This week, an 8-0 decision by the Supreme Court in TC Heartland v. Kraft Foods Group handed a major win to apartment firms and other businesses when it ruled that that companies can only be sued where they are incorporated. The ruling cuts to the heart of the debate surrounding frivolous patent infringement claims being made against end users of technology products, including apartment companies and prevents patent trolls from venue shopping for friendly courts such as the Eastern District of Texas.
Patent trolls, also known as non-practicing entities, purchase extremely broad patents to make predatory claims of infringement without demonstrating that the patented technology was used without permission. These claims often come in the form of vaguely worded demand letters that threaten litigation unless a licensing fee is paid. In most cases, these patents are not for an idea or technology that the patent troll invented or even a product that they manufacture. Instead, the patents simply serve as a vehicle to extort money out of businesses for being an end-user of a product. Many times, businesses are left with no real recourse and pay the demanded licensing fee, or settle out of court, to avoid the slow and expensive legal process that they would encounter if they chose to fight back.
Given the rise in importance of technology products to apartment companies and their service providers, the industry has been significantly affected by the rise in patent infringement claims. As the multifamily industry increasingly relies on cutting-edge technology and off-the-shelf products to conduct our daily operations and ensure the livability of our apartment communities, we remain vulnerable to possible legal action by patent trolls. NMHC/NAA believe that the Supreme Court decision in TC Heartland v. Kraft Foods Group is a great first step, but continue to stress that comprehensive patent reform must be a priority for Congress. We encourage Congress and the Trump administration to address abuses in our patent system that hurt businesses, large and small, and are a drain on our nation’s economy.