Supreme Court Limits Forum Shopping Options in Patent Litigation

Supreme Court Limits Forum Shopping Options in Patent Litigation

Summary

On Monday, May 22, 2017, the U.S. Supreme Court issued a decision in TC Heartland LLC v. Kraft Foods Group Brands LLC, that limits a patentee’s choices of venue in patent infringement litigation. Specifically, the Supreme Court held that “a domestic corporation ‘resides’ only in its State of incorporation for purposes of the patent venue statute.” This decision is expected to increase the number of patent infringement cases being brought in Delaware because of the high number of businesses that incorporate there.

The Facts of the Case

TC Heartland (“Heartland”) is organized under Indiana law and is headquartered in Indiana. Kraft Food Brands LLC (“Kraft”) is organized under Delaware law and has its principal place of business in Illinois. Kraft sued Heartland in the District Court for the District of Delaware, alleging patent infringement. Kraft asserted venue in Delaware based on Heartland’s shipping of allegedly infringing products into the state. Heartland is not registered to conduct business in Delaware and has no meaningful local presence there.

The District Court and the Federal Circuit’s Decision

The District Court denied Heartland’s motion to dismiss the case or to transfer venue to the District Court for the Southern District of Indiana. The Federal Circuit denied a petition for a writ of mandamus. The Federal Circuit relied upon its own precedent that allowed suit to be brought anywhere the defendant is doing business.

The Supreme Court’s Analysis of the Patent Venue Statute

28 U.S.C. § 1400(b) 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.”

In its discussion, the Supreme Court stated that “[t]he history of the relevant statutes provides important context for the issue in this case.” In 1897, Congress enacted a patent specific venue statute, §1400(b)’s predecessor, which permitted suit in the district of which the defendant was an “inhabitant,” or a district in which the defendant both maintained a “regular and established place of business” and committed an act of infringement. At that time, a corporation was understood to “inhabit” only the state in which it was incorporated.

In 1948, Congress recodified the patent venue statute as § 1400(b) and enacted the general venue statute, 28 U.S.C.§1391. Section 1400(b) replaced the previous statute’s “inhabits” with “resides.” Section 1391(c) defined residence as “any district in which [a corporation] is incorporated or licensed to do business or is doing business.” The Supreme Court, in Fourco Glass Co v. Transmirra Products Corp., 353 U.S. 222, 226(1957), confirmed its earlier decision that §1400(b) “is the sole and exclusive provision controlling venue in patent infringement actions, and . . . is not to be supplemented by . . . §1391(c).” The Supreme Court also concluded that “resides” in the recodified version of § 1400(b) bore the same meaning as “inhabits” in the previous version.

Congress subsequently amended §1391(c) in 1988 and 2011 to provide that “a corporation shall be deemed to reside in any judicial district in which it is subject to personal jurisdiction at the time the action is commenced.” Section §1400(b) remained unaltered. The Federal Circuit, through its case law, took the position that the amendment to §1391(c) applies to §1400(b).

In Monday’s decision, the Supreme Court reversed the Federal Circuit, reaffirming its holding in Fourco: the word “reside,” as applied to domestic corporations, refers only to the state of incorporation. The Supreme Court reasoned that Congress has not amended §1400(b) and thus, Congress did not change the meaning of §1400(b) when it amended §1391. Had they intended to do otherwise, the Court reasoned, Congress would have provided a clear indication of its intent in the text of the amended provision.

Forum Shopping for Patent Litigation

This decision is expected to curtail the ability of plaintiffs to bring patent infringement actions in jurisdictions perceived to be “patent-friendly” such as the Eastern District of Texas. More infringement actions are expected to be filed in Delaware where many companies are incorporated, and in technology centers such as Northern California where many technology companies have established places of business.

Saul Ewing attorneys regularly assist clients with patent enforcement and other causes of action in the federal courts, including in the federal courts in Delaware. If you have any questions about this alert or would like more information, please contact Mark Simpson, Weiguo (Joe) Zhou, one of the other attorneys in our intellectual property practice, or the attorney in the Firm with whom you are regularly in contact.

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