Forum Shopping In Patent Litigation Is Finished – TC Heartland Case
By: Wisu Sul
On May 22, 2017, the U.S. Supreme Court reversed decades of patent venue law in TC Heartland LLC v. Kraft Foods Group Brands LLC,[1] holding that a corporation “resides” only in its state of incorporation for purposes of determining proper venue under 28 U.S.C. § 1400(b).[2] Patentees are not able to choose a federal court that has favorable rules and procedures.
In TC Heartland LLC, Kraft Foods Group Brands LLC the patentee, sued TC Heartland LLC for infringing its patents on “liquid water enhancers” in the District of Delaware, but TC Heartland asked the court to move the case to Indiana.[3] TC Heartland shipped the alleged infringing products to Delaware, but was incorporated and headquartered in Indiana.[4] The District Court held that the venue was proper, and the Federal Circuit affirmed the District Court’s ruling.[5]
The Supreme Court reversed the Federal Circuit’s ruling.[6] The Supreme Court held that a “domestic corporation ‘resides’ only in its State of incorporation for purposes of the patent venue statute.”[7] Thus, venue is only proper for patent cases in (a) a defendant’s State of incorporation or (b) where the defendant has committed acts of infringement and has a regular and established place of business.[8]
- Prior History of TC Heartland LLC
Under the patent venue statute, 28 U.S.C. § 1400(b), “[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.”[9] The US Code also contains a broader venue statute, 28 U.S.C. § 1391, which states “[e]xcept as otherwise provided by law” and “[f]or all venue purposes,” a corporation “shall be deemed to reside, if a defendant, in any judicial district in which such defendant is subject to the court’s personal jurisdiction with respect to the civil action in question.”[10]
Prior to TC Heartland LLC, there were two important cases about patent venues, and the general venue statute, 28 U.S.C. § 1391, was amended twice.[11]
In Fourco Glass Co., the Supreme Court held that § 1400(b) was the sole and exclusive venue provision in patent infringement actions.[12] The Court noted that § 1400(b) is not to be supplemented by the provisions of § 1391(c).[13] The Court interpreted the term “resides” in § 1400(b) to only the state in which a corporation is incorporated.[14]
In 1988, Congress amended the general venue statute, 28 U.S.C. § 1391, to include the phrase “[f]or purposes of venue under this chapter.”[15]
In VE Holding Corp., the Federal Circuit held that venue over a patent infringement defendant has been proper in any district where the defendant is subject to personal jurisdiction.[16] The Federal Circuit interpreted the phrase “[f]or purposes of venue under this chapter” as indicating that § 1391(c) clearly applies to § 1400(b).[17] The Federal Circuit redefined the meaning of the term “resides,” interpreting the phrase “the judicial district where the defendant resides” in § 1400(b) as “any district where there would be personal jurisdiction over the corporate defendant.”[18]
In 2011, Congress amended the phrase “[f]or purposes of venue under this chapter” in § 1391 to “[f]or all venue purposes,” and added a new subsection (a) stating that the section “shall govern the venue of all civil actions,” and “[e]xcept as otherwise provided by law.”[19]
- Patent Forum Shopping
The holding of VE Holding Corp. allowed patentees a choice of the forum. VE Holding Corp. expanded the range of permissible options for venue over patent infringement cases because it subjected corporate defendants to lawsuits anywhere they might be subject to personal jurisdiction.[20]
Jurisdiction over patent cases is unique because the patent right is not limited to a specific location, but exists in every district in the United States.[21] Patentees are able to be injured in every district where an infringing sale was made because that is where the patent owner suffers economic loss.[22] Therefore, patentees can obtain specific jurisdiction over the accused infringer in any district the infringer sells his products.[23]
The only option for an alleged infringer is to make a motion for transfer of venue based on Forum non conveniens.[24] However, courts rarely grant transfers in patent cases due to the fact the convenience of litigation in one district is not drastically different from another district.[25]
As a result, over the past ten years, the patent-friendly district, the Eastern District of Texas, has been the capital of patent litigation.[26] Also, Delaware, where the patentee filed a patent infringement suit in TC Heartland, has been the second-busiest court behind the Eastern District of Texas in recent years.[27]
- Procedural History of TC Heartland LLC
A patentee, Kraft Foods Group Brands LLC, filed a patent infringement suit in the District Court for the District of Delaware against a competitor, TC Heartland LLC, who is organized under Indiana law and headquartered in Indiana but ships the allegedly infringing products into Delaware.[28]
