Venue in patent infringement cases is determined by a statute only applicable to patent cases: 28 U.S.C. § 1400(b). That statute permits venue "in the judicial district where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business." Id. On its face, this is narrow, but there is a caveat: The general venue statute, applicable to non-patent cases, states that "[f]or all venue purposes" a corporate defendant resides "in any judicial district in which such defendant is subject to the court's personal jurisdiction with respect to the civil action in question." 35 U.S.C. § 1391(c)(2) (emphasis added). The courts have held that this provision's similarly-worded predecessor applies to § 1400(b), with the practical effect that a company selling allegedly infringing products nationwide can properly be sued in any district.
This has led to seemingly anomalous statistics: For example, in 2015, 45.5% of patent complaints were filed in the Eastern District of Texas alone, with a single judge in that district handling 20 percent of all patent cases in 2014.
In response to this perceived problem, on March 17, 2016, Sen. Jeff Flake introduced the Venue Equity and Non-Uniformity Elimination Act of 2016 (an acronym of "VENUE Act"). The proposed legislation would replace the current § 1400(b) with a longer but more specific list of permissible venues. As to the defendant, the bill narrows the scope of venue to "(1) where the defendant has its principal place of business or is incorporated; (2) where the defendant has committed an act of infringement of a patent in suit and has a regular and established physical facility that gives rise to the act of infringement; [and] (3) where the defendant has agreed or consented to be sued in the instant action." This would eliminate nationwide venue and limit venue to a few identifiable districts based on a defendant's activities. Where the first two criteria do not create venue as to a foreign defendant, that defendant may be sued in any district as provided by § 1391(c)(3).
But the bill also permits venue in districts related to the plaintiff's or its predecessor's activities. First, the bill creates venue "(4) where an inventor named on the patent in suit conducted research or development that led to the application for the patent in suit." And, second, the bill allows venue "(5) where a party has a regular and established physical facility that such party controls and operates, not primarily for the purpose of creating venue," and where the party has either "(A) engaged in management of significant research and development of an invention claimed in a patent in suit prior to the effective filing date of the patent; (B) manufactured a tangible product that is alleged to embody an invention claimed in a patent in suit; or (C) implemented a manufacturing process for a tangible good in which the process is alleged to embody an invention claimed in a patent in suit." On its face, this provision is applicable to plaintiffs and defendants both, but there is bound to be significant overlap with (2) as to defendants. Both of these provisions principally benefit practicing patent owners, by establishing venue in their home districts, but do not serve NPEs seeking to create venue in a preferred district.
Congressional consideration of this reform bill will be influenced by the Federal Circuit's decision in In re TC Heartland LLC,1 a petition for a writ of mandamus that the court recently denied. The petitioner therein argued that the phrase "all venue purposes" in § 1391(c) does not include the patent-specific venue statute. The court relied on a prior holding, from 1990, that the predecessor language in § 1391(c)—"[f]or the purposes of venue under this chapter"—included § 1400(b), since it is part of the same "chapter" as § 1391(c).2 Interestingly, the court also relied, in part, on the pending VENUE Act to show Congress' understanding of current law. But given the incongruous patent docket in East Texas, it is likely that the petitioner in TC Heartland, or an aggrieved defendant in a future case, will ask the en banc court to overrule its prior decision.
Either of these proposals—legislative or judicial—would serve to balance patent cases more evenly across the courts of the United States.
Footnotes
1 No. 2016-105 (Fed. Cir. Apr. 29, 2016) (precedential).
2 VE Holding Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574, 1578–80 (Fed. Cir. 1990).
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