SCOTUS limits venue for patent lawsuits
In a landmark decision, the U.S. Supreme Court has dramatically tightened the restrictions on where patent owners can file infringement lawsuits. The court’s unanimous ruling is expected to rein in the “forum shopping” that so often occurs in patent infringement cases, where patentees try to file in judicial districts considered to be more plaintiff-friendly, such as the defendant-dreaded Eastern District of Texas.
The case involved a lawsuit between two companies and the states where they do business. TC Heartland LLC is organized and headquartered in Indiana. Kraft Foods Group Brands LLC is organized under Delaware law, with its principal place of business in Illinois. Kraft sued TC Heartland for patent infringement in the federal district court in Delaware. TC Heartland isn’t registered to conduct business in Delaware and has no meaningful presence there, but it does ship the allegedly infringing products into the state.
TC Heartland asked to have the case transferred to a district court in Indiana. The trial court in Delaware rejected the request, and the Federal Circuit Court of Appeals agreed. TC Heartland then turned to the Supreme Court.
Home, sweet, home
The patent venue law, also known as Section 1400(b), provides that infringement actions should be filed in the judicial district where 1) the defendant resides or 2) has committed infringement and has a regular and established place of business. According to the Federal Circuit, the general venue law, Sec. 1391(c), defines “residence” for corporate defendants.
Sec. 1391 currently provides that “[e]xcept as otherwise provided by law” and “[f]or all venue purposes,” a corporate defendant resides in any judicial district where it’s subject to personal jurisdiction for the lawsuit in question. Because the Delaware court could exercise personal jurisdiction over TC Heartland, the Court of Appeals reasoned, the company resided in Delaware under Sec. 1391 and, therefore, under Sec. 1400(b).
The Supreme Court disagreed. It pointed to its 1957 decision in Fourco Glass Co. v. Transmirra Products Corp., where it found that Congress enacted Sec. 1400(b) as a standalone venue statute and that “resides” for purposes of the provision meant the state of incorporation. Sec. 1400, the Court said, is the sole and exclusive law controlling patent infringement venue and isn’t to be supplemented by Sec. 1391.
According to the Court, the only question here was whether Congress changed Sec. 1400(b)’s meaning when it amended Sec. 1391 in 1988 to state that it applied “for purposes of venue under this chapter” of laws or when it adopted the current version in 2011. When Congress intends to make such a change, the Court found, it ordinarily provides a relatively clear indication of its intent in the amended provision’s text.
No such indication appears in the current version of Sec. 1391, the high court said. In fact, the current version includes a savings clause that expressly states that it doesn’t apply “when otherwise provided by law,” making clear that Sec. 1400(b) is a standalone statute.
Mapping the future
The Court concluded that, as applied to domestic corporations, the term “resides” in Sec. 1400(b) refers only to the state of incorporation. This interpretation significantly narrows patent owners’ options when deciding where to file infringement actions.
Defendants may enjoy a home-court advantage more often now, instead of ending up in courts that might have rules and procedures different from their own. They could, however, face extended delays due to protracted pretrial litigation over whether they have a “regular and established place of business” in a district sufficient to justify finding venue there. •
TC Heartland LLC v. Kraft Foods Group Brand LLC, No. 16-341, May 22, 2017 (U.S.)