Supreme Court Changes the Patent Venue Landscape

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Overview


In a highly anticipated decision, the Supreme Court of the United States issued a unanimous opinion in TC Heartland LLC v. Kraft Food Group Brands LLC, holding that for the purposes of venue in patent infringement actions, a domestic corporation “resides” only in its state of incorporation. As a result, a domestic corporation may only be sued for patent infringement in a judicial district (i) in its state of incorporation or (ii) where the domestic corporation has both (a) committed acts of infringement and (b) has a regular and established place of business.

In Depth


On May 22, 2017, the Supreme Court of the United States issued its decision in TC Heartland LLC v. Kraft Food Group Brands LLC tightening restrictions on where patent infringement actions may be filed. In an 8-0 decision authored by Justice Clarence Thomas, the Court held that for purposes of venue in patent infringement actions, a domestic corporation “resides” only in its state of incorporation. As a result, a domestic corporation may only be sued for patent infringement in a judicial district (i) in its state of incorporation or (ii) where the domestic corporation has both (a) committed acts of infringement and (b) has a regular and established place of business.

Case Background

TC Heartland manufacturers flavored drink mixes and is incorporated under Indiana law and headquartered in Indiana. Kraft filed a patent infringement complaint in the US District Court for the District of Delaware accusing TC Heartland of infringing Kraft’s patents. TC Heartland argued venue was improper in Delaware under 28 USC § 1400(b) and moved to transfer the case to the US District Court for the Southern District of Indiana. Section 1400(b)—also referred to as the patent venue statute—provides that “[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.” TC Heartland argued that venue was improper in Delaware because TC Heartland (i) did not reside in Delaware and (ii) did not have a regular and established place of business in Delaware.

Both the district court and Federal Circuit rejected TC Heartland’s arguments. The Federal Circuit focused on the interplay between the patent venue statute (§ 1400(b)) and the general venue statute (28 USC § 1391(c)) and concluded that for purposes of venue in a patent infringement action, a corporate entity resides in any judicial district in which the entity is subject to personal jurisdiction. (IP Update, Vol. 19, No. 5). Applying this logic, the Federal Circuit found that since the District of Delaware could exercise personal jurisdiction over TC Heartland, TC Heartland resides in Delaware for purposes of venue under § 1400(b). TC Heartland appealed to the Supreme Court.

Legislative and Jurisprudence History

The legislative history of the patent venue and general venue statute provide important context for the Supreme Court’s decision. In 1948, Congress codified the patent venue statute as § 1400(b), which states that a patent infringement action “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.” At the same time, Congress enacted the general venue statute as § 1391, which states that for venue purposes a corporation resides in any judicial district in which it is incorporated, licensed to do business, or doing business.

In 1957, the Supreme Court considered the patent and general venue statutes in tandem in Fourco Glass v. Transmirra Prods, 353 U.S. 222 (1957). In Fourco, the Supreme Court concluded that for purpose of § 1400(b), a domestic corporation “resides” only in its state of incorporation and rejected the argument that § 1400(b) incorporated the broader definition of “reside” as recited in the general venue statue of § 1391(c).

Since deciding Fourco, Congress has not amended § 1400(b), but has twice amended § 1391. In 1988, Congress amended § 1391(c), to provide, that “[f]or purposes of venue under this chapter, a defendant that is a corporation shall reside in any judicial district in which it is subject to personal jurisdiction.” In 1990, the Federal Circuit interpreted this amendment in VE Holding v. Johnson Gas Appliance, 917 F.2d 1574 (1990) finding that the phrase “for purposes of venue under this chapter” in § 1391(c) established the definition of “reside” for all other venue statutes, including § 1400. The Federal Circuit thus concluded that in patent infringement actions, venue is proper in any judicial district where the defendant is subject to personal jurisdiction.

In 2011, Congress amended § 1391(c) to read “[e]xcept as otherwise provided by law” “for all venue purposes … [a corporate defendant] shall be deemed to reside [] in any judicial district in which such defendant is subject to the court’s personal jurisdiction.” The Federal Circuit decision in TC Heartland concluded that the changes made to the general venue statue in 2011 did not affect the Federal Circuit’s ruling in VE Holding.

Petition for Certiorari

In its petition for certiorari, TC Heartland argued that the Federal Circuit improperly held that Fourco is no longer prevailing law in determining where venue is appropriate in patent infringement action and incorrectly departed from Fourco’s interpretation of § 1400(b) based on the 2011 amendments to § 1391(c). (IP Update, Vol. 19, No. 12). The precise question presented to the Supreme Court was the same as that decided in Fourco: “whether 28 USC § 1400(b) is the sole and exclusive provision governing venue in patent infringement actions and is not supplemented by 28 USC § 1391(c).”

Supreme Court Decision

The Supreme Court reversed the Federal Circuit and held that the 2011 amendments to § 1391 did not modify the meaning of “reside” in § 1400(b) as interpreted by Fourco and a domestic corporation therefore “resides” in its state of incorporation for purposes of the patent venue statute. The Court found no indication that Congress intended to alter the meaning of the patent venue statute, as interpreted by Fourco, when it enacted the 2011 amendment. In fact, the Court noted that the holding in Fourco was even stronger now that § 1391(c) expressly states it does not apply when “otherwise provided by law” and thus contemplates that other venue statutes, including the patent venue statute, may retain a definition of “reside” that conflicts with the default definition provided by the general venue statute. The Court also found Congress did not ratify the Federal Circuit decision in VE Holding when it passed the 2011 amendment. Instead, the 2011 amendment undermined VE Holding since that decision relied almost exclusively on the addition of the phrase “[f]or venue purposes of venue under this chapter” in the 1988 amendment. By deleting the clause “under this chapter” in the 2011 amendment and wording the current version of § 1391 nearly identical to the 1948 version of § 1391, the Supreme Court found that the interpretation of § 1400 in Fourco remains the prevailing law in determining venue for patent infringement actions. Thus, as applied to corporations, “reside” in § 1400(b) refers only to the state of incorporation.

Practice Note

The Supreme Court’s decision will have a significant impact on patent litigation. First, the most immediate consequence is the likely diminishment of the Eastern District of Texas as a popular patent litigation forum since most companies often sued in the Eastern District of Texas are neither incorporated in Texas nor have a regular and established place of business in the Eastern District of Texas. Second, there may be a concomitant increase in the number of filings in Delaware (where many companies are incorporated), the Northern District of California, the Southern District of New York, and other districts in which technology and pharmaceutical companies are headquartered. Third, there will likely be increased motion practice as to whether a defendant has a “regular and established place of business” in a district sufficient to support venue under § 1400(b). Fourth, there may be an increase in the number of filings against the foreign parent corporations of US subsidiaries since, under the applicable venue statutes, foreign defendants can be sued in any judicial district where personal jurisdiction is found. Finally, in actions where a patent holder seeks to sue multiple defendants, the patent holder may have to bring multiple actions in multiple jurisdictions to comply with the venue requirements. This will result in additional cost for the patent holder and may result in additional motion practice and/or the implementation of multidistrict litigation (MDL) processes, which could, in turn, introduce both delay and a certain amount of uncertainty.