WASHINGTON (CN) - Unraveling 25 years of patent-litigation precedent, the Supreme Court ruled Monday that a company’s site of incorporation determines its residency for the purposes of being sued.
Thomas Duston, a partner at Marshall, Gerstein & Borun, said the death of the venue trend will stun the nation’s intellectual-property attorneys.
“The consequences of the Supreme Court’s action cannot be understated,” Duston said in a statement. “Patentee-friendly jurisdictions — in particular, the Eastern District of Texas — are destined to see a dramatic decline in patent litigation. In contrast, the federal District Court for the District of Delaware will undoubtedly see a significant rise in patent litigation, owing to the large number of corporations incorporated in Delaware.”
Nationwide implication aside, Monday's ruling stems from a claim by Kraft Foods that TC Heartland infringed its patent for the low-calorie water sweetener MiO. Because of confusion about where the suit belongs, however, the merits of this case have gone untested.
The dispute erupted out of tension between the 1957 case Fourco Glass Co. v. Transmirra Products Corp., in which the Supreme Court said companies must sue infringers where they “reside,” and a 1990 decision by the Federal Circuit that has let litigants bring lawsuits anywhere they spot infringement.
In particular, the latter precedent has made the Eastern District of Texas a hub of patent litigation, hearing more than 40 percent of the country’s cases. Hoping to guide the industry referendum that TC Heartland's case has triggered, interested parties from the tech industry and intellectual-law experts flooded the Supreme Court with friend-of-court briefs ahead of March oral arguments.
The Supreme Court was unanimous this morning that its 60-year-old interpretation of the patent-venue statute, Section 1400(b) of Title 28, is still the authority.
Much of the consternation surrounding the issue involves the fact that Congress has amended the general venue statute, Section 1391(c) of Title 28, twice since Fourco, while Section 1400(b) remains untouched.
The Federal Circuit had been relying on a 1988 change to the general statute when it found, in the 1990 decision VE Holding v. Johnson Gas Appliance Co., that the amendment affected the meaning of the patent-venue statute.
But Monday’s ruling notes that Congress left Section 1400(b) unaltered again when it adopted the current version of Section 1391 in 2011.
In bringing its water-flavorer lawsuit in Delaware, where it expected friendlier reception of its case, Kraft Foods had relied on VE Holding. The Federal Circuit hewed to its precedent last year in blocking removal of the case to Indiana, the home of TC Heartland.
Justice Clarence Thomas wrote the unanimous reversal Monday for the Supreme Court.
“The current version of §1391 does not contain any indication that Congress intended to alter the meaning of §1400(b) as interpreted in Fourco,” he wrote.
Thomas found little evidence of Congress ratifying the Federal Circuit’s VE Holding precedent.
“If anything, the 2011 amendments [to Section 1391] undermine that decision’s rationale,” the opinion states.