So-called ‘patent trolls’ have often sued in remote federal courts that have a reputation for friendliness to plaintiffs. Patent lawyers said Monday’s ruling would change the litigation landscape for patent suits by barring such ‘forum shopping.’
WASHINGTON — The Supreme Court on Monday placed tight limits on where patent lawsuits may be filed — a unanimous decision that was a blow to so-called patent trolls, or companies that buy patents not to use them but to demand royalties and sue for damages.
Such companies have often sued in remote federal courts that have a reputation for friendliness to plaintiffs. More than 40 percent of patent lawsuits, for instance, are filed in a federal court in East Texas.
In recent years, a single judge based in Marshall, Texas, oversaw about a quarter of all patent cases nationwide, more than the number handled by all federal judges in California, Florida and New York combined.
Monday’s decision was a victory for big technology companies and other patent holders, which have complained about what they called forum shopping in patent cases. Other companies have argued that it makes sense to let cases be considered by courts that have developed expertise in patent matters.
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The case, TC Heartland v. Kraft Foods Group Brands, No. 16-341, concerned flavored drink mixes made by TC Heartland, which is based in Indiana. Kraft sued it claiming patent infringement in Delaware, which, like Texas, has a high concentration of patent suits.
TC Heartland sought to move the case to Indiana, but lower courts refused, relying on a 1990 decision of the U.S. Court of Appeals for the Federal Circuit, a specialized court that handles patent appeals. That decision said defendants in patent cases, as in other cases, may be sued essentially anywhere they do business.
The legal question in the case was whether the Federal Circuit had correctly interpreted part of a 1948 statute that requires patent suits to be filed “in the judicial district where the defendant resides.”
Justice Clarence Thomas, writing for the court, said the Federal Circuit had misconstrued the law and ignored a 1957 Supreme Court precedent that had set out the correct interpretation. A domestic corporation, Thomas wrote, resides only in the state of its incorporation.
Kraft had argued that later amendments to a related statute changed the meaning of the 1948 law. Thomas rejected that argument, quoting a book on statutory interpretation by Justice Antonin Scalia, who died last year, and Bryan A. Garner.
“A clear, authoritative judicial holding on the meaning of a particular provision should not be cast in doubt and subjected to challenge whenever a related though not utterly inconsistent provision is adopted in the same statute or even in an affiliated statute,” the two authors wrote.
Thomas’ opinion did not discuss the consequences of the ruling, but patent lawyers said it would change the litigation landscape for patent suits.
“Forum shopping in patent litigation is over,” said Shawn G. Hansen, a patent lawyer with Nixon Peabody. “The half of patent cases previously filed in East Texas will now have to shift to places like Delaware, California and New York. The costs of defending patent litigation will be reduced, and the costs of patent trolling activity will be increased.”