The Future of Forum-Shopping in a Post-TC Heartland World

By Byron Pickard & Joseph Kim
January 11, 2017

For the past twenty-six years, patent owners were free to sue companies for patent infringement in any federal court where that company was subject to personal jurisdiction. This requirement placed few restrictions on patent owners’ ability to pick their preferred forum, leading to a disproportionate number of patent-infringement filings in perceived patent-owner-friendly courts—most prominently the Eastern District of Texas. But that practice soon may come to an end. On December 14, 2016, the Supreme Court granted certiorari in TC Heartland v. Kraft, to decide whether the patent-venue statute, 28 U.S.C. § 1400(b), is the “sole and exclusive provision governing venue in patent infringement actions.” If so, patent owners would only be able to sue companies for patent infringement in the state where that company is incorporated.

The 1988 Amendments to the general venue statute led to forum shopping in patent suits

Until 1988, the only proper venue for patentees to file patent-infringement suits was in the corporate defendant’s state of incorporation. See Fourco Glass Co. v. Transmirra Prods. Corp., 353 U.S. 222 (1957). This limitation was based on the patent-venue statute, 28 U.S.C. § 1400(b), which only allowed patent suits to be filed either (1) “in the judicial district where the defendant resides,” or (2) “where the defendant has committed acts of infringement and has a regular and established place of business.” The statute did not define what constitutes residency for individuals or corporations. In 1957, the Supreme Court answered that question in Fourco and held that venue in patent suits was limited to “the state of incorporation only.” 353 U.S. at 226.

This state of the law persisted until 1988 when Congress amended the general venue statute of § 1391 to apply “[f]or purposes of venue under this chapter” and by defining corporate “residence” to include any venue where the corporate defendant “is subject to personal jurisdiction.” Pub. L. 100-702, 102 Stat. 4669 (1988) (emphasis added). In VE Holding Corp. the Federal Circuit held that, because both §§ 1391 and 1400 were in the same chapter, § 1391’s broad venue provision effectively broadened the venue available in patent suits—corporate defendants could now be sued for patent infringement anywhere they were subject to personal jurisdiction, including venues where a single alleged act of infringement occurred. See VE Holding Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574 (Fed. Cir. 1990); Polar Electro Oy v. Suunto Oy, 829 F.3d 1343 (Fed. Cir. 2016).

The Federal Circuit’s broad interpretation of the patent-venue statute has led to widespread forum-shopping with a disproportionate number of cases being filed in the Eastern District of Texas. For example, since 2011, roughly a quarter of all patent-infringement cases have been filed in the Eastern District, with 2015 being a peak year when 44% of all patent-infringement cases were filed. This despite the fact that the Eastern District of Texas is home to relatively few companies and home to little more than 3.5 million people. By comparison, the Northern District of California, a district with nearly 8 million people and home to many companies, only made up 4-5% of all patent-infringement filings annually.

Table 1: Percentage of Cases Filed in the Most Popular Districts. Source: Docket Navigator Analytics.

Table 1: Percentage of Cases Filed in the Most Popular Districts. Source: Docket Navigator Analytics.

TC Heartland challenges the status quo

In 2011, Congress again amended Section 1391 to provide that it applied “[f]or all venue purposes,” instead of “[f]or purposes of venue under this chapter,”—a seemingly broader scope applicability. Pub. L. 112-63, 125 Stat. 758 (2011). Congress also added a new subsection, § 1391(a), that applies to the entire section; it states “[e]xcept as otherwise provided by law—(1) this section shall govern the venue of all civil actions brought in district courts of the United states.” While the phrase “except as otherwise provided by law” is not new to § 1391, for the first time Congress made it apply to the whole section in general. In the 1988 amendments, the phrase was independently in three different subsections but absent from the relevant subsection § 1391(c) that the VE Holding court relied on to broaden the definition of “reside.” Now with the 2011 amendments applying the exception to the entire section, TC Heartland argues that the introductory language explicitly excludes the application of a more general statutory provision on a specific provision. See Petition for a Writ of Certiorari, TC Heartland, LLC v. Kraft Foods Gp. Brands LLC, No. 16-341, 2016 WL 4983136, at *25 (2016) (“Specific terms prevail over the general in the same or another statute which otherwise might be controlling.”). Thus, it contends that § 1391 does not apply to § 1400.

This newly added “except as otherwise provided by law” introductory language lies at the heart of the issue before the Supreme Court. TC Heartland argues that the 2011 amendments effectively overruled VE Holding because venue in those suits is “otherwise provided by law,” under Section 1400(b). The upshot of TC Heartland’s argument is that Congress reinstated the status quo ex ante for patent-suit venue under Fourco.

Recent Supreme Court trends suggest that reversal is likely

Although it can be difficult to predict how the Supreme Court will rule in a given case, two major trends suggest that reversal is likely in TC Heartland. First, there has been trend by the Court to restrict or limit litigants’ access to federal courts in areas ranging from constitutional due process, civil pleading standards, federal-question jurisdiction, and standing, to name a few. Likewise, over the past decade the Court has taken a large number of patent cases from the Federal Circuit and has in the vast majority reversed.

