Summary
The U.S. Supreme Court on Monday, May 22, 2017, unanimously held that patent infringement lawsuits may be filed against domestic corporations only in the company’s state of incorporation, or where the company has a regular place of business and committed acts of alleged infringement. The decision marks a significant break from over a quarter century of Federal Circuit precedent which had permitted suits to be filed wherever the corporation was subject to personal jurisdiction. In practice, that meant that patent infringement suits could be filed essentially wherever the defendant sold the allegedly infringing products through established trade channels. The Eastern District of Texas became a very popular forum for patent infringement suits because of the perception that that forum was friendly to plaintiffs. In light of the Supreme Court’s decision today, few plaintiffs will be able to file patent infringement cases in the Eastern District of Texas against domestic corporations because relatively few defendants are incorporated in Texas or maintain a regular place of business in the Eastern District of Texas.
Background of the Case
Kraft Foods Group filed suit against TC Heartland in the District of Delaware alleging patent infringement. TC Heartland is an Indiana limited liability company with its principal place of business in Indiana. TC Heartland responded to the Complaint by filing a motion to dismiss the action for improper venue or to transfer the case to the Southern District of Indiana. The motion was denied based upon the Federal Circuit’s prior decision in VE Holdings Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574 (Fed. Cir. 1990), which permitted patent infringement suits to be filed wherever the defendant was subject to personal jurisdiction. TC Heartland then filed a Petition for a Writ of Mandamus before the Federal Circuit, seeking to overturn the District Court’s ruling. The Federal Circuit denied the Petition in a unanimous precedential opinion, re-affirming its earlier decision in VE Holdings. In re TC Heartland LLC, 821 F.3d 1338 (Fed. Cir. 2016). TC Heartland then filed a Petition for a Writ of Certiorari before the Supreme Court, arguing among other things that the Federal Circuit’s decisions in VE Holdings and TC Heartland were inconsistent with the Supreme Court’s earlier decision in Fourco Glass Co. v. Transmirra Prods. Corp., 353 U.S. 222 (1957). The Supreme Court granted certiorari and, in today’s ruling, agreed with TC Heartland, overturning the Federal Circuit’s precedents.
Decision
The Supreme Court’s decision was based upon its interpretation of the Patent Venue Statute, 28 U.S.C. 1400(b), which reads: “Any 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.” The question before the Court was the meaning of the term “resides.” The Supreme Court had previously addressed this issue in Fourco. There, the Court held that, for purposes of Section 1400(b), a corporation “resides” only in the state where it is incorporated. In reaching this conclusion, the Court rejected the argument that the General Venue Statute, 28 U.S.C. 1391, dictated a broader definition of the term “resides.” That statute provides that “[a] corporation may be sued in any judicial district in which it is incorporated or licensed to do business or is doing business, and such judicial district shall be regarded as the residence of such corporation for venue purposes.” In rejecting this argument, the Court reviewed the history of Section 1400(b) and its predecessor statutes, and the Court concluded that Congress intended Section 1400(b) to be a restrictive, stand-alone venue statute for patent cases, and that the definition of residence found in the General Venue Statute, therefore, did not apply to patent cases. In today’s decision in TC Heartland, the Supreme Court held that two amendments to the wording of Section 1391 did not provide a clear indication that Congress intended Section 1391 to define residence for purposes of the Patent Venue Statute. Accordingly, the Supreme Court re-affirmed its own decision in Fourco, and reversed the Federal Circuit’s decisions in VE Holdings and TC Heartland.
Observations
In light of today’s decision, plaintiffs in patent infringement cases will no longer have a wide variety of choices of where to file suit against accused infringers. Previously, if the alleged infringement was nationwide, the plaintiff could choose to file in almost any forum that it deemed convenient or otherwise advantageous. Now, plaintiffs will be limited to filing suit in the defendant’s state of incorporation, or in a district where the defendant maintains a regular place of business and has committed acts of alleged infringement. This should significantly decrease the number of patent infringement suits filed in the Eastern District of Texas. It will also decrease the number of patent infringement suits filed by plaintiffs in their own home forum. In addition, it may increase the number of patent infringement suits filed in the District of Delaware because so many companies are incorporated in Delaware.