Implications of the TC Heartland Decision for Jury Verdicts

May 30, 2017

In its recent ruling in the matter of TC Heartland v. Kraft, the U.S. Supreme Court held that the term “residence”, as referenced in 28 U.S.C. 1400(b), refers to the state in which a defendant is incorporated.  Based on this ruling, patent infringement lawsuits may now only be filed in the U.S. District Court where the defendant is incorporated or where the defendant has a regular and established place of business.   It is clear that SCOTUS’ ruling will drastically change the landscape of patent litigation.  In a recent study by Chien and Risch (2015), they estimated that if SCOTUS found in favor of TC Heartland, 58% of 2015 cases would have been filed in a different venue.  The authors of this research found that the Eastern District of Texas would have been most directly impacted by SCOTUS’s ruling with the percentage of patent cases filed there in 2015 dropping from 44% to 15%.  Chien and Risch suggested that these cases would have been filed in the District of Delaware which would have seen its share of patent cases increase from 9% to 24%.  Similarly, the Northern District of California would have seen a rise in the percentage of patent lawsuits filed in the venue, from 4% to 13%.

 

With the Eastern District of Texas likely losing its dominance as the primary venue for patent lawsuits, what is the likely impact on jury verdicts of having more cases filed in the District of Delaware, the Northern District of California, and elsewhere?   The 2017 PWC Patent Litigation Study, which provided an analysis of jury verdicts in various federal venues, may be informative.  For instance, between 1997 and 2016, the median damage award in patent cases tried to verdict in the District of Delaware was higher than in the Eastern District of Texas ($16.2 million versus $9.9 million, respectively) while the median damages awarded in the Northern District of California was much lower at $5.4 million.  The overall success rate among patent holders in the District of Delaware was lower than the Eastern District of Texas (41% versus 54%); however, in both of the aforementioned venues, patent holders were more likely to prevail than in the Northern District of California where patent holders had only a 27% success rate.  It must be noted that the damages and verdict success rate reported in PWC’s 2017 Patent Litigation Study included both jury and bench trials.  Moreover, as compared to other venues, there were many more lawsuits filed by NPEs in the Eastern District of Texas which may have contributed to that venue’s lower median damage award when compared to the District of Delaware.

 

The results of the PWC study are consistent with our extensive experience conducting pre-trial jury research and consulting on patent litigation matters in each of the previously mentioned venues.  We have found that jurors in the District of Delaware tend to be as plaintiff oriented as jurors in the Eastern District of Texas while jurors in the Northern District of California are much less likely to favor the plaintiff patent holder.  This is likely due in part to the demographic composition of these venues.  For example, the District of Delaware has a large conservative, blue-collar base in the lower part of the state that is, at least from a demographic standpoint, like that of the venire in the Eastern District of Texas.  While jurors with white-collar occupations tend to live in Wilmington, these jurors comprise but a small percentage of the population of eligible jurors in Delaware.  Moreover, prospective jurors who live in Wilmington are likely to be challenged for cause or to have peremptory strikes used against them (typically by the plaintiff).  

 

Recent census data comparing the Eastern District of Texas, the District of Delaware, and the Northern District of California show that the latter has a much more demographically diverse population and a significantly higher median income.  Importantly, the Northern District of California has a large technology industry which impacts jurors’ attitudes about patents.  Based on the jury research we have conducted in each of these venues, we have found that jurors’ predispositions and life experiences in both the District of Delaware and the Eastern District of Texas were more plaintiff-oriented than jurors in the Northern District of California.  For instance, in pre-stimulus questions given in our jury research, mock jurors in the Eastern District of Texas and the District of Delaware were more likely to believe that it is “very difficult” to obtain a patent, as compared to mock jurors in the Northern District of California.  Conversely, jurors in the Northern District of California are more likely to work for an employer that has patents, and to know someone who has had dealings with the United States Patent and Trademark Office; life experiences which are more predictive of a defense-oriented juror.  Equally important, we have found in our jury research that jurors in the Northern District of California tend to be less enamored with patents in general, and are more likely to believe that corporate defendants develop their own technology and thus, “do things differently.”

 

Regardless of the differences in demographics and life experiences for jurors in the three venues, at an early stage it is imperative to identify storylines which resonate with all jurors.  Two storylines in particular – the inventor storyline and the relationship storyline – strongly influence jurors’ verdict decisions.  In a patent dispute, the inventor storyline has a formulaic arc with a protagonist (the inventor) who encounters an issue.  After a great deal of toil, he or she has an epiphany to overcome all obstacles in his or her path, with the end result being an invention that benefits society.  Jurors will be persuaded by plaintiffs who can tell this story and show the benefits of an inventor’s hard work.  As many litigants are also business competitors, jurors will also focus on the relationship between the parties leading up to the litigation.  The relationship storyline will dominate juror deliberations as they consider whether the defendant had access to the plaintiff’s technology and/or whether the parties partnered or collaborated on developing the technology.  In a case where a plaintiff argues that the defendant abandoned a business relationship, jurors will focus on whether the defendant betrayed the plaintiff.  The relationship story is not limited to just interactions between plaintiffs and defendants, but is also evaluated in a larger context as jurors focus on whether other companies licensed the patents at issue.  Finally, since we know that jurors learn primarily through visual means, graphic demonstratives play a vital role in developing the inventor and relationship storylines and help educate and persuade jurors about the technology, infringement, and invalidity issues.

 

The TC Heartland v. Kraft ruling does not change the fact that lay jurors will continue to decide complex patent cases.  The decision will only change where these cases are tried.  Regardless of the trial venue, jurors will be strongly persuaded by visual presentations that communicate compelling storylines.  Therefore, it is critical to develop and test case themes, storylines, and visual elements as part of the development of your trial strategy so that litigants can persuasively communicate the complex issues inherent in all patent cases. 

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