Part of many companies’ fear of being sued for patent infringement has been the risk of having to litigate out of town from their headquarters and places of business, and often in hard to access districts like Marshall, Texas. That risk of increased expense and inconvenience was significantly lessened by the U.S. Supreme Court in its ruling today. In an 8-0 decision (in which Justice Gorsuch did not participate), the U.S. Supreme Court ruled in TC Heartland LLC v. Kraft Food Brands Group LLC, that patent owners must file infringement lawsuits where the defendant “resides,” which essentially is limited to the defendant’s state of incorporation. This ruling upends nearly 30 years of practice following the 1990 Federal Circuit ruling of VE Holding Corp. v. Johnson Gas Appliance Co., and reinstates the more-restrictive standard from the 1957 decision in Fourco Glass Co. v. Transmirra Products Corp.
This ruling will likely curb the effect of concentrating patent infringement litigation in a handful of perceived plaintiff-friendly federal courts. The patent venue statute, 28 U.S.C. § 1400(b), provides that “[a]ny civil action for patent infringement may be brought in the judicial district where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business.” As held in the Opinion authored by Justice C. Thomas, “…a domestic corporation ‘resides’ only in its state of incorporation for purposes of the patent venue statute…” The Supreme Court ruled in Fourco Glass Co. that § 1400(b) is the exclusive authority for venue in patent infringement actions, and was not to be supplemented by § 1391(c).
Lewis Rice covered this case in March of 2017, shortly before oral argument. In our prior alert, we noted that the Eastern District of Texas has been described as the “patent litigation capital of America” because over 40% of all U.S. patent cases are filed there despite few defendants located there.
The effect of the ruling should shift patent infringement cases back to Delaware, the place of incorporation of many companies, the former hub of patent litigation before the 1990 Federal Circuit ruling of VE Holding Corp. Over a million businesses, over fifty percent of publicly traded U.S. companies and sixty percent of Fortune 500 companies, are incorporated in Delaware. This matter will continue to hold the interest of many constituents as the implications for limited liability companies, foreign companies, and pending lawsuits are determined. Moreover, the final word might still be to come from Congress.