Supreme Court Reverses Federal Circuit on Venue for Patent Infringement Suits

TC Heartland LLC v. Kraft Foods Grp. Brands LLC, except GORSUCH, J., who took no part in the consideration or decision of the case.)

Venue for patent infringement cases are governed by 28 U.S.C. § 1400(b), which states that patent infringement suits can be brought 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. In Fourco Glass Co. v. Transmirra Products Corp., 353 U.S. 222 (1957), the Supreme Court held that for purposes of § 1400(b), a domestic corporation “resides” only in the state of its incorporation.

In this case, Kraft sued TC Heartland in the District of Delaware, alleging that TC’s products infringed one of its patents. TC is organized under Indiana law and is headquartered in Indiana. Kraft is organized in Delaware and has its principal place of business in Illinois. TC moved to dismiss or transfer the case to the Southern District of Indiana, arguing that venue was improper in Delaware under § 1400(b), because it is not registered to do business in Delaware and has no meaningful presence there. The District Court rejected these arguments and the Federal Circuit denied a petition for a writ of mandamus. The Federal Circuit concluded that relatively recent amendments to the general venue statute, 28 U.S.C. § 1391(c), which provides that a defendant resides in any district where it is subject to personal jurisdiction, were applicable to the specific venue provisions of § 1400(b) for patent suits. The Supreme Court granted certiorari and reversed.

The question in this case is whether the general venue provision in § 1391(c), as amended, supplants the Court’s decision in Fourco, and thereby allows a plaintiff to bring a patent suit against a domestic corporation in any district in which the corporation is subject to personal jurisdiction. The Supreme Court concluded “no,” and held that for patent infringement, a domestic corporation resides only in the state of its incorporation.

The Court reviewed the history of both the general venue provision in § 1391(c) and the patent venue provision in § 1400(b). The Court noted that patent cases have been placed “in a class by themselves, outside the scope of general venue legislation” since 1897, when the first patent-specific venue statute was enacted. Since then, the Court has repeatedly rejected, in cases like Fourco, any attempt to incorporate the definition of “resides” in § 1391(c) into the definition of “resides” in § 1400(b), noting that § 1400(b) “is the sole and exclusive provision controlling venue in patent infringement actions, and . . . is not to be supplemented by . . . § 1391(c).”

Nevertheless, Kraft argued that amendments to § 1391(c) in 1988 and 2011 superseded the Court’s decision in Fourco, and allow plaintiffs to sue a defendant for patent infringement in any district where the defendant is subject to personal jurisdiction. This has been the practice for decades, under Federal Circuit precedent. The Supreme Court disagreed, noting that Congress has not amended § 1400(b) since its enactment and did not provide any clear indication that it intended to change the meaning of § 1400(b) when it amended § 1391(c). Kraft’s argument was weakened by the fact that the text of the amended § 1391(c) includes a savings clause, which expressly states that it applies, except when “otherwise provided by law,” such as in a specific venue statute.  The Court found nothing in the text of § 1391(c) or § 1440(b) to suggest that the definition of “resides” in the amended § 1391(c) applies to § 1440(b) for patent infringement cases. Thus, as applied to domestic corporations in a patent infringement suit, the Court held that “resides” refers only to the state of incorporation. The Court expressly declined to consider the impact of its holding, if any, on foreign corporations.

A domestic defendant in a patent infringement case can only be sued in a district where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business. A domestic defendant in a patent case “resides” only in its state of incorporation. Thus, personal jurisdiction over the defendant is insufficient, by itself, to establish proper venue in a patent infringement case.

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Discuss this

There are currently 1 Comment comments.

  1. Mike May 26, 2017 9:42 am

    TC Heartland just made the patent troll problem worse.

    Without equal venue and the ability to enforce IP rights, small inventors hold worthless pieces of paper, and TC Heartland did exactly that, throwing small inventors, universities, and research centers under the bus by putting venue 100% in favor of defendants. Inventors simply cannot afford to chase infringers all throughout the states in order to protect their IP. And because TC Heartland just dramatically increased the cost for inventors to enforce their IP rights, and because the risk for attorneys to even consider contingency fee arrangements just skyrocketed, TC Heartland actually just added fuel to the fire regarding the patent troll problem.

    It’s not that difficult to realize that the more difficult it becomes for small inventors to enforce their IP rights, the more likely they will actually cede their IP over to trolls for enforcement.

    On legal footing alone, I actually do agree with SCOTUS’s decision due to precedent, but if you listen to the oral arguments, it was repeatedly suggested that Congress is the entity that needs to step up to the plate and construct a better venue statute in 1400(b).

    Dabney, Esq. (petitioner in Heartland’s oral argument) summed it up rightly when he said: “If there is a problem with the way Congress wrote the law, that’s just too bad. That’s not for a court to come in and overrule precedent in order to achieve a goal like that.” And he’s right. SCOTUS does not have the authority to write law. In fact, at 45:25 in the oral argument, Justice Sotomayor asks William Jay Esq. (respondent for Kraft) why he thought so many patent suits go to Texas, and whether it was due to venue forum shopping. Jay said that, rather than a SCOTUS binary decision on venue, CONGRESS IS BETTER EQUIPPED TO HANDLE THE VENUE PROBLEM, with one of the things being: “… Congress can … create a definition that doesn’t turn on the word ‘resides’ at all … [Congress] can add where the plaintiff has done research on the invention that is patented. Those are, in fact, what the proposals look like. … They all at least offer principal place of business and some plaintiff-centered venue.”

    In short, Congress needs to amend 1400(b).

    It is clear that TC Heartland just created an unfair venue problem for small business and independent inventors. Without fair venue, all inventors will question: “Why bother getting a patent when protecting it cannot be enforced?” And US innovation will ultimately suffer as a result.

    Equal defendant-plaintiff patent venue reform is the only correct path forward, and this is an issue that both sides of the aisle will agree on. SCOTUS is leaving it up to Congress to write a better statute, and we need one that at least includes inventors’ place of research. This will bring fair balance to venue, and it will still solve the problem of forum shopping, simply because trolls are not listed as inventors on the patents they own and would not be able to choose their district court.

    To accomplish this, look no further than here:
    https://www.congress.gov/bill/114th-congress/senate-bill/2733

    This bill was introduced in the 114th Congress, but post TC Heartland, it now has significant importance for preserving innovation, and needs to be introduced again in the 115th Congress.

    With this bill’s amendments to 1400(b) and under its construction of venue:
    – defendants keep their state of incorporation,
    – inventors get representation because it takes into consideration where inventors reside and/or their research was done, and
    – because PAEs are not the listed inventors in the patents they own, forum shopping is still nixed for them.

    It solves the problem that TC Heartland just created for small business, independent inventors, universities, and research centers.

    I encourage everyone to contact their representative and push for patent venue reform. Contact Senator Flake’s office and ask him to sponsor this bill again until we get a fair and balanced venue statute.

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