The justices sided 8-0 with beverage flavouring firm TC Heartland in its legal battle with food and beverage company Kraft Heinz, ruling that patent infringement suits can be filed only in courts located in the jurisdiction where the targeted company is incorporated.
Justice Neil Gorsuch did not participate in the decision. The decision overturned a ruling last year by the US Court of Appeals for the Federal Circuit, a Washington-based patent court, that said patent suits are fair game anywhere a defendant company’s products are sold.
Individuals and companies that generate revenue by suing over patents instead of making products have been dubbed “patent trolls”.
The ruling is likely to lessen the steady flow of patent litigation filed in a single federal court district in rural East Texas because of its reputation for having rules and juries that favour plaintiffs bringing infringement suits.
The dispute began when Heartland, a subsidiary of Heartland Consumer Products Holdings, sought to transfer a patent infringement suit Kraft filed against it in Delaware federal court to Heartland’s home base in Indiana. Heartland said it has no presence in Delaware and 98% of its sales are outside of that state, but the appeals court denied the transfer last year.
Even though the lawsuit was not filed in Texas, the arguments in the case touched on the peculiar fact that the bulk of patent litigation in the US flows to the Eastern District of Texas, far from the centres of technology and innovation in the US.
More than 40% of all patent lawsuits are filed in East Texas. Of those, 90% are brought by “patent trolls,” according to a study published in a Stanford Law School journal. Limiting patent lawsuits to where a defendant company is incorporated would potentially make it harder to get to trial or score lucrative jury verdicts. The Federal Circuit denied the transfer by relying on one of its precedents from 1990, which loosened the geographic limits on patent cases. Yesterday, the Supreme Court agreed with Heartland.