United States: Forum Shopping Tactics After TC Heartland

The U.S. Supreme Court's May 2017 decision in TC Heartland v. Kraft Foods Group Brands is widely seen as sharply limiting where patent infringement lawsuits may be filed. For nearly 27 years, the U.S. Court of Appeals for the Federal Circuit applied a broad test for venue—finding venue proper where an alleged infringer is subject to general or specific personal jurisdiction. Instead, the Supreme Court rejected this longstanding precedent by ruling that venue in a patent infringement case is only proper if the defendant (1) "resides" in the district (for a domestic corporation, its state of incorporation only); or (2) both has committed "acts of infringement" and has a "regular and established place of business" in the district.

While TC Heartland does raise new obstacles for patent plaintiffs, it remains to be seen whether the limiting effect it has on forum shopping will be as significant as many predict. In fact, non-practicing entities will likely engage in a variety of litigation strategies to minimize the impact of the Supreme Court's decision. This article explores litigation strategies—new and old—that will likely play a role in the post-TC Heartland regime.

Gaming Residence

Many commentators have interpreted TC Heartland to mean that a corporate defendant's "reside[nce]" under 28 U.S.C. § 1400(b) is the company's home district (assuming the company's headquarters is located in its state of incorporation). This is far from settled, however. In TC Heartland, the Court wrote that "residence" means "the State of incorporation" only. Even the notion of incorporating in a specific judicial district does not have much legal grounding. In the eyes of the states (at least the few examined for this article: California, New York and Texas), the process of incorporation does not lend itself to being limited to particular judicial districts in a given state. As such, a question remains as to whether a suit can be filed in any district within the party's state of incorporation, or whether it must be filed in only one of the districts within the state of incorporation. At least one circuit has held that, for multidistrict states, venue is proper in all districts within that state of incorporation. See Davis v. Hill Engineering, Inc. (interpreting 28 U.S.C. § 1391(c)), overruled on other grounds.

In states with only a single judicial district—such as Delaware, where many companies elect to incorporate—this open question will not be of concern. But approximately half of the states—including California, New York and Texas—are divided into multiple judicial districts. In these states, the opportunity for forum shopping still presents itself. A California corporation with its headquarters in San Francisco, for example, would still be subject to venue in the U.S. District Court for the Central District of California—generally considered more plaintiff-friendly than the Northern District of California—or even in the Eastern District of California. Likewise, the U.S. District Court for the Eastern District of Texas potentially remains a proper venue for patent cases against any Texas corporation, irrespective of where it maintains offices.

Suits Against Foreign Parents

A second implication of TC Heartland is its potential to drive increased litigation against a domestic corporation's foreign parents as means to obtain favorable venue. In 1972, a unanimous Supreme Court held in Brunette Machine Works, Ltd. v. Kockum Industries, Inc. that patent venue as to foreign entities is not limited by § 1400(b). Instead, as to foreign parent entities, venue was governed by then-existing § 1391(d), providing that "[a]n alien may be sued in any district." In TC Heartland, the Court expressly declined to "express any opinion" on Brunette Machine Works or the implications of its holding on foreign corporations.

TC Heartland thus provides no guidance as to whether the venue limitations of § 1400(b) can be avoided by simply filing suit against a foreign parent. This is particularly true given that the then-existing venue statute discussed in Brunette Machine Works, § 1391(d), was replaced in 2011. The parallel provision in § 1391(c) now reads that "a defendant not resident in the United States may be used in any judicial district...."

Patent plaintiffs may avoid the new, more restrictive reading of § 1400(b) by suing a foreign parent entity rather than its domestic counterparts. This strategy would place the onus on the foreign defendant to challenge the plaintiff's complaint and seek a stay or transfer to a different district. In many districts, that burden is not easily overcome. Moreover, many district courts require litigation to move forward even if the defendant timely challenges jurisdiction, venue or the sufficiency of a pleading. Patent plaintiffs, therefore, may file a complaint against a foreign parent (or related entity) in an unfavorable venue as a means of forcing the domestic entity to intervene, or possibly just to create enough hassle to force a nuisance settlement.

Customer Suits

Another method of forum shopping post-TC Heartland is a suit against a customer or distributor of the ultimate target. While TC Heartland limits suits against a corporate defendant to the state of incorporation, and districts in which the defendant has committed acts of infringement and has a regular and established place of business, a plaintiff set on securing a particular venue may simply find downstream targets to sue in its chosen venue. In the case of an allegedly infringing device, for example, a plaintiff might simply choose to sue the brick-and-mortar retailer in any given district where the retailer sells the device.

This is not to say that the manufacturer-defendant is left with no options. For example, it could still seek a stay or transfer under the judicially created "customer suit" doctrine. Under that rule, "[w]hen a patent owner files an infringement suit against a manufacturer's customer and the manufacturer then files an action of noninfringement or patent invalidity, the suit by the manufacturer generally takes precedence." See In re Nintendo of America, Inc.. However, even the customer suit exception has its limits. The exception is not mandatory, and district courts have taken markedly different approaches in determining whether a customer-suit should be stayed in view of a suit involving the manufacturer. In any case, the onus is once again on the defendant to seek a stay and to litigate the case (even in an improper venue) pending the district court's decision.

Remote Employees

The second prong of § 1400(b) could also be used to forum shop. Aside from the obvious case in which a defendant maintains a brick-and-mortar location where it also has committed acts of alleged infringement, work-from-home employees will increasingly become a means to establish venue. The Eastern District of Texas has taken the lead in addressing this issue. In a recent decision, Judge Rodney Glistrap created a new multi-factor test to evaluate whether the residences of remote employees may be deemed a "regular and established place of business" of their employers. (Full disclosure: The authors represent the party challenging venue in that case). Memorandum Opinion and Order, Raytheon Co. v. Cray, Inc., Case No. 15-cv-1554 (E.D. Tex. June 29, 2017), ECF No. 289. If Judge Gilstrap's approach is adopted and endorsed, corporations with remote employees for which business expenses are reimbursed (e.g., expenses for telephone and internet use, as well as auto mileage) may be subject to venue in any district where its remote employees reside.

TC Heartland's Effect on Forum Shopping Remains to Be Seen

Many defendants see TC Heartland as having eliminated their exposure to being sued in far-away districts used by non-practicing entities extract small value settlements. Unfortunately, however, that practice may be far from over.

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
Events from this Firm
22 Aug 2018, Speaking Engagement, Koln, Germany

The panel discusses recent European legal developments around what you can and cannot put in your game – from the design of in-app purchases and rewarded ads to current age-rating trends and the ubiquitous loot box.

23 Aug 2018, Other, Washington, DC, United States

In August, NELI will present the nation's foremost annual public sector training surveying EEO and employment law developments impacting federal, state and local government employment, examining the effect of these developments on current practices, and providing practical advice to ensure compliance in the areas listed below:

5 Sep 2018, Other, Chicago, United States

As the world’s economies grow increasingly integrated through trade, acquisitions and joint ventures, U.S. international tax laws impact a greater percentage of businesses and transactions.

Similar Articles
Relevancy Powered by MondaqAI
Morrison & Foerster LLP
McDermott Will & Emery
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Morrison & Foerster LLP
McDermott Will & Emery
Related Articles
 
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
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions