In TC Heartland LLC v Kraft Foods Group Brands LLC, (No 16 -341) May 22, 2017, the Supreme Court concluded that under the patent venue statue, 28 USC § 1400(b), a domestic corporation “resides” only in its State of incorporation, narrowing the prevailing definition of corporate residence for a domestic corporation and restricting the options for a patent plaintiff.
The patent venue statute, 28 USC § 1400(b), has been in place since 1948 and 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.” Unfortunately, the patent venue statute does not define corporate “residence.”
Prior to the holding in TC Heartland, patent plaintiffs benefitted from a very broad definition of corporate “residence” found in the general venue statute, 28 USC §1391(c), which states, “a corporate defendant shall be deemed to reside in any judicial district in which such defendant is subject to the courts personal jurisdiction with respect to the civil action in question.” Establishing personal jurisdiction over a corporate defendant is fairly easy in most states. Typically, substantial sales within the state where the district court sits is sufficient to establish the minimum contacts necessary for personal jurisdiction. Therefore, patent plaintiffs could easily select their preferred jurisdictions, one being the US District Court for the Eastern District of Texas, where over 36.4% ( 1,647) of the patent infringement suits were filed in 2016, (LexMachina.com, 2016 Fourth Quarter Litigation Update, January 12, 2017).
The Supreme Court had earlier rejected the practice of supplementing § 1400(b) with the definition of residence in §1391(c) of the general venue statute in the case of Transmirra Products Corp. v. Fourco Glass Co., 233 F 2d 885 (1956). The Court in Fourco found that this practice was inconsistent with the intention of Congress to provide a separate venue statute for patent cases and concluded that “resides” in 1400(b) bore the same meaning as “inhabit[s]” in the preceding patent venue statute of 1897 such that for patent cases, domestic corporations were subject to venue only in their state of incorporation.
An amendment to the general venue statute in 1988 led the Federal Circuit to conclude in VE Holding Corp. v Johnson Gas Appliance Co. 917 F 2d.1574(1990) that the definition of “reside” in §1391 (c ) should once again be applied to §1400(b). This interpretation of §1400(b) continued up until this Supreme Court decision.
In TC Heartland, the Supreme Court reaffirmed its findings in Fourco that Congress did not intend to change the role of §1400(b) as a separate venue statute for patent cases. The Court found the amendments to the general venue statute in 1988 and 2011 provided no indication that Congress intended to alter the interpretation of §1400(b) in Fourco. Therefore, “residence” for a domestic corporation under 1400(b) refers only to the State of incorporation.
While the decision in TC Heartland will impact the ability of a patent plaintiff to forum shop when bringing an action against a domestic corporation, the rules with regard to the proper venue when suing foreign corporations remain untouched by this decision. For the time being, a patent plaintiff can still file suit against a foreign corporation in essentially any US District Court. In addition, the decision does not address the alternative means for establishing venue under 28 USC § 1400(b), which provides an action for patent infringement may be brought in the judicial district where “the defendant has committed acts of infringement and has a regular and established place of business.” It appears plaintiffs wanting to select a particular forum in which to bring suit other than the State of incorporation of a defendant may still do so if they can show the defendant has an established place of business in that forum, in addition to infringing sales. Therefore, the US District Court for the Eastern District of Texas is likely to remain a busy forum for patent infringement suits.