Forty percent of all patent litigation cases are filed in the United States District Court for the Eastern District of Texas. This court has become famous (or infamous) for its liberal venue practices, accepting cases where neither plaintiff nor defendant conduct significant business. Moreover, the court is perceived by many as a plaintiff friendly jurisdiction. On Monday, May 22, 2017, the U.S. Supreme Court in TC Heartland LLC v. Kraft Foods Group Brands LLC reversed nearly 30 years of established patent venue practice that allowed what many patent practitioners had concluded was an abusive practice. This 8-0 decision, written by Justice Clarence Thomas, resoundingly reaffirms earlier Supreme Court precedent holding that a domestic corporation “resides” only in the state of its incorporation, and not wherever it may be subject to “personal jurisdiction.” The effect of this ruling, which overturns the contrary decision of the United States Court of Appeals for the Federal Circuit, is that patent holders may only bring suit where a corporate defendant is incorporated or where the corporation has committed acts of infringement and has a regular and established place of business.
The potential impact for your business
For businesses and individuals contemplating a patent infringement lawsuit, the decision in TC Heartland will restrict the courts in which venue is proper. The predominance of the Eastern District of Texas as a preferred venue, particularly for non-practicing entities or “trolls,” appears to be at an end. Many feel that Delaware federal courts will be the “new” hotbed of patent litigation cases as so many entities are incorporated there. The ruling may also eliminate a “home court advantage” that patent holders could sometimes stake out by filing a case in the federal court closest to “home.” By restricting where a corporate defendant legally “resides” to the state of incorporation, a plaintiff wishing to sue elsewhere must show infringing acts as well as a defendant’s presence by having “a regular and established place of business.” This is often a difficult test to meet.
The silver lining in this ruling is that alleged infringers will no longer be subject to lawsuit in federal courts located in places that they have no significant corporate presence. Such remote courts are more inconvenient and usually more costly than being sued where there is a regularly established place of business or where incorporated. Of course, being sued for patent infringement is never a good thing. This ruling, making it more difficult for “patent trolls” to operate in a single federal court, may in fact decrease such cases by raising the venue standards back to where the Supreme Court intended them many years ago.