Supreme Court limits 'venue shopping' for patent cases

Supreme Court limits 'venue shopping' for patent cases
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A Supreme Court decision on Monday will limit the controversial practice of “venue shopping” — where plaintiffs pick court locations that they believe will be favorable to the cases they’re arguing.

The court reversed a U.S. Court of Appeals for the Federal Circuit decision from last year that had been used as justification for bringing cases to venues wherever the companies involved happened to conduct business.

Companies will now be required to bring lawsuits to where the targeted company is incorporated. 

The court unanimously ruled in favor of petitioner TC Heartland LLC, an Indiana-based water-flavoring company, over Kraft Heinz in an 8-0 decision.

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Heartland argued that Kraft’s patent-infringement suit against it should not take place in Kraft’s chosen district in Delaware. Heartland instead petitioned to have the case moved to Indiana, where it is incorporated.

“Individuals and businesses in the U.S. have been unfairly required for decades to defend patent suits in far off locales adding cost, complexity and unpredictably to the intellectual property marketplace. The Supreme Court’s decision in favor of Heartland changes that system for the better,” said Ted Gelov, Heartland FPG CEO.

Kraft reacted less positively to the Supreme Court’s decision.

"While we are disappointed in the Supreme Court's ruling on this procedural matter, we respect the Court's opinion and do not believe it has any impact on the ultimate outcome of our case," said Michael Mullen, Kraft’s senior vice president of corporate and government affairs.

The ruling will have broad implications for patent lawsuits, which are frequently moved to certain districts that have a track record of being favorable to patent infringement claims. 

In delivering the court’s opinion, Justice Clarence Thomas wrote that much of the decision hinged on the word “resides,” which the court found to mean state of incorporation. Thomas wrote that because of this interpretation, updates to the rules by Congress did not change a 1957 Supreme Court decision that had previously found that patent suits must take place in the targeted company's home state.

Though the TC Heartland and Kraft case focused on a disagreement between whether the case should take place in Indiana or Delaware, 40 percent of all patent suits are filed in east Texas. Ninety percent are brought in by “patent trolls,” or companies that hold patents but do not manufacture or produce anything, according to the Stanford Law Journal.

The decision was met with open arms by major players in the technology industry. Dell, Oracle, Intel and Adobe had all filed briefs in support of Heartland.

“Today’s opinion from the Supreme Court is an important step in restoring balance in litigation and confidence in the patent system,” said the Business Software Alliance, a Washington, D.C.-based trade association. BSA represents technology companies like Apple, IBM and Microsoft.

“Given the definition of ‘resides’ is limited to the ‘state of incorporation,’ it may lead to a swell in patent cases in Delaware, and otherwise funnel cases towards defendants’ home jurisdictions,” said Kirkland & Ellis intellectual property partner John O’Quinn.

The court’s newest member, Justice Neil Gorsuch, did not participate in the consideration of the case or the court’s decision.

This story was updated at 3:16 p.m.