Supreme Court Reins-In Patent Venue

The United States Court House in Marshall Texas

The U.S. Supreme Court on Monday put tighter restrictions on where patent owners can file infringement lawsuits, a decision that upends almost 30 years of established practice and will likely force many lawsuits out of the patent litigation hotbed of the Eastern District of Texas. This ruling hurts those companies since they can no longer file in remote federal courts that have a reputation for friendliness to plaintiffs. The most favored venue for patent trolls has always been the U.S. District Court for the Eastern District of Texas in the town of Tyler, which has always been seen as being favorable towards litigants in patent cases.

That shift will mean a dramatic decline in cases at the federal courthouse in Marshall, Texas, where hundreds of patent lawsuits are filed each year.

These are companies that make their money nearly entirely from patent licensing, representing two-thirds of all cases in U.S. district courts at the time, they became known as patent trolls.

A district court had ruled that a case could be brought in any district to which a defendant is subject to jurisdiction.

Now, Delaware - where many USA companies are incorporated due to friendly business statues - is likely to see a surge in cases.

The practice of defending patents, even those purchased from other companies, is legitimate.

Limiting patent lawsuits to where a defendant company is incorporated would potentially make it harder to get to trial or score lucrative jury verdicts.

In its ruling, the Supreme Court stated it was upholding one of its earlier patent decision from 1957 known as Fourco. He noted Apple Inc AAPL.O , a frequent target for East Texas patent lawsuits, has stores in Plano and Frisco, two Dallas suburbs that fall within the district.




The justices ruled unanimously that patent owners must bring lawsuits only in states where the targeted company is incorporated.

Individuals and companies that generate revenue by suing over patents instead of actually making products have been dubbed "patent trolls". While the suit had nothing to do with technology, it highlighted the practice of "forum shopping" by forcing TC Heartland to face a suit in DE instead of in, where it's based.

Not a word about "patent trolls" appears in today's 13-page opinion, but it's no secret that do-nothing patent holders were the issue at the heart of the contentious debate over patent venue.

The U.S. Court of Appeals for the Federal Circuit, however, said in 1990 that suits can be filed wherever the defendant regularly does business.

"The Federal Circuit's permissive venue rule has fundamentally shaped the landscape of patent litigation in ways that harm the patent system, by enabling extensive forum shopping and forum selling, supporting opportunistic patent litigation by patent trolls", attorney Mark Lemley wrote in a friend of the court filing, with 60 other legal experts, in behalf of TC Heartland.

In a unanimous decision, the justices held that the US Court of Appeals for the Federal Circuit, which handles all patent appeals, has been using the wrong standard to decide where a patent lawsuit can be brought.

The Delaware court denied the motion, ruling that sales into Delaware were sufficient for venue under the general venue statute, 28 U.S.C. § 1391 (c). This case would still likely leave approximately 60% of patent cases in these same five districts.

The court's newest member, Justice Neil Gorsuch, did not participate in the consideration of the case or the court's decision.

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