https://archive.org/details/LegalGeekEp105
The law governing where patent lawsuits can be filed geographically has been a hot subject of debate as the patent troll problem intensified in the last two decades. The patent law states that a lawsuit can be filed where a defendant resides, or has a regular and established place of business. The definition of resides has been open to some differing interpretations.
Back in 1957, the Supreme Court ruled as to all venue statutes, patent and otherwise, that a company "resides" in the place it is incorporated. For many companies, that it Delaware. In 1990, the Federal Circuit Court of Appeals decided in a patent case that a recent amendment to the general venue rules would be applied to patent cases such that in effect, any court in a state where a defendant company did business would be where a company "resides," and therefore could be a proper venue for a patent infringement lawsuit. In other words, patent plaintiffs could forum shop and place lawsuits wherever they wanted in the U.S.
That decision of the Federal Circuit led to some patent-owner favoring districts like the rural Eastern District of Texas to receive a higher share of the patent lawsuits filed in America. Indeed, that Eastern District of Texas was so popular that it became known as the Rocket Docket, referring both to speed and the local NASA presence. In the last 3 years alone, more than 40% of all U.S. patent infringement suits were filed in this one remote federal district court.
This particular case was between two sellers of drink mix products. Heartland is headquartered and incorporated in its home state of Indiana, and while it ships product to consumers in Delaware, it has no business offices or significant presence there. Kraft is headquartered in Delaware, like many big companies, and it sued Heartland in Delaware for patent infringement. Heartland tried to get the lower courts to move the case to their home district of Indiana, but this was unsuccessful. The open forum rules that the Federal Circuit applied in 1990 were applied once again, and Heartland was deemed to reside in Delaware thanks to having consumers there.
The Supreme Court reversed in a unanimous decision. The Court determined that the 1990 decision by the Federal Circuit that greatly expanded the definition of where a corporation resides was inconsistent with the statute and Congressional intent, and therefore, the old 1957 precedent applies that residence means only the place of incorporation. Thus, this case is remanded to the lower courts where it will likely now be moved to Indiana.
The broader implications of this decision are huge for U.S. patents. The Eastern District of Texas is not a residence for most companies, and so the Rocket Docket will immediately lose most of its caseload in all likelihood. Districts like Delaware, where many companies incorporate for favorable tax treatment, and North California, home to a high number of tech companies, will likely be inundated with many more patent cases. Furthermore, the threat of being dragged by a patent troll into any jurisdiction they want that may be favorable to patent owners is immediately kaput.
Some interesting questions remain like how is this rule applied to foreign defendants, and what happens to the likely 50%or more of pending cases ongoing in improper districts at this point? This decision only dealt with the "resides" definition and therefore gives no clarity as to what constitutes the other way venue is proper in patent cases, which is a regular and established place of business.
Regardless, the Bottom Line is, forum shopping is likely dead in patent litigation now, and that should even things out across the courts of this country in a more balanced and equitable manner. This is a net positive for patent law, and it likely lessens the need for immediate Congressional action to reform the venue part of patent law.
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