United States: High Court Limits Where Patent Suits Can Be Filed

Seyfarth Synopsis: Venue in a patent litigation is limited to the alleged infringer's state of incorporation or where the defendant has committed infringing acts and has a regular and established place of business.

Less than two months after oral argument, the Supreme Court issued a unanimous decision on May 22, 2017, in TC Heartland LLC v. Kraft Foods Group Brands LLC, uprooting long-standing precedent that allowed patent owners to sue anywhere there was personal jurisdiction over the alleged infringer. The Court held that venue is only proper in the state where the alleged infringer is incorporated or where it has both committed acts of infringement and has a regular and established place of business.

By taking this stand, it is possible that the Supreme Court will prevail where the Federal Circuit and Congress have failed and curb "patent troll litigation" in patent-friendly district courts like the Eastern District of Texas by non-practicing entities ("NPEs").

Evolution of Patent Venue Laws

The issue in TC Heartland can be traced to an 1897 venue statute for patent infringement cases. Previously, patent litigations were treated like any other federal case for venue purposes.

Venue refers to the proper or most convenient location for a case or trial. It is designed to keep litigation near the defendant or the site of the action that gave rise to the suit. In 1897, Congress approved a separate patent venue statute, which established venue (1) where the alleged infringer was an "inhabitant" or (2) where the defendant both committed the act(s) of infringement and maintained a "regular and established place of business." In 1948, Congress made a slight non-substantive revision, replacing "inhabit[]" with "resides." Previous Supreme Court decisions determined that the pre-1948 and post-1948 statute was the exclusive venue provision for patent infringement actions and that "inhabit" and "resides" both mean the place of the alleged infringer's incorporation.

The 1948 patent venue statute, 28 U.S.C. § 1400(b), has not been modified since its enactment. It reads:

Any 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.

In contrast to the patent venue statute, the generally applicable venue statute has undergone more recent revisions. For example, in 1988, Congress expanded the location where a defendant can and should be sued. The general venue statute modified the definition of "resides" by expanding residence to include "any judicial district in which such defendant is subject to the court's personal jurisdiction." Personal jurisdiction can include places where the defendant has directed its actions, for example, where the product at issue is in the stream of commerce.

Two years later, in VE Holding Corp. v. Johnson Gas Appliance Co., the Federal Circuit evaluated whether the 1988 change to the general venue statute affected the patent-specific venue provision. The end result was to make venue proper for patent litigation anywhere the defendant is subject to personal jurisdiction rather than the more restricted definition of "resides" as the place of incorporation.

Over the last 27 years, attorneys have associated VE Holding. with an increase in forum shopping -- once venue became easier to establish, plaintiffs brought suit in places thought to provide advantages in terms of procedure, outcome, or otherwise. For example, VE Holding is said to have contributed to the rise of the Eastern District of Texas as a go-to district for patent owners. The Eastern District of Texas offers streamlined patent litigation procedures and a reputation for patent holder wins. It is not a populous district, nor a place of incorporation or a principal place of business for most defendants. But recent statistics show that it is the second most common forum for patent litigation disputes, trailing only inter partes review and post-grant review proceedings before the Patent Trial and Appeal Board.

After VE Holding, the Federal Circuit continued to field cases concerning venue. In light of the rise of "troll" litigation by NPEs filed in plaintiff-friendly forums, it attempted to limit venue by finding that retaining jurisdiction under certain circumstances was an abuse of discretion. Congress also tried to limit patent venue in an attempt to curb NPE litigation. But its several attempts at legislation failed.

TC Heartland

TC Heartland allowed the Supreme Court a second chance to evaluate VE Holding. (and provided an opportunity to combat forum-shopping in patent litigation matters). In TC Heartland, Kraft Food Group Brands LLC ("Kraft") brought suit against TC Heartland, LLC ("TC Heartland") in the District Court of Delaware. TC Heartland moved to dismiss the suit or at least transfer the case -- the company was incorporated in Indiana, maintained headquarters in Indiana, and less than 2% of the allegedly infringing product ended up in Delaware. The district court denied the motion, and TC Heartland appealed.

On appeal, the Federal Circuit addressed the effect of another set of amendments to the general venue statute made in 2011. At that time, Congress added language stating that the general venue statute applied "[e]xcept as otherwise provided by law." TC Heartland argued that the new language made the general venue statute inapplicable where other venue statutes existed, such as the patent venue statute. The Federal Circuit rejected TC Heartland's arguments, reaffirming VE Holding. According to the court, the patent venue statute did not define the term "resides" and thus looking to the general venue statute for guidance would not defy the "otherwise provided by law" language added in 2011.

By an 8-0 vote, the Supreme Court reversed the Federal Circuit, and overturned the precedent of VE Holding. In its place, the Supreme Court determined that the term "resides" for purposes of the patent venue statute should be interpreted to mean the state of incorporation of the defendant. Under TC Heartland, plaintiffs alleging patent infringement must therefore file suit where the defendant resides (i.e., their state of incorporation) rather than wherever personal jurisdiction exists. Alternatively, a plaintiff can make use of the second location for venue provided by Section 1400(b): where the defendant has committed acts of infringement and has a regular and established place of business.

Takeaways:

  • Patent litigation venue is governed solely by 28 U.S.C. § 1400(b).
  • For domestic corporations, venue in patent litigation is proper only (1) where the alleged infringer is incorporated or (2) where the alleged infringer has committed acts of infringement and has a regular and established place of business.
  • TC Heartland is likely to shift patent litigation away from courts with very minimal ties to the district, and toward states where many domestic corporations are incorporated.

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.