published Mar 27th 2017, 12:45 pm, by Susan Decker
(Bloomberg) —
The U.S. Supreme Court grappled over whether to upend a quarter-century of practice and limit where patent-infringement lawsuits can be filed.

The justices Monday heard arguments in a case involving water flavoring containers that could end the reign of the Eastern District of Texas, which handles more than a third of all patent suits in the U.S. The one-hour session didn’t provide a clear indication of how the court will rule.

The case centers on whether Kraft Heinz Foods Co. could sue an Indiana company, TC Heartland LLC, in Delaware on claims it copied patented containers for water enhancers. The U.S. Court of Appeals for the Federal Circuit, the nation’s top patent court, has since 1990 given patent owners wide latitude to determine where a defendant “resides” for purposes of jurisdiction.

TC Heartland said that conflicts with a 1957 Supreme Court precedent setting a narrower standard. Justice Elena Kagan questioned whether Congress has essentially acceded to the Federal Circuit’s position.

“For 30 years the Federal Circuit has been ignoring our decision” on where cases can be filed, Kagan said.

Tech companies like Alphabet Inc.’s Google said the Federal Circuit had created a situation where a Texas district adjacent to the Louisiana border is the biggest location for patent suit filings even though no major manufacturers are based there.

Software and financial companies, and even the state of Texas, said the district has enabled a rise of patent owners who use legal threats to extract undeserved money from operating companies.

The court became the most popular forum after District Court Judge T. John Ward took the bench in 1999 and set out to attract patent lawsuits. Ward, who retired in 2011, established local rules that were deemed friendly to patent owners, and the reputation stuck.

The anomaly of having so many suits filed in a single district that’s not a hub of innovation is proof that “patent cases are much more susceptible to abuses,” TC Heartland lawyer James Dabney said.

Kraft lawyer William Jay argued that it’s more a question of how cases are handled than the rules on where cases are filed. A victory for TC Heartland, he said, would cause problems for pharmaceutical companies seeking to block generic-drug companies from entering the market before drug patents expire.

Drug litigation has strict timing guidelines, and drugmakers often file multiple cases in a single court so one judge handles them all. A change in the rules would force them to sue in multiple courts, Jay said.

Dabney said that concern is “overstated” because there’s a process for consolidating lawsuits filed in multiple districts.

The high court is scheduled to rule by the end of its term in June. The case is TC Heartland v. Kraft Foods Group Brands, 16-341.
To contact the reporter on this story: Susan Decker in Washington at sdecker1@bloomberg.net To contact the editors responsible for this story: Jon Morgan at jmorgan97@bloomberg.net Laurie Asseo, Elizabeth Wasserman
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