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Ebay REUTERS-Robert Galbraith

Federal judge: If incorporated in Delaware, litigate there

6/10/2011 COMMENTS (0)

WILMINGTON, Del., June 10 (Reuters) - California-based eBay Inc and other companies should expect to fight their legal battles in Delaware if they decide to organize under the state's popular corporate law, a federal judge ruled.

The ruling stems from a patent infringement lawsuit brought by Connecticut-based XPRT Ventures LLC against eBay Inc, PayPal Inc and other companies based in California and Maryland that are incorporated in Delaware.

The companies argued the case, which involves patents covering online payment methods, should be transferred to the U.S. District Court for the Northern District of California. The defendants said they were sued in Delaware purely for "litigation reasons."

U.S. District Judge Sue Robinson in Wilmington rejected that argument in her Wednesday decision, as well as other arguments about inconvenience and congestion in Delaware's federal court.

"As always, the court stresses that, because all defendants are Delaware corporations, they have no reason to complain about being sued in Delaware," wrote Robinson.

Delaware's federal district court handles many patent disputes, mostly involving out-of-state companies suing a Delaware-incorporated company.

Most listed companies in the United States incorporate in Delaware.

One of the main reason companies incorporate in Delaware is to have access to the state's specialized business court, said Alex Poltorak of General Patent Corp, which provides patent consulting.

"So they made this choice, it's disingenuous to ask to transfer the case out," said Poltorak, who is not involved in the eBay case.

The case is XPRT Ventures LLC v eBay Inc et al, U.S. District Court, District of Delaware, No. 10-595.

For XPRT: Dominick Gattuso of Proctor Heyman.

For eBay: Jack Blumenfeld and Rodger Smith II of Morris, Nichols, Arsht & Tunnell; Ramy Hanna of Morgan Lewis & Bockius.

(Reporting by Tom Hals)


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