Tech companies cheer Supreme Court’s ruling on patent lawsuits

Tech companies and app developers are breathing a sigh of relief after Monday’s major Supreme Court ruling on patents. More specifically, patent lawsuits — a rising number of which analysts say are bogus and threaten to strangle startups and inventions.

Here’s what you need to know.

What’s the name of the case?

The case is called TC Heartland v. Kraft Foods. Kraft had sued Heartland over a type of product that’s called a “liquid water enhancer,” which is essentially a package of flavoring that you can dump into a bottle of water. Kraft said that Heartland had stolen its idea. The case took on significance as it called into question where cases like these could be tried.

What do you mean, where?

Until the Supreme Court’s ruling last week, patent lawsuits could be heard all across the country, giving companies the opportunity to seek out courts where the odds were tilted in their favor.

This led to a kind of clustering, where a small handful of federal courts became responsible for deciding a huge number of cases.

So what does the Supreme Court’s ruling mean for this system?

It’s a big deal, particularly for smaller companies. The Court voted unanimously to say that patent lawsuits should be tried where the defending company is based, rather than in a court of the plaintiff’s choosing. Legal analysts say this decision could shift a huge number of cases away from “plaintiff-friendly” districts and toward more “neutral” venues.

How does this ruling benefit tech companies?

Tech companies worry a lot about being sued by firms that simply hold a lot of patents but don’t use them to manufacture any goods. If a “patent troll” can make the litigation so painful for a tech company that it would rather pay to get rid of the suit or if the troll has picked a friendly court and the court hands the troll a victory, then the trolls win.

If tech companies can spend less of their time and money on frivolous lawsuits, the thinking goes, they can reinvest those resources into developing new technologies.