The U.S. Supreme Court ()
In a terse opinion that will alter the landscape — literally — of patent infringement litigation, the U.S. Supreme Court on Monday ruled that such lawsuits must be brought in the state where the defendant company is incorporated.
Justice Clarence Thomas, writing for an 8-0 court in TC Heartland v. Kraft Foods Group Brands, said “a domestic corporation ‘resides’ only in its state of incorporation for purposes of the patent venue statute.” Justice Neil Gorsuch did not participate in the decision.
The ruling likely spells an end to the near-monopoly the federal court in the Eastern District of Texas holds in handling patent cases. Plaintiffs for decades have filed suits in that pro-plaintiff district based on a broader interpretation of venue that made suits possible almost anywhere.
Roughly 40 percent of infringement suits have been filed in the district in the last two years, a statistic that critics say is proof of blatant forum-shopping. As a result of Monday’s ruling, Delaware may become the most popular venue because many companies are incorporated there.
The case before the court was filed in Delaware, not Texas. Kraft, incorporated in Delaware, filed suit there against Indiana-based Heartland, claiming infringement of patents that are essential to products that allow customers to add calorie-free flavors to drinking water.
Heartland claimed it had little connection to Delaware and sought to move the suit to its home state, citing a patent-venue statute that limits litigation to the state of incorporation. But Kraft asserted that Heartland’s products are sold in Delaware, making it a proper venue under a broader law that allows such suits to be filed almost anywhere, especially when nationwide companies are involved. The U.S. Court of Appeals for the Federal Circuit ruled last year in favor of Kraft, citing longstanding precedent.
During oral arguments in March, most justices seemed unconcerned about the looser interpretation of venue. But Thomas’s 10-page opinion did not equivocate. Citing a 1957 precedent, Thomas wrote, “this Court definitively and unambiguously held that the word ‘reside[nce]’ … has a particular meaning as applied to domestic corporations: It refers only to the State of incorporation.”
The ruling is a win for Hughes Hubbard & Reed partner James Dabney, who argued for Heartland. Goodwin Procter partner William Jay represented Kraft.
Thomas made no mention of the Eastern District of Texas in his decision, but it was on the mind of some participants in the case. Texas Solicitor General Scott Keller filed a brief siding with TC Heartland, even though a decision in the company’s favor would affect the economy of Marshall and Tyler, Texas, where the Eastern District resides. “Marshall is so popular for patent suits that a hotel there got a Public Access to Court Electronic Records subscription and offered this electronic access to federal court dockets to help sell rooms to lawyers,” Keller wrote on behalf of Texas and 17 other states.
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