Bold News! A Recent Supreme Court Ruling Changes The Patent Litigation Landscape! Will There Be Less Patent Trolls?

The Supreme Court recently held that a domestic corporation resides only in its state of incorporation for purposes of the patent venue statute. Justice Clarence Thomas, writing for an 8-0 court, (newly appointed Gorsuch did not participate in the decision because arguments started before his term) ruled in favor of TC Heartland LLC who said Kraft Foods Group shouldn’t be allowed to sue them in Delaware. 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 the company only had minimal connections to Delaware, and wanted to the move the case to its home state, Indiana, citing 28 U.S.C. 1400(b) that limits litigation to the state of incorporation. Kraft argued that since Heartland’s products were sold in Delaware, venue would be proper under 28 U.S.C. 1391(c), which allows suits to be filed anywhere the company has minimum contacts. For nationwide companies such as Heartland this means a suit can be brought almost anywhere. Last year, the U.S. Court of Appeals ruled in favor of Kraft, citing longstanding precedent. The Supreme Court reversed the Federal Circuit and ruled that 28 U.S.C. 1400(b) remains the only applicable patent venue statute and that the term “residence” in 28 U.S.C. 1400(b) means only the state in which a company is incorporated.

This ruling completely changes the patent litigation landscape. Currently more than one-third of all infringement suits are filed in the Eastern District of Texas because of their very pro plaintiff rules and deadlines, leaving the area a haven for patent trolls. In fact, one of the cities in the Eastern District became so popular for patent suits that a hotel there has a Public Access to Court Electronic Records subscription to help sell rooms to lawyers. Interestingly, the Supreme Court Opinion did not mention Texas or patent trolls but the ruling will diminish the amount of cases there and forum shopping in general. This means the cost of defending patent litigation will be reduced, and the costs of patent trolling activity will be increased. On the other hand Delaware is the second busiest district for patent cases and many U.S. companies, similar to Kraft Foods Group, are incorporated in Delaware, so expect a dramatic increase in cases filed there. To conclude, the Court did not address the question of how this ruling will impact foreign corporations so the Eastern District of Texas is likely to remain a popular venue when filing a suit against foreign defendants.

Author: Chris Mayle, Patent Attorney