Dec 2 (Reuters) - A U.S. Circuit Court has rejected the long-standing argument that incorporating in Delaware can be considered the controlling factor in deciding where a company can sue.

The U.S. Court of Appeals for the Federal Circuit overturned on Friday a ruling by Delaware's District Court and took the unusual step of ordering the lower court to send a patent infringement lawsuit to a California federal court.

About half of all listed U.S. companies are incorporated in Delaware.

Companies with no operations in the state are increasingly bringing patent lawsuits in Delaware, citing incorporation to justify the venue, in part because the court has a reputation for speed.

The ruling stemmed from an intellectual property dispute between Marvell International Ltd of Bermuda and Link_A_Media Devices Corp, or LAMD.

Marvell sued LAMD in Delaware, where the defendant was incorporated. LAMD asked the Delaware District Court to transfer the case to California Northern District where it is based and where Marvell employs its inventors.

Delaware District Court Judge Sue Robinson erred in refusing that request because she placed too much weight on the plaintiffs' choice of venue, the Court of Appeals found.

"The court's heavy reliance on the fact that LAMD was incorporated in Delaware was similarly inappropriate," said the eight-page opinion. The case was heard by Randall Rader, the chief judge, and judges Timothy Dyk and Kathleen O'Malley.

"The defendant's state of incorporation, however, should not be dispositive of the public interest analysis. Aside from LAMD's incorporation in Delaware, that forum has no ties to the dispute or to either party," the ruling said.

Delaware's Bankruptcy Court is among the busiest in the country for large Chapter 11 cases, and the state's federal District Court is also a leading court for patent litigation.

Delaware is also home to Chancery Court, a state court noted for its expertise in business disputes.

In June, Robinson refused to transfer a case involving eBay Inc to a federal court in the Internet auctioneer's home state of California.

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

The case is In re Link_A_Media Devices Corp, U.S. Court of Appeals for the Federal Circuit, No. 990.

For Link_A_Media Devices Corp.: Deanne Maynard of Morrison & Foerster.

For Marvell International Ltd.: Indranil Mukerji of Fish & Richardson.

(Reporting by Tom Hals)

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