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Supreme Court Rules on Where Companies “Reside” in Patent Cases

US Supreme Court
Rules companies reside where
incorporated

The US Supreme Court has ruled that, for purposes of venue in patent cases, a domestic corporation “resides” in the state where it’s incorporated — and thus must be sued for infringement there.

The case of TC Heartland v. Kraft Foods involves two competitors in the market for flavored drink mixes.

Heartland, the petitioner, is organized under Indiana law and based in Indiana.

Kraft is organized under Delaware law and is based in Illinois.

Kraft sued Heartland in the District Court for Delaware, alleging that Heartland’s products infringed one of Kraft’s patents.

Heartland has no meaningful local presence in Delaware but does ship its products to the state.

Heartland moved to dismiss the case or transfer venue to the District Court for the Southern District of Indiana.

The Supreme Court, citing its own 1957 Fourco Glass decision, noted that:

The patent venue statute, 28 U. S. C. §1400(b), provides that “[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 Fourco, the Court concluded that for purposes of patent law a corporation “resides” only in its state of incorporation.

In 1990, the Federal Circuit, in the VE Holding case, ruled in response to Congress’s amendment of the general venue statute that “a defendant that is a corporation shall be deemed to reside in any judicial district in which it is subject to personal jurisdiction at the time the action is commenced.”

The Supreme Court has now overruled the Federal Circuit.
The decision is expected to have significant effects on patent litigation practice.

In recent years, the Eastern District of Texas has become a favored venue for patent litigation — and especially for cases brought by Patent Assertion Entities (sometimes called “patent trolls”).

According to Fortune, the Eastern District of Texas

has been a hothouse of patent lawsuits thanks to plaintiff-friendly laws and juries that have a reputation for handing out outsize damages awards.

Given the large number of companies incorporated in Delaware (although they rarely actually do business there), the federal court for the District of Delaware is likely to see a boom in patent cases.

Delaware is already the second-busiest patent district in the federal court system.

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