TC Heartland LLC v. Kraft Foods Group Brands LLC581 U.S. ___ (2017)

The reign of the Eastern District of Texas as the pro-patentee jurisdiction of choice for patent litigation in the United States may have just come to an end.

In this 8-0 Supreme Court decision, the SCOTUS reaffirmed its holding in Fourco Glass Co. v. Transmirra Products Corp. 353 U.S. 222 (1957) [Fourco] to find that the proper venue for bringing a patent infringement suit against a domestic corporation is either (1) where the defendant resides, which refers only to where the defendant is incorporated, or (2) where the defendant has committed acts of infringement and has a regular place of business.

The decision likely means a drop in the number of patent suits brought in the East District of Texas, a historically pro-patent venue, and a corresponding rise in the number of patent suits brought in various districts throughout the United States where defendants do business, and particularly in the District of Delaware, a common corporate headquarters for US companies.

Patent Venue Statute in 28 U.S.C. §1400(b) vs. General Venue Statute in 28 U.S.C. §1391

The decision turned on the statutory interpretation of the patent venue statute in 28 U.S.C. §1400(b) versus general venue statute in 28 U.S.C. §1391. The patent venue clause reads:

(b) Any 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 the case of domestic corporations, the Fourco decision interpreted “resides” in §1400(b) to refer only to the state in which the domestic corporation is incorporated.

This interpretation remained largely unchanged until Congress made amendments to the general venue statute §1391, which had a more expansive definition of residency. The changes were interpreted in VE Holding Corp. v. Johnson Gas Appliance Co., 917 F. 2d 1574 (1990) [VE Holding] to override the more limited definition of corporate residency in §1400(b), thus opening the door for widespread patent litigation forum shopping which has seen the East District of Texas become the go-to venue for patent enforcement.

The only issue to be addressed in this case was whether Congress changed the meaning of §1400(b) when it twice amended §1391 after Fourco. The changes to §1391 included adding “[f]or purposes of venue under this chapter,” and “[f]or all venue purposes” instead of “for venue purposes,” which were considered in VE Holding to cause the more expansive definition of residency in §1391 to override the more limited definition in §1400(b). [2] The broader definition of residency in §1391 allows a corporation to be sued in any district in which it is subject to personal jurisdiction, which is not limited to where it is incorporated. [2]

On a review of the legislative history and statutory interpretation, the SCOTUS determined that the meaning of §1400(b) was not changed since Fourco. The SCOTUS was particularly swayed by the lack of expressed intent of Congress to affect such a change, [8] and was further swayed by the inclusion in §1391 of the escape clause “[e]xcept as otherwise provided by law,” thus providing an out for §1400(b). [9] Furthermore, the SCOTUS observed that the language of “[f]or purposes of venue under this chapter” was removed after VE Holding, a strong signal that nothing in §1391 suggests congressional approval of VE Holding. [10]

Commentary: Canadian Corporations

The case leaves unanswered the procedural question of how cases currently pending in the East District of Texas are to be handled.

It is also important to note that this decision did not address the impact on foreign corporations doing business in the United States. Canadian corporations, especially those doing business in the United States over the Internet, will have to wait to see if they will be keeping the East District of Texas busy.

This case further opens the door for patent holders strategically targeting infringers further down the corporate chain, including suppliers, distributors and even customers, who may reside in a more favourable jurisdiction for patent litigation.