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Supreme Court Ruling Stymies Patent Trolls

In a blow to 'patent trolls,' the U.S. Supreme Court said venue for corporate defendants in patent litigation is where they are incorporated.

The decision threw a roadblock in the way of companies that buy patents just to demand royalties and sue. The high court said patent claims must be made in a defendant's home state -- not in some other jurisdiction.

As applied to domestic corporations, "residence" under the patent venue statute, 28 U.S.C. section1400(b) refers only to the state of incorporation, Justice Clarence Thomas wrote for the court in TC Heartland v. Kraft.

Texas, Delaware, or Indiana?

Patent lawyers had argued that the patent trolls were making their money by forum-shopping in Texas. The Supreme Court didn't seem especially interested in that argument at a hearing in March, but the decision shows they were listening.

The case started as a dispute about whether venue for an unincorporated company in a patent case was in Delaware or Indiana. Kraft sued TC Heartland for infringing its patents on "liquid water enhancers" in Delaware, but the defendant asked the court to move the case to its home state of Indiana. The judge rejected the request, saying the company had shipped products to Delaware.

After one failed appeal, TC Heartland returned to the U.S. Circuit Court of Appeals for the Federal Circuit and then to the U.S. Supreme Court. Then 32 retailers came into the case as amicus curiae.

Where the Defendant Resides

They said venue is too often based on mere allegations of doing business in a plaintiff-friendly forum -- which is Texas 40% of the time.

"In the most popular patent district, the Eastern District of Texas, the patent holder wins 72% of all jury trials," they said in a brief.

For Thomas and the court, except Neil Gorsuch who did not participate in the case, it was a straightforward decision. The patent venue statute means what it says: a domestic corporation resides only in the state of incorporation. It resolved a bigger issue for businesses, however.

"Forum shopping in patent litigation is over," said patent lawyer Shawn G. Hansen. "Half of the patent cases previously filed in East Texas will now have to shift to places like Delaware, California and New York."

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