The Court’s Efforts to Limit Access to Federal Courts

The Court has been reducing plaintiff’s access to federal courts for nearly a decade. Thus, reining in the bounds of what constitutes proper venue would not be surprising:

  • [2009]: Raised the pleading standard in all civil cases to require complaints to allege a plausible set of facts. Ashcroft v. Iqbal, 556 U.S. 662 (2009).
  • [2012]: Held that arbitration agreements are strictly enforceable absent statutory language commanding otherwise. CompuCredit Corp. v. Greenwood, 132 S. Ct. 665 (2012).
  • [2014]: Limited a court’s general jurisdiction over a corporation to where it is “at home,” meaning its place of incorporation and/or principal place of business. 134 S. Ct. 746 (2014).
  • [2014]: Limited a court’s specific jurisdiction over a non-resident defendant to where there is a sufficient relationship among the defendant, forum, and litigation. 134 S. Ct. 1115 (2014).
  • [2016]: Heightened the injury-in-fact requirement for Article III standing, rejecting standing by a statutory violation, instead requiring actual, concrete injury to the plaintiff. Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016).
  • [2016]: Held that statutory grants of exclusive federal jurisdiction is not necessarily enough, requiring that cases still meet the “arising under” test under 28 U.S.C. § 1331. Merrill Lynch, Pierce, Fenner & Smith Inc. v. Manning, 136 S. Ct. 1562 (2016).

A reversal in TC Heartland would be a part of this larger trend insofar as it would curtail plaintiffs’ ability to sue in the venue of their choice in patent suits.

The Court typically reverses or vacates the Federal Circuit in the patent cases where it grants certiorari to Federal Circuit decisions

Since 1999, the Court has granted certiorari in fifty-seven Federal Circuit cases. In total, the Court has either reversed or vacated the Federal Circuit’s decision in nearly 75% of those cases. Only in the remaining 25% of cases did the Court affirm the lower court’s decision.Statistically, it is likely that the Court granted certiorari in TC Heartland to review and reverse the Federal Circuit’s decision to uphold the district court’s finding that venue is proper.

The Effects of a Reversal

If the Court reverses the Federal Circuit in TC Heartland, then venue would be proper in the corporate defendant’s place of incorporation.[1] The Court’s trend toward limiting jurisdiction and access to courts highlight a desire to rein in a plaintiff’s ability to pick and choose the forum most convenient for the plaintiff with no regard for the defendant. Thus, reversal would likely mean:

  • D. Tex. will see fewer patent filings.
  • States with more corporations incorporated there, like California, Delaware, and New York, will see an uptick in patent filings.[2]
  • Districts with more corporate headquarters, like N.D. Cal., C.D. Cal., N.D. Tex., S.D. Tex., S.D.N.Y., and N.D. Ill. will see an uptick in patent filings if the defendant has committed acts of infringement in the district in which the headquarter sits. As noted above, venue is also proper in the district where the defendant has committed acts of infringement and has a regular and established place of business.
  • Filing against multiple defendants may require filing in multiple different districts, which will likely increase costs and stretch resources for plaintiffs.
  • With multiparty litigation, litigants will see an increase in the use of multidistrict litigation panels, under 28 U.S.C. § 1407, for pretrial matters.

A narrower interpretation of § 1400(b) may quell some patent suits as plaintiffs are unable to file in E.D. Tex. and as they confront the realities of possibly litigating in multiple districts. However, narrowing the Federal Circuit’s interpretation of the patent-venue statute would be consistent with the Court’s trend in limiting the reach of courts on defendants and forum-shopping by plaintiffs. TC Heartland is likely to do just that.

Conclusion

Ultimately, TC Heartland may be the case that diminishes a plaintiff’s ability to forum-shop and finally turn back the Federal Circuit’s broad interpretation of § 1400(b). Plaintiffs will be limited in their choice of forums, and defendants will have a stronger connection to the venue. If recent trends of (1) the Court limiting plaintiff’s access to federal courts, and (2) granting certiorari just to reverse a Federal Circuit ruling, holds true, then filings in perceived patent-owner friendly courts will likely be redirected to districts where corporations are incorporated or where they have their headquarters.

[1] According to § 1400(b), venue is proper in one of two forums, either in the district where the defendant resides or where the defendant has committed acts of infringement and has a regular and established place of business. The issue in VE Holding and Fourco was whether residency was limited to the state of incorporation.

[2] A lingering question is when selecting a forum based on the place of incorporation in states with multiple districts, which venue is proper? Courts are split on where venue is proper. See Davis v. Hill Eng’g, Inc., 549 F.2d 314 (5th Cir. 1977) (overruled on other grounds) (venue is proper in all districts in the state); Horizon Mktg. v. Kingdom Int’l Ltd., 244 F. Supp. 2d 131 (E.D.N.Y. 2003) (venue is proper only in the district of its official corporate address). The Court will likely have to address this issue down the road.

The Author

Byron Pickard

Byron Pickard is a director and Practice Group Leader of the Litigation Group of Sterne, Kessler, Goldstein & Fox. He focuses his practice on patent litigation, trademark and trade-dress issues, copyright matters, licensing disputes, and commercial disputes affecting intellectual property. For more information, or to contact Byron, please visit his firm profile page.

Byron Pickard

Joseph Kim is an associate in the Litigation Group of Sterne, Kessler, Goldstein & Fox, and his practice involves complex intellectual property disputes in federal district court, before the Patent Trial and Appeal Board, and before the U.S. International Trade Commission.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

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There are currently 1 Comment comments. Join the discussion.

  1. Paul F. Morgan January 12, 2017 9:50 am

    Note that there is prior case law interpreting 1400(b)’s words: ” ..or where the defendant has committed acts of infringement and has a regular and established place of business.” That is, case law from the long time period before the Fed. Cir. held that same existing statute moot for corporations 26 years ago. Another article, on that case law, would be useful, assuming the Sup. Ct. decision is as predicted here.

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