  So long as, for example, the infringing product was sold in the district, venue was proper there.  As a result of the liberal interpretation of the venue rules, the Eastern District of Texas became a popular forum for patent infringement cases, with more cases being filed there than any other district in the country.

Subsequently, new decisions regarding the inconvenience of a forum required the trial court to transfer the case if it was found to be clearly more convenient for the parties for the case to be heard elsewhere.  But now, after the Supreme Court’s TC Heartland decision, a patent infringement suit can only be filed against a corporate defendant either 1) where the defendant is incorporated or 2) where the defendant has a regular and established place of business and has committed acts of infringement.

The Supreme Court’s decision has resulted in a decline in filings in the Eastern District of Texas and a rise in filings in the District of Delaware where many companies are incorporated.   Motions filed in numerous cases have resulted in disputes over what is a “regular and established place of business” under the patent venue statute, and it will be some time before the specific parameters of the venue statute are defined.  But in the meantime, we know that the venue in many patent cases will be limited depending on where the defendant is doing business.

Historically, patent owners have been reluctant to send detailed cease and desist letters to alleged infringers in many cases because of fear that the infringer might file a declaratory judgment action in the venue of its choice seeking a finding of non-infringement and/or invalidity of the asserted patent.  However, this may be changing after the TC Heartland decision given that the possibilities for venue are more limited for those infringers who do not have places of business around the country.

Knowing this, the concern of a declaratory judgment action being filed in response to a cease and desist letter will be lessened in many cases, which may lead the patent owner to include more specifics about the infringement in the cease and desist letter.  The patent owner may not even have the option of choosing a forum like the Eastern District of Texas to file suit before sending the letter.  Likewise, the infringer will know this as well and is less likely to incur the expense of filing a declaratory judgment action.

Assuming that the patent owner does send more detailed allegations of infringement in its cease and desist letters, this could help the patent owner support a claim of willful infringement which provides enhanced damages in a patent infringement suit.  So when receiving such a letter, it is prudent to seek advice of counsel regarding the allegations of infringement and secure an opinion of counsel if necessary to help prevent a later finding of willful infringement.  The court in making an willfulness determination will look at the actions taken by the accused infringer to determine the subjective intent of the infringer in a willfulness determination.  By taking prompt measures to determine that the patent is not infringed and/or that it is invalid, the infringer can likely avoid a finding of willful infringement.