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U.S. Supreme Court Upsets 30 Years of Precedent, Changing Where Companies Can Be Sued for Patent Infringement

The U.S. Supreme Court on Monday, May 22, 2017, changed the playing field regarding where patent owners can file infringement lawsuits against accused infringers.

The decision in TC Heartland LLC vs. Kraft Food Brand upends nearly 30 years of established practice. The effect of this decision will be to move most patent lawsuits out of the Eastern District of Texas, causing future patent lawsuits to be filed where companies actually reside by incorporation or principal place of business, such as the District of Delaware.

According to 28 U.S.C. § 1400(b), venue is proper in a patent case (1) “in the judicial district where the defendant resides,” or (2) “where the defendant has committed acts of infringement and has a regular and established place of business.”  For many years, starting with VE Holding Corp v. Johnson Gas Appliance Co., courts have interpreted this statute extremely broadly, allowing suits in any jurisdiction in which the defendant is subject to personal jurisdiction. This essentially allows a plaintiff to sue a defendant in any district in which that defendant sells their products, exposing large, national companies to suits in nearly any venue a plaintiff desires.

Justice Clarence Thomas was very clear in his decision: “the Court definitively and unambiguously held that word reside[nce]…has a particular meaning as applied to domestic corporations: It refers only to the state of incorporation.”

Few companies have particular contact with the Eastern District of Texas, yet more than 36 percent of all patent cases were filed there in 2016, nearly four times as many cases as in the next leading district.  If these cases no longer can be filed in Texas, they likely will be filed elsewhere. Likely possible venues include Delaware, where more than half of all publicly traded companies and nearly two-thirds of all Fortune 500 companies are incorporated, and the Northern District of California, where many tech companies are headquartered.  Unsurprisingly, these are the second and fifth most common patent litigation districts under the current system.

To discuss the ways in which the decision regarding patent infringement venue may affect your intellectual property lawsuit, contact one of the Philadelphia and Delaware patent litigation attorneys at Panitch Schwarze at 888.291.5676.

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