The competitor moved to transfer venue to a district court in Indiana, claiming that venue was improper in Delaware.[29] The competitor argued that the patentee did not “resid[e]” in Delaware and had no “regular and established place of business” in Delaware under § 1400(b).[30] The District Court rejected these arguments.[31] The Federal Circuit denied a petition for a writ of mandamus, concluding that § 1391(c) supplies the definition of “resides” in § 1400(b).[32] The Federal Circuit reasoned that because petitioner resided in Delaware under § 1391(c), it also resided there under § 1400(b).[33]
- The Supreme Court Decision
The Supreme Court reversed the Federal Circuit and interpreted “resides” in the patent venue statute narrowly.[34] The Court reaffirmed its interpretation of the patent venue in Fourco Glass Co.[35] In Fourco Glass Co., the Supreme Court interpreted that the word “reside[nce]” in § 1400(b) to only the State of incorporation.[36] In TC Heartland, the Court noted that “Congress has not amended § 1400(b) since Fourco, and neither party asks [the Court] to reconsider [its] holding in that case.”[37]
First, the Court pointed out that the current version of § 1391 does not contain any indication that Congress intended to alter the meaning of § 1400(b) as interpreted in Fourco Glass Co.[38] The Court noted that no material difference existed between the phrase “[f]or all venue purposes” in the current version of § 1391(c) and the phrase “for venue purposes” in the version at issue in Fourco Glass Co.[39] Also, the Court noted that the addition of the word “all” to the current provision does not suggest that Congress intended for us to reconsider that conclusion.[40]
Indeed, the Court reasoned that the saving clause of § 1391 in its current version, which states “that it does not apply when ‘otherwise provided by law,’” makes explicit the qualification that [the] Court previously found implicit in the statute.[41]
Finally, the Court noted that there was no indication that Congress in 2011 ratified the Federal Circuit’s decision in VE Holding Corp. because nothing in the current version of § 1391 suggests congressional approval of VE Holding Corp.[42]
The Court reaffirmed that a domestic corporation resided only in its State of incorporation, and bringing a patent infringement action is proper only (1) in the state where the corporation is incorporated, or (2) where the defendant has committed acts of infringement and has a regular and established place of business.[43]
- Stop Forum Shopping – Post TC Heartland LLC
The TC Heartland LLC case will alter the patent litigation landscape. It blocks patentees from choosing the forum that has favorable rules and procedures.
First, many alleged infringers will seek to dismiss or transfer their venue based on this ruling. They alleged that venue is only proper for patent cases in (1) a patentee’s State of incorporation or (2) where the alleged infringer has committed acts of infringement and has a regular and established place of business.
Second, the holding in TC Heartland LLC will preclude patentees from bringing cases in patent-friendly jurisdictions like the Eastern District of Texas, or the District of Delaware. The decision will reduce the opportunity for forum shopping.
Finally, more patent infringement suits will rise in the common states of incorporation and states that have recognized industries. For example, there will likely be a greater number of cases brought in Delaware, a common state of incorporation, as well as in technological hubs like the Northern District of California, where many companies are incorporated or headquartered.
In sum, the Supreme Court declared that the forum shopping in patent litigation is finished.
[1] TC Heartland LLC v. Kraft Foods Grp. Brands LLC, 137 S. Ct. 1514, 1520 (2017).
[2] Id. at 1520; 28 U.S.C. § 1400(b) (2017).
[3] TC Heartland LLC, 137 S. Ct. at 1517.
[4] Id.
[5] Id. at 1516.
[6] Id. at 1520.
[7] Id. at 1517.
[8] Id. at 1521.
[9] 28 U.S.C. § 1400(b).
[10] 28 U.S.C. §§ 1391(a), (c) (2017).
[11] See Fourco Glass Co. v. Transmirra Products Corp., 353 U.S. 222, 225 (1957); VE Holding Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574, 1578 (Fed. Cir. 1990); 28 U.S.C. § 1391.
[12] Fourco Glass Co., 353 U.S. at 229.
[13] Id. at 228.
[14] Id. at 229.
[15] See Judicial Improvements and Access to Justice Act, § 1013(a), 102 Stat. 4669.
[16] VE Holding Corp., 917 F.2d at 1578.
[17] Id.
[18] Id.
[19] See Federal Courts Jurisdiction and Venue Clarification Act of 2011, § 202, 125 Stat. 763.
[20] See Alisha Kay Taylor, What Does Forum Shopping in the Eastern District of Texas Mean for Patent Reform?, 6 J. Marshall Rev. Intell. Prop. L. 570 (2007).
[21] Id. at 576.
[22] Id.
[23] Id.
[24] Id.
[25] Id.
[26] Id. at 580.
[27] Id.
[28] TC Heartland LLC, 137 S. Ct. at 1517.
[29] Id.
[30] Id.
[31] Id.
[32] Id.
[33] Id.
[34] Id. at 1520.
[35] Id.
[36] Fourco Glass Co., 353 U.S. at 229.
[37] TC Heartland LLC, 137 S. Ct. at 1520.
[38] Id.
[39] TC Heartland LLC, 137 S. Ct. at 1520 (citing Pure Oil Co. v. Suarez, 384 U.S. 202, 204–05 (1966)).
[40] TC Heartland LLC, 137 S. Ct. at 1521.
[41] Id.
[42] Id.
[43] Id.