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Patent-suit filings get new limits

by Greg Stohr and Susan Decker Bloomberg News | May 23, 2017 at 1:53 a.m.

The U.S. Supreme Court put sharp new limits on where patent-infringement lawsuits can be filed, undercutting patent owners' ability to channel cases to favorable courts.

The justices on Monday unanimously ruled in favor of TC Heartland LLC, an Indiana-based maker of water flavorings that said a Kraft Heinz Co. unit shouldn't be allowed to sue it in Delaware. The high court said patent suits should be filed in the state where the defendant is incorporated.

The ruling will bar many patent owners from pressing cases in the Eastern District of Texas, a patent-friendly jurisdiction where more than one-third of all infringement suits are now filed.

"It's going to send cases back to their natural home, and for most cases that is not the Eastern District of Texas," said Sarah Guske, a patent lawyer with Baker Botts in San Francisco. "It does change the dynamics."

The justices reversed a ruling by a federal appeals court that handles patent cases, which had ruled since 1990 that suits could be filed essentially anywhere a business sold products. Tech companies such as Alphabet Inc.'s Google said the U.S. Court of Appeals for the Federal Circuit had created a situation where the Texas district, adjacent to the Louisiana border, is the biggest location for patent suit filings even though no major manufacturers are based there.

The opinion by Justice Clarence Thomas focused only on the legal question of whether the rule for patent cases is different than the standard for other types of civil suits. There was no mention of the Texas court.

The court in Delaware, already the second-busiest for patent cases, is likely to get more lawsuits because many companies are incorporated there, Guske said.

The case before the court involves flavoring pouches for water. Kraft, which sells the MiO water enhancer, filed the suit in Delaware, where Kraft Foods Group is incorporated. Heartland makes its products in Indiana under brands including Refreshe, Skinnygirl and Sunkist. Heartland wanted the case transferred to Indiana but was rebuffed by a district court and the Federal Circuit. The Supreme Court ordered a lower court to reconsider the issue.

"While we are disappointed in the Supreme Court's ruling on this procedural matter, we respect the court's opinion and do not believe it has any impact on the ultimate outcome of our case," said Michael Mullen, a spokesman for Kraft.

Generic-drug companies had backed TC Heartland in the case because they consider the Delaware courts to be more favorable to brand-drug companies. Seventeen states, including Texas, also backed Heartland.

The decision adds to a series of rulings from the Supreme Court and the Federal Circuit over the past decade that have limited the amount of money patent owners can get in damages; restrained their ability to block the use of their inventions, especially by noncompetitors; and forced patent owners to provide more details when they file suit.

More than 4,500 patent suits were filed in 2016, down from the peak in 2013, when more than 6,100 cases were filed, according to analytics firm Lex Machina.

Business on 05/23/2017

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