Supreme Court puts new restriction on patent trolls

The high court unanimously curbs the use of "forum shopping," limiting patent litigation to the judicial district where the defendant is incorporated.
Written by Stephanie Condon, Senior Writer

The Supreme Court on Monday unanimously ruled that patent infringement suits can only be filed in the judicial district where the alleged patent infringer is incorporated. The decision limits the use of "forum shopping," in which the patent holder files suit in a court from which they expect a favorable outcome.

The case, Heartland v. Kraft, focused on the beverage industry, but its outcome should have a significant impact on technology companies that are constantly fending off patent trolls.

The court ruled 8-0 in favor of Heartland. Justice Neil Gorsuch did not consider the case. The case stems from Kraft Foods' initial allegation that TC Heartland infringed on its patent for a flavored water mix. Kraft sued Heartland in Delaware, even though Heartland is headquartered in Indiana and does very little business in Delaware.

Heartland sought to transfer the case to Indiana, citing a patent venue statute that says, "[a]ny civil action for patent infringement may be brought in the judicial district where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business." In the 1957 case Fourco Glass Co. v. Transmirra Products Corp., the Supreme Court considered this rule and decided this meant "the state of incorporation only."

However, the US Court of Appeals for the Federal Circuit denied the move. It cited another patent venue statute, which says, "For all venue purposes ... [a corporation] shall be deemed to reside, if a defendant, in any judicial district in which such defendant is subject to the court's personal jurisdiction with respect to the civil action in question."

In its unanimous decision, the Supreme Court ruled that the latter statute doesn't change the 1957 Fourco decision.

Several organizations filed briefs in support of Heartland, including tech companies, retailers, and public advocacy groups like the Electronic Frontier Foundation (EFF). Intel and Dell filed their own amicus brief, as did the Software Alliance and the Software & Information Industry Association.

A group of 41 companies and seven associations -- including Adobe, HP, NetApp, Oracle, Red Hat, and SAP -- filed a brief together, stating they are "all too familiar with the effects of forum shopping in patent cases."

That particular brief pointed to statistical evidence of "rampant forum shopping":

In 2016, 44 percent of all patent cases were filed in only two districts, the Eastern District of Texas and the District of Delaware, the district in which this case arose. Since 2014, a single judge in the Eastern District of Texas has handled one-quarter of all patent cases nationwide.

Meanwhile, the brief says, "the patent holder wins more often than not when it selects the forum of an infringement action, and the alleged infringer wins more often than not when it selects the forum by filing a declaratory judgment action. In the most popular patent district, the Eastern District of Texas, the patent holder wins 72 percent of all jury trials."

The companies also argued that forum shopping in patent litigation "adversely affects innovation."

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