United States: Supreme Court Review Of Patent Venue Granted

Could a Decision Reduce Patent Cases Filed in the E.D. Texas?

The Supreme Court has agreed to review the Federal Circuit's decision in VE Holding Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574 (Fed. Cir. 1990), which grants patent plaintiffs wide latitude in choosing the venue in which to pursue litigation. 

Specifically, the Court granted TC Heartland, LLC's petition that argues the Federal Circuit erred when it defined the term "resides" in the patent litigation venue statute, 28 U.S.C. § 1400(b), with reference to the broader definition of "reside" in the general venue statute, 28 U.S.C. § 1391(c). 

The petition argues that the practical effect of VE Holding was to vitiate the venue limitations of § 1400(b) and open up patent litigation venue to potentially any district in which personal jurisdiction over a corporate defendant is proper.  Arguably, the most notable recent result of this change is the explosion of patent cases filed in the Eastern District of Texas in the last ten years, which saw almost 44% of all patent cases filed in 2015.  Like the District of Delaware, the Eastern District of Virginia, and the Western District of Wisconsin, the Eastern District of Texas often is perceived as having procedures, such as tight schedules for trials (i.e., a "rocket docket"), and a jury pool, that favor plaintiffs.  What distinguishes the Eastern District of Texas is the success rate in recent years of non-practicing entities. 

TC Heartland, LLC, an Indiana company, was sued by Kraft Foods Group Brands LLC in the District of Delaware for allegedly infringing several of Kraft's patents for liquid water enhancers.  TC Heartland notes in its petition that a) it is an Indiana registered company, b) it designed and manufactured the allegedly infringing products in Indiana, and c) only 2% of its sales were shipped to Delaware at the instruction of an Arkansas-based customer. 

Accordingly, TC Heartland moved the district court, and then the Federal Circuit in a writ of mandamus, to transfer venue because it does not reside in Delaware under the patent venue statute  as interpreted by the Supreme Court in Fourco Glass Co. v. Transmirra Products Corp., 353 US 222 (1957).  The district court and the Federal Circuit declined TC Heartland's motion and writ, respectively.

In its petition for certiorari, TC Heartland argued, in part, that Fourco held that patent venue is appropriate in the district in which a defendant resides, i.e., in which the defendant is incorporated.  In Fourco, the Supreme Court expressly declined to supplement the interpretation of patent venue set forth in 28 U.S.C. § 1400(b) with the more general provisions regarding venue in 28 U.S.C. § 1391(c).  As such, TC Heartland argued that VE Holding is subordinate to the Supreme Court's precedent in Fourco, which the Federal Circuit could not overrule. 

Implications

Corporate defendants, as well as members of Congress and legal associations, all have expressed growing discontent with the forum shopping that VE Holding is perceived to permit.  Should the Supreme Court find for TC Heartland, there exists the possibility of a significant reduction in cases filed in venues perceived to be plaintiff-friendly.

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