U.S. Corporate Defendants Incorporated In Multi-District States Reside Only In A Single District For Patent Venue Purposes
In the third important patent venue decision it has issued in the past week (In re: BigCommerce, No. 2018-122 (May 15, 2018)), the Federal Circuit has clarified the proper location for patent infringement suits against U.S. corporations whose state of incorporation is large enough to have multiple federal judicial districts. According to the Court,
a domestic corporation incorporated in a state having multiple judicial districts ‘resides’ for purposes of the patent-specific venue statute, 28 U.S.C. § 1400(b), only in the single judicial district within that state where it maintains a principal place of business, or failing that, the judicial district in which its registered office is located[.]
The Court’s opinion answers a question left open by the Supreme Court’s landmark decision in TC Heartland, LLC v. Kraft Foods Grp. Brands, LLC, 137 S.Ct. 1517 (2017), which held that a U.S. corporate defendant resides in the state in which it is incorporated (see our prior post), but did not answer the question of where to sue in multi-district states.
The Court’s interpretation of the patent venue statute as restricting venue to a single judicial district was not unexpected (see our prior post), and pointed to “clear support in the statute’s language, history, purpose, and precedent.” The Court’s opinion also, however, provides guidance on how to determine the proper district for patent venue that was not strictly required to resolve the case at hand.
First, it discusses the meaning of “principal place of business.” The Court signals by its quotations from Supreme Court and secondary sources that a corporation’s principal place of business is typically its “nerve center,” where its “corporate business is transacted” or “where a corporation’s officers direct, control, and coordinate the corporation’s activities,” and notes that this “should normally be . . . its headquarters.” The Court further notes that the meaning of principal place of business “is to be distinguished from” a corporation’s “‘regular and established place of business’” that, under the statute, is used to determine proper venue for suits against U.S. corporations in states in which they do not reside (i.e., are not incorporated). Reading between the lines, the Court’s opinion suggests that a “regular and established place of business” has a broader meaning that encompasses more general business activities. These distinctions may be important in future cases in which a corporation has facilities in more than one district that may or may not qualify as a principal place of business. However, because it was undisputed that BigCommerce’s headquarters were in Austin, Texas, which is in the Western District of Texas, the finding that venue was proper only in the Western District of Texas (and not the Eastern District where it was sued) was an easy call.
Second, the Court went on to offer its opinion that if a corporation has no principal place of business at all in its state of incorporation, it can still be sued in the judicial district within that state “in which its registered office is located.” The Court reasoned that a “universally recognized foundational requirement of corporate formation is the designation of a registered office that will serve as a physical presence within the state” and that “[i]n the absence of an actual principal place of business . . . the public is entitled to rely on the designation of the registered office . . . as the place where the corporation resides.”
Takeaway: The Federal Circuit’s three recent venue opinions fill in gaps left by TC Heartland. These decisions — In re: HTC Corporation, No. 2018-130 (May 9, 2018), affirming that a non-U.S. corporation can be sued for patent infringement in any judicial district (see our prior post); In re: ZTE (USA) Inc., No. 2018-113 (May 14, 2018), holding that the plaintiff bears the burden of proving proper venue in patent cases (see our prior post), and now In re: BigCommerce, No. 2018-122 (May 15, 2018), clarifying that a U.S. corporation incorporated in a multi-district state resides, for purposes of venue, in the one judicial district where it has its principal place of business or, alternatively, its registered office — provide a much-needed measure of certainty in this important area for both plaintiffs and defendants alike.