UK: The US Supreme Court Definitively States Where A Domestic Corporation Resides For Purposes Of Venue In A Patent Infringement Case, The Delaware Supreme Court Further Develops The Application Of Business Judgment Review In Controller Buyout Disput....

Last Updated: 7 July 2017
Article by Joshua Becker

This week's corporate law news roundup includes discussions of the US Supreme Court's recent decision relating to where a corporation resides for purpose of venue in patent infringement cases, as decision that may reduce the number of patent trolls; the Delaware Supreme Court's application of business judgment review in controller buyout disputes, a decision that further strengthens the application of the management friendly standard in such cases; and the SEC's recent charges against individuals who allegedly disclosed nonpublic information relating to government plans to cut Medicare reimbursement rates, which affected the stock prices of certain publicly traded medical providers.

SUPREME COURT LIMITS RESIDENCE UNDER PATENT VENUE STATUTE TO DEFENDANT'S STATE OF INCORPORATION

On May 22, 2017, the United States Supreme Court definitively stated where a domestic corporation resides for purposes of venue in a patent infringement case. Consequently, some experts predict that the Court's decision may make nuisance patent claims more difficult, thereby reducing the number of so-called patent trolls who often attempt to extract a quick settlement. In its unanimous decision, the Supreme Court ruled that venue for such cases is limited to the State of incorporation for corporate defendants. Writing for the Court, Justice Thomas stated that modifications to the general venue statute, 28 U.S.C. §1391, did not change the meaning of "resides" in, thus rejecting the argument that Congress intended to make such a change. For more information on the TC Heartland LLC v. Kraft Foods Group Brands LLC case, see https://www.supremecourt.gov/opinions/16pdf/16-341_8n59.pdf.

DELAWARE COURT UPHOLDS DISMISSAL OF BOOKS-A-MILLION SUIT

On May 22, 2017, the Delaware Supreme Court affirmed the Delaware Chancery Court's 2016 dismissal of an investor class action alleging that the directors of Books-A-Million Inc. acted in bad faith when they approved a bid by the company's controlling stockholder to take the company private. The Chancery Court's dismissal was significant because it applied the rationale established in In re MFW Shareholders Litigation and Kahn v. M & F Worldwide Corporation (MFW). According to MFW, controller buyouts are subject to review using the "business judgment" standard, rather than the more stringent "entire fairness" review. Applying the business judgment standard, the Chancery Court concluded that the plaintiffs' claims failed under that review. The Delaware Supreme Court's affirmation of the Chancery Court's dismissal further strengthens and develops the application of MFW in controller buyout disputes. For more information on the In re Books-A-Million, Inc. Stockholders Litigation case, see http://courts.delaware.gov/Opinions/Download.aspx?id=257180.

SEC FILES CHARGES IN TRADING SCHEME INVOLVING CONFIDENTIAL GOVERNMENT INFORMATION

On May 24, 2017 the SEC announced charges in an alleged insider trading scheme involving tips of nonpublic information about government plans to cut Medicare reimbursement rates, which affected the stock prices of certain publicly traded medical providers or suppliers. The SEC's complaint alleges that a former government employee obtained key confidential details about upcoming decisions by the Centers for Medicare and Medicaid Services (CMS) from his close friend and former colleague at the agency. According to the SEC's complaint, the tipper serves as a health insurance specialist in the CMS and tipped the recipient about at least three pending CMS decisions that affected the amount of money that companies receive from Medicare to provide services or products related to cancer treatments or kidney dialysis. For more information, see https://www.sec.gov/news/press-release/2017-109.

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