Summer Entrepreneurial Experiences

How the Nation’s Highest Court is Helping Startups

Friday, May 26, 2017 2:20 pm

This summer I will be working on three of my own ventures, all with unique intellectual property (IP) claims. I believe that IP protection is critical to innovation. Without protection of ideas, individuals cannot reap the full benefits of their inventions and subsequently focus less on research and development. The complex systems of IP and patent law have fascinated me ever since we filed our first patent on our EZ Cork technology. EZ Cork (operating as Simpull Cork) is an integrated loop system in synthetic cork which allows a consumer to open a wine bottle without the use of external tools and for the original cork to be placed back into the bottle and reused. Now that we are in the thick of the patenting process, I am trying to learn as much as I can about the US patent system. Recently The Supreme Court handed down a ruling that will affect all of us with IP claims, so I wanted to share.

Background

The Supreme Court recently ruled on TC Heartland v. Kraft Foods which began as a simple patent infringement suit, but quickly took national significance as it called into question where cases like these could be tried. Until the Supreme Court’s ruling this week, patent lawsuits could be heard all across the country, giving companies the opportunity to seek out courts where the odds were tilted in their favor. This led to a kind of clustering, where a handful of federal courts became responsible for deciding a huge number of patent cases. One major example is the Eastern District of Texas, which is notorious both for hearing a lot of patent infringement cases and also for handing accusers big wins.

What Does It Means to Us

This ruling is a big deal, particularly for small companies. The court voted unanimously to say that patent lawsuits should be tried where the defending company is based, rather than in a court of the plaintiff’s choosing. Legal analysts say this decision could shift a huge number of cases away from “plaintiff-friendly” districts and toward more “neutral” venues where a defending company stands a better chance of fending off a suit.

Startups often worry about being sued by firms that simply hold a lot of patents, but don’t use them to manufacture any goods. These are called “nonpracticing entities,” or “patent trolls,” because their main source of revenue comes from suing companies for infringement and hoping they settle, rather than using their patents to create things. Trolls lose if the company it’s targeting calls its bluff — if it takes the nonpracticing entity to court and wins. This becomes more likely, analysts say, if patent cases can be heard in venues other than the ones that trolls prefer. If startups can spend less time and money on frivolous lawsuits, they can reinvest those resources into further innovation.

2 Responses to “How the Nation’s Highest Court is Helping Startups”

  1. You are super knowledgeable about patent law, Arthur! I think this Supreme Court ruling really reinforces our country’s support of startups and small businesses – the land of opportunity!

  2. Interesting. Glad you are digging into some of this stuff. Good to spend time understanding this, specially as your aim is to build a company of patents that you license out, like SimpullCork. Would love to hear your progress on getting SimpullCork itself going.

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