United States: US Supreme Court Limits Scope Of Venue For Patent Infringement Litigation

In TC Heartland LLC v. Kraft Foods Group Brands LLC, No. 16-341, 2017 WL 2216934 (May 22, 2017), the United States Supreme Court narrowed the choice of venue for patent infringement cases, overturning the Federal Circuit's interpretation of 28 USC §1400(b). The venue statute for patent infringement reads "[a]ny civil action for patent infringement may be brought 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." 28 USC §1400(b). The Supreme Court held that a domestic defendant "resides" only in its state of incorporation for purposes of venue under §1400(b). TC Heartland, 2017 WL 22196943 at *8. The TC Heartland decision is likely to impact where many patent litigations are filed, and which entities are chosen as defendants. It may cut down the concentration of patent lawsuits filed in the notorious Eastern District of Texas, and increase the quantity of cases filed in Delaware, where many companies are incorporated, and in the Northern District of California, where many technology companies are based. The Supreme Court expressly declined to address how the statute applies to foreign corporations that may not reside in the US, and may not have a "regular and established place of business."

Supreme Court's rationale in TC Heartland

Kraft Foods brought a patent infringement suit against TC Heartland in the District of Delaware. Because TC Heartland is incorporated in Indiana and has its principal place of business in Indiana, it moved to dismiss the case or transfer venue to Indiana. TC Heartland, 2017 WL 2216934 at *3. The district court denied the motion, and the Federal Circuit denied a petition for a writ of mandamus. Id. Federal Circuit's denial was based on its holding that the "resides" requirement in §1400(b) was defined by general venue provision of 28 USC §1391(c), which states, in part, that an entity "shall be deemed to reside, if a defendant, in any judicial district in which such defendant is subject to the court's personal jurisdiction." TC Heartland, 2017 WL 2216934 at *5; 28 USC §1391(c).

The Supreme Court rejected the Federal Circuit's statutory interpretation of §1400(b). TC Heartland, 2017 WL 2216934 at *3, 7. The Supreme Court noted that it had already addressed this same issue in Fourco Glass Co. v. Transmirra Products Corp., 353 US 222 (1957) where it "definitively and unambiguously held that the word "reside[nce]" in § 1400(b)... refers only to the State of incorporation." TC Heartland, 2017 WL 2216934 at *7. In Fourco, the Supreme Court further explained that §1400(b) is the "sole and exclusive" provision for venue in patent infringement cases and is "not to be supplemented by...§1391(c)." Fourco, 353 US at 229. The Supreme Court thus affirmed its holding in Fourco stating that §1400(b) has not been amended since Fourco and that the amendments to §1391(c) do not change the meaning of §1400(b) under Fourco. TC Heartland, 2017 WL 2216934 at *7.

The impact of the TC Heartland decision on filing new cases

The TC Heartland decision will have an effect on where patent cases are filed against domestic corporations. §1400(b) provides the following two bases for venue: (1) "where the defendant resides or" (2) "where the defendant has committed acts of infringement and has a regular and established place of business." Since a defendant only resides in its state of incorporation, filings are likely to rise in locations like the District of Delaware, where many defendants are incorporated. This increase, though, may not be as much as people may initially anticipate given the other basis for venue, i.e., where the defendant "committed acts of infringement and has a regular and established place of business."

Patent plaintiffs will likely continue to forum shop when they can. Plaintiffs who want to obtain venue in a district other than a defendant's state of incorporation (for example, the Eastern District of Texas rather than the District of Delaware) may rely on the second prong of §1400(b). That prong provides for venue where the defendant committed acts of infringement and has a "regular and established place of business." Thus, if a defendant has an office, store or other business facility, for example in Eastern District of Texas, plaintiffs may seek to use that as a hook to argue that venue is appropriate in that district. The TC Heartland decision may likewise affect which entities in the supply chain are chosen as defendants. If a plaintiff cannot secure venue in a desired district for a manufacturer of an allegedly infringing product, the plaintiff may sue the large nationwide retail outlets that sell the allegedly infringing computer at a store in that district to secure venue.

TC Heartland and foreign corporations

The Supreme Court explicitly declined to address the impact of its decision on venue for foreign corporations in patent infringement cases, explaining instead:

The parties dispute the implications of petitioner's argument for foreign corporations. We do not here address that question, nor do we express any opinion on this Court's holding in Brunette Machine Works, Ltd. v. Kockum Industries, Inc., 406 US 706, 92 S.Ct. 1936, 32 L.Ed.2d 428 (1972) (determining proper venue for foreign corporation under then existing statutory regime).

TC Heartland, 2017 WL 2216934 at *7n.2. In Brunette Machine Works, 406 US at 714, the Supreme Court held that venue in a patent infringement action against a foreign corporation is governed by 28 USC §1391(d) and not §1400(b). The Supreme Court reasoned that §1391(d), which at the time read "[a]n alien may be sued in any district," is "properly regarded, not as a venue restriction at all, but rather as a declaration of the long-established rule that suits against aliens are wholly outside the operation of all the federal venue laws, general and special." Id. However, in 2011, §1391 was amended to delete and replace subsections (a)-(d). The parallel portion of the statute, §1391(c)(3), now reads "a defendant not resident in the United States may be sued in any judicial district, and the joinder of such a defendant shall be disregarded in determining where the action may be brought with respect to other defendants." 28 USC §1391(c)(3). If the Supreme Court maintains the same reasoning as in Brunette, then venue will likely remain appropriate in any judicial district. That was not decided in TC Heartland and will be decided in future cases.

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