Supreme Court Poised to Shake Up Patent Battlefield

WASHINGTON (CN) – Legal experts say the Supreme Court is poised to shake up a Texas court’s dominance in patent-infringement battles after taking up a dispute between water-flavoring companies.

Kraft Foods brought the underlying federal complaint in Delaware, accusing TC Heartland of selling “liquid water enhancers” that infringe on three Kraft patents.

Indiana-based Heartland, which purports on its website to be “a pioneer in the nascent Water Enhancer category,” moved to dismiss the complaint for lack of personal jurisdiction.

In refusing to dismiss or transfer the case, however, the District Court noted that Heartland admittedly shipped 44,707 cases of water-enhancing products into Delaware in 2013.

These products generated at least $331,000 in revenue, accounting for about 2 percent of Heartland’s total water-enhancer sales that year.

Heartland petitioned the Supreme Court for relief after the Federal Circuit affirmed in April 2016.

Per its custom, the justices did not issue any comment late Wednesday in taking up the case.

The issue before the court concerns a conflict in Federal Circuit and Supreme Court precedent.

Though the patent venue statute, 1400(b), says infringement actions “may be brought in the judicial district where the defendant resides,” a subsection of the statute called 1391(c) notes that it is possible for a corporate entity to reside in multiple judicial districts.

In the 1957 case Fourco Glass Co. v. Transmirra Products Corp., the Supreme Court held that the subsection 1391(c) should not supplement 1400(b).

As applied to corporate entities, that case holds, the phrase “where the defendant resides” in Section 1400(b) “mean[s] the state of incorporation only.”

Federal Circuit precedent holds to the contrary, despite the absence of congressional amendment.

Heartland’s appeal raises precisely the same as the issue decided in Fourco: “Whether 28 U.S.C. § 1400(b) is the sole and exclusive provision governing venue in patent infringement actions and is not to be supplemented by 28 U.S.C. § 1391(c).”

The law firm Morrison & Foerster noted Thursday that resolution of the case “could upend the Eastern District of Texas’s prominence hearing patent cases.”

Noting that plaintiffs “have long perceived an advantage there with court rules, judges and juries,” the firm noted in a statement that the Eastern District of Texas is home to the highest concentration of patent-infringement suits.

Heartland is represented by James Dabney with the Manhattan firm Hughes Hubbard & Reed.

Kraft is represented by John Luken with the Cincinnati firm Dinsmore & Shohl.

A group of 32 internet companies, retailers and associations filed an amicus brief in the case through the Lewiston, Maine, firm Brann & Issacson.

A group of 56 law and economics professors fled a brief as well, as did Dell and The Software & Information Industry Association, and the Electronic Frontier Foundation, the Washington Legal Foundation, and the American Bankers Association.

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