Supreme Court Ruling Is Likely to Suppress Patent Troll Suits

In a unanimous ruling, the U.S. Supreme Court tightened rules on where patent lawsuits may be filed. The consequences, say the experts, will make it much more difficult for patent trolls to seek out friendly courts that are likely to rule in their favor. Patent trolls are companies that buy patents solely to demand royalties and sue for damages. Currently, more than 40 percent of all patent lawsuits are filed in a federal court in East Texas, with a single judge there overseeing 25 percent of all nationwide patent cases.

According to The New York Times, that number exceeds “the number handled by all federal judges in California, Florida and New York combined.” The Supreme Court case in question was TC Heartland v. Kraft Foods Group Brand, with regard to flavored drink mixes made by Indiana-based TC Heartland. Kraft wanted the case heard in Delaware, which also hears a large number of such suits, but TC Heartland requested to move the case to its home state of Indiana.

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The lower court denied TC Heartland’s request, referring to a 1990 decision by the U.S. Court of Appeals for the Federal Circuit, “a specialized court that handles patent appeals,” saying that “defendants in patent cases … may be sued essentially anywhere they do business.”

At question was whether the U.S. Court of Appeals correctly interpreted part of a 1948 statue that states patent suits must be filed “in the judicial district where the defendant resides.” Justice Clarence Thomas wrote that “the Federal Circuit had misconstrued the law and ignored a 1957 Supreme Court precedent that had set out the correct interpretation,” which is that “a domestic corporation … resides only in the state of its incorporation.”

Kraft argued that later amendments to a related statue changed the meaning, but the Court turned it down, sending the case to Indiana.

The decision is seen as “a victory for big technology companies and other patent holders, which have complained about what they called forum shopping.” According to Reuters, “Apple, Google, Samsung Electronics and Microsoft have been frequent targets of patent lawsuits, including in East Texas.”

TC Heartland chief executive Ted Gelov notes that, “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.”

“Forum shopping in patent litigation is over,” said Nixon Peabody patent lawyer Shawn G. Hansen. “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.”