United States: Federal Circuit Preserves Status Quo For Venue In Patent Cases

In a strongly worded opinion, the US Court of Appeals for the Federal Circuit denied a petition for a writ of mandamus and rejected arguments that Congress intended that a defendant accused of patent infringement be deemed to "reside" in its place of incorporation. In Re: TC Heartland LLC, Case No. 16-105 (Fed. Cir., Apr. 29, 2016) (Moore, J). In the absence of additional legislation, venue in patent cases is proper in any district where the defendant makes sales.

Kraft Foods Group accused TC Heartland of infringing Kraft's patents based on sales of liquid water-enhancer products. Kraft brought the suit in Delaware, but Heartland moved to either dismiss the action or transfer venue to the Southern District of Indiana, where Heartland has its primary place of business. Although Heartland contended that it had no local presence in Delaware, the evidence established that Heartland shipped orders of the accused products into Delaware. The district court rejected Heartland's theory that it did not "reside" in Delaware for venue purposes according to 28 USC § 1400(b) and also rejected the contention that the court in Delaware lacked specific personal jurisdiction.

After the district court's denial of the request to dismiss or transfer, Heartland filed a petition for a writ of mandamus at the Federal Circuit. The majority of the amicus briefing that the petition attracted was directed to the impact the decision would have on filings in the Eastern District of Texas—the district court attracting by far the highest volume of patent filings.

The Federal Circuit's venue analysis turned on the applicability of long-established precedent and an absence of evidence that Congress intended to overrule prevailing law. In 1990, the Federal Circuit held in VE Holding v. Johnson Gas Appliance that definition of corporate residence in the general venue statute (28 USC § 1391) applies to the patent-focused venue statute (§ 1400). Following this ruling, district courts uniformly adopted a broad understanding of "corporate residence" in patent cases. In 2011, Congress amended § 1391, subsections (a) and (c), changing the language preceding the definition of "corporate residence" from "For the purposes of venue under this chapter" to "For all venue purposes." Heartland argued that with this change, Congress intended to alter the definition of corporate residence so as to nullify the effect of the Federal Circuit's ruling in VE Holding.

Finding Heartland's argument to be "utterly without merit or logic," the Federal Circuit emphasized the lack of evidence supporting the view that Congress intended, through amendments in 2011, to codify Supreme Court of the United States precedent regarding the patent venue statute from 1957. To the contrary, the Federal Circuit pointed out that congressional reports over the years have consistently recognized that the broad understanding of corporate residence articulated in VE Holding is prevailing law. The Federal Circuit was similarly dismissive of Heartland's arguments that it was not subject to specific personal jurisdiction, finding that Kraft's infringement allegations were sufficiently related to shipments of accused product to Delaware.

Practice Note: Now that the Federal Circuit has declined to reinterpret the existing statutes governing venue in patent cases, any change in in the status quo would likely require congressional action. The Venue Equity and Non-Uniformity Elimination Act of 2016 remains pending in the Senate but has a low probability of passing before the upcoming presidential election. The bill would limit patent suits to courts more closely related to defendants or to the development of the patented technology. As recently as May 13, 2016, Senate Judiciary Committee Chairman Chuck Grassley (R-IA) confirmed that he does not plan to act on the bill, indicating that he will instead direct Congress towards more comprehensive patent reform efforts.

For a similar ruling, see Script Security Solutions v. Amazon.com (E.D. Tex.) (Bryson, J, sitting by designation) (IP Update, Vol. 19, No. 4).

Federal Circuit Preserves Status Quo For Venue In Patent Cases

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