United States: Supreme Court's TC Heartland Decision Will Move Venue Out of E.D. Texas

On May 22, 2017, in TC Heartland LLC v. Kraft Foods Group Brands LLC, the Supreme Court unanimously overturned nearly thirty years of Federal Circuit law regarding venue in patent infringement cases, holding that the patent venue statute 28 U.S.C. § 1400(b) is the exclusive provision controlling venue in patent cases, and that under § 1400(b), "a domestic corporation 'resides' only in its State of incorporation." Justice Gorsuch took no part in the consideration or decision of the case. By reaffirming its 1957 decision in Fourco Glass Co. v. Transmirra Products Corp. and confining a domestic corporation's residence to its state of incorporation, this decision dramatically limits the number of districts where a patentee may bring suit. Previously circumscribed only by personal jurisdiction concerns, infringement suits against a domestic corporation may now only be brought in its state of incorporation or "where [it] has committed acts of infringement and has a regular and established place of business." The immediate impact will be substantial. Many defendants will no longer be subject to suit in the plaintiff-friendly Eastern District of Texas, a district where, in 2015, more than 40% of all patent cases were brought. Instead, the District of Delaware or the Northern District of California may become the most popular venues for patent cases.

Background

While TC Heartland will have great consequences for the Eastern District of Texas, the case had its roots in a whole other forum altogether. Kraft sued TC Heartland, an Indiana-based entity, for infringement of a patent covering liquid water enhancers in the District of Delaware. TC Heartland moved to transfer the case to the Southern District of Indiana, arguing that venue was improper in Delaware because it is not registered to do business in Delaware and does not have any regular or established place of business in Delaware. The District of Delaware denied the motion to transfer, and TC Heartland sought a writ of mandamus from the Federal Circuit. The Federal Circuit denied the petition for mandamus, relying on VE Holding Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574 (Fed. Cir. 1990) to hold that venue was proper in the District of Delaware under its interpretation of the patent and general venue statutes, 28 U.S.C. § 1400(b) and 28 U.S.C. § 1391, respectively. Section 1400(b) provides for venue in patent infringement cases (1) where the defendant resides; or (2) where the defendant has committed acts of infringement and has a regular and established place of business. Section 1391(c)(2) defines corporations' and other unincorporated entities' "residence" for venue purposes as anywhere the entity is subject to personal jurisdiction.

In 1957, the Supreme Court held in Fourco, 353 U.S. 222, that the patent venue statute (28 U.S.C. § 1400(b)) "[wa]s the sole and exclusive provision controlling venue in patent infringement actions, and that it [wa]s not to be supplemented by the provisions of 28 U.S.C. § 1391(c)." "Residence" for patent venue purposes, the Court held, was defined by common law for corporations as the state of incorporation.

In 1988, Congress amended the general venue statute (28 U.S.C. § 1391) to include the phrase "[f]or purposes of venue under this chapter." The Federal Circuit in VE Holding interpreted this change to § 1391 as evincing Congress' intent to part ways with Fourco and apply § 1391(c)'s definition of residence to § 1400(b), which was within the same chapter as § 1391. In 2011, § 1391 was amended again. The phrase "[f]or purposes of venue under this chapter" was changed to "[f]or all venue purposes," and a new subsection (a) was added stating that that section "shall govern the venue of all civil actions," "[e]xcept as otherwise provided by law."

TC Heartland sought certiorari, which the Supreme Court granted on December 14, 2016. The question presented was whether the interpretation of the patent venue statute (28 U.S.C. § 1400(b)) as set forth in Fourco was altered by the two intervening changes to the general venue statute (28 U.S.C. § 1391). 

Supreme Court Proceedings and Decision

The Court held oral argument on March 27, 2017. Chief Justice Roberts suggested that he "would have thought that" the phrase in § 1391 "except as otherwise provided by law" "excluded overturning the Fourco decision." Notably, the justices seemed uninterested in engaging in the policy arguments, which was the focus of many amici. For example, Justice Breyer asked, "[T]hese amici briefs . . . they're filled with this thing about a Texas district which they think has too many cases. What's this got to do with this?"

Yesterday, the Court unanimously ruled that under the patent venue statute, 28 U.S.C. § 1400(b), "a domestic corporation 'resides' only in its State of incorporation." The Court reviewed the history of the patent venue and the general venue statutes and reaffirmed its interpretation of them in Fourco. It noted that "Congress has not amended § 1400(b) since Fourco, and neither party [had] ask[ed] [it] to reconsider [its] holding in that case." The Court next considered whether the two intervening amendments to the general venue statute effected a change to the proper interpretation of the patent venue statute. The Court held that the amendments did not have such an effect.

Because "[t]he current version of § 1391 does not contain any indication that Congress intended to alter the meaning of § 1400(b) as interpreted in Fourco," that interpretation stands, the Court reasoned. Addressing specifically the two amendments to § 1391(c) since Fourco, the Court stated that it "do[es] not see any material difference between the" phrase "[f]or all venue purposes" in the current general venue statute and the phrase "for venue purposes" in the general statute in effect at the time Fourco was decided, noting that "[t]he plaintiffs in Fourco [had] advanced" an argument similar to the one pressed by Kraft. "Th[e] Court was not persuaded then, and the addition of the word 'all' to the already comprehensive provision does not suggest that Congress intended for [it] to reconsider that conclusion."

Indeed, the Court reasoned that the saving clause of § 1391 in its current form, which states "that it does not apply when 'otherwise provided by law' . . . makes explicit the qualification that th[e] Court previously found implicit in the statute." Finally, the Court rejected the argument "that Congress in 2011 ratified the Federal Circuit's decision in VE Holding. If anything, the 2011 amendment undermines the decision's rationale." The Court concluded, "[a]s applied to domestic corporations, 'reside[nce]' in § 1400(b) refers only to the State of incorporation."

Implications

By limiting the residence of domestic corporations to the state of incorporation for patent infringement cases, the Supreme Court's decision dramatically circumscribes the number of districts in which defendants may be sued. Many defendants will no longer be subject to suit in the Eastern District of Texas, by far the most popular current venue. Instead, the District of Delaware is likely to increase in popularity because of its status as the most popular venue for incorporation. There may also be an increase in suits filed in the Northern District of California, where many companies are incorporated or headquartered, and there may be an increase in the use of multi-district judicial panels for patent litigation. Going forward, parties are likely to litigate a number of sub-issues relating to venue, including what constitutes a "regular and established place of business" sufficient to confer venue under 28 U.S.C. § 1400(b). Congress may even seek to amend the current patent venue statute, as some elected officials have intimated.

As for foreign corporations and unincorporated entities, the Supreme Court explicitly declined to comment on the import of its decision for these entities, deferring any decisions to future cases. The effects of yesterday's TC Heartland decision will be felt for years to come.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.