TC Heartland v. Kraft Foods: Venue in Patent Cases Limited by § 1400(b)
The Supreme Court of the United States has tightened restrictions on where patent infringement actions may be filed. In an 8–0 decision, the Supreme Court held that for purposes of venue in patent infringement actions, a domestic corporation “resides” only in its state of incorporation. As a result, a domestic corporation may only be sued for patent infringement in a judicial district (1) in its state of incorporation or (2) where the domestic corporation has committed acts of infringement and has a regular and established place of business. TC Heartland LLC v. Kraft Foods Group Brands LLC, Case No. 16-341 (Supr. Ct., May 22, 2017) (Thomas, Justice).
TC Heartland manufacturers flavored drink mixes and is incorporated under Indiana law and headquartered in Indiana. Kraft filed a patent infringement complaint in the US District Court for the District of Delaware accusing TC Heartland of infringing Kraft’s patents. TC Heartland argued venue was improper in Delaware under 28 USC § 1400(b) and moved to transfer the case to the US District Court for the Southern District of Indiana. Section 1400(b), also referred to as the patent venue statute, 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.” TC Heartland argued that venue was improper in Delaware because TC Heartland (1) did not reside in Delaware and (2) did not have a regular and established place of business in Delaware.
Both the district court and the US Court of Appeals for the Federal Circuit rejected TC Heartland’s arguments. The Federal Circuit focused on the interplay between the patent venue statute (§ 1400(b)) and the general venue statute (28 USC § 1391(c)), and concluded that for purposes of venue in a patent infringement action, a corporate entity resides in any judicial district in which the entity is subject to personal jurisdiction (IP Update, Vol. 19, No. 5). Applying this logic, the Federal Circuit found that since the District of Delaware could exercise personal jurisdiction over TC Heartland, TC Heartland resided in Delaware for purposes of venue under § 1400(b). TC Heartland appealed to the Supreme Court.
In its petition for certiorari, TC Heartland argued that the Federal Circuit, relying on the 2011 amendments to § 1391(c), improperly held that the 1957 Supreme Court decision in Fourco Glass v. Transmirra Prods. (where the Supreme Court concluded that for purposes of § 1400(b), a domestic corporation “resides” only in its state of incorporation) is no longer the prevailing law when determining where venue is appropriate in a patent infringement action (IP Update, Vol. 19, No. 12). In Fourco Glass, the Supreme Court rejected the argument that § 1400(b) incorporated the broader definition of “reside” as recited in the general venue statue of § 1391(c). The precise question presented to the Supreme Court was the same as that decided in Fourco: “whether 28 U.S.C. § 1400(b) is the sole and exclusive provision governing venue in patent infringement actions and is not supplemented by 28 U.S.C. § 1391(c).”
The Supreme Court reversed the Federal Circuit and held that the 2011 amendments to § 1391 did not modify the meaning of “reside” in § 1400(b) as interpreted by Fourco, and that therefore a domestic corporation “resides” in its state of incorporation for purposes of the patent venue statute. The Supreme Court found no indication that Congress intended to alter the meaning of the patent venue statute, as interpreted by Fourco, when it enacted the 2011 amendment. In fact, the Supreme Court noted that the holding in Fourco was even stronger now that § 1391(c) expressly states that it does not apply when “otherwise provided by law” and thus contemplates that other venue statutes, including the patent venue statute, may retain a definition of “reside” that conflicts with the default definition provided by the general venue statute. The Supreme Court also found that Congress did not ratify the Federal Circuit decision in VE Holding when it passed the 2011 amendment. Instead, the 2011 amendment undermined VE Holding, since that decision relied almost exclusively on the addition of the phrase “[f]or venue purposes of venue under this chapter” in the 1988 amendment. By deleting the clause “under this chapter” in the 2011 amendment, the wording of the current version of § 1391 became nearly identically to the 1948 version of § 1391. Thus, the Supreme Court found that the interpretation of § 1400 in Fourco remains the prevailing law in determining venue for patent infringement actions and as applied to corporations, “reside” in § 1400(b) refers only to the state of incorporation.
Practice Note: The Supreme Court’s decision will have a significant impact on patent litigation. First, the most immediate consequence is the likely diminishment of the Eastern District of Texas as a popular patent litigation forum, since most companies sued there are neither incorporated in Texas nor have a regular and established place of business in the Eastern District of Texas. Second, there may be a concomitant increase in the number of filings in Delaware (where many companies are incorporated) and the Northern District of California and Southern District of New York (where many companies are headquartered). Third, there will likely be increased motion practice as to whether a defendant has a “regular and established place of business” in a district sufficient to support venue under § 1400(b). Fourth, there may be an increase in the number of filings against the foreign parent corporations of US subsidiaries, since foreign defendants can be sued in any judicial district where personal jurisdiction is found. Finally, given that a plaintiff now likely must sue each defendant to a multi-party litigation in separate jurisdictions, there may be an increase in the use of multi-district litigation panels to address pre-trial issues. This could result in months of delay while motion practice before the multi-district litigation panel is resolved.