Why it matters: Patent plaintiffs are generally empowered to sue corporate defendants in any district where they can establish personal jurisdiction. However, the Federal Circuit will soon decide if the 2011 amendments to the Federal Rules of Civil Procedure limited venue in patent cases to places where the defendant is incorporated or has an established place of business and has allegedly infringed. See In re Heartland, LLC. Such a restriction, if imposed, would effectively foreclose many plaintiffs from filing suit in what they perceive to be "favorable" jurisdictions (such as the Eastern District of Texas).
Detailed discussion: On March 11, 2016, the Federal Circuit heard oral argument in In re TC Heartland, LLC—a case where the court is being asked to establish stricter venue rules for patent cases.
Venue in patent cases is currently governed by 28 U.S.C. §1400(b) and 28 U.S.C. §1391(c). The former (a statute specifically directed to patent cases) provides that venue is proper: (1) in the judicial district where the defendant "resides"; or (2) where the defendant has committed acts of infringement and has a regular and established place of business. The latter (which is a general venue statute) provides that an entity (e.g., a corporation) resides, if a defendant, in any judicial district in which the entity is subject to the court's personal jurisdiction with respect to the civil action in question. As a result, patent plaintiffs are generally empowered to sue corporate defendants in any district where they can establish personal jurisdiction.
In 2014, Kraft Food Group Brands LLC (a Delaware limited liability company) sued TC Heartland (an Indiana limited liability company) for patent infringement in the District of Delaware. TC Heartland moved to dismiss the case or, in the alternative, have the case transferred to the Southern District of Indiana (because TC Heartland "resided" in Indiana, had its "regular and established place of business" in Indiana, and 98% of Kraft's claims arose out of activity allegedly conducted by TC Heartland in Indiana). The District of Delaware denied the motion, which led TC Heartland to file a petition for writ of mandamus with the Federal Circuit (a petition that was granted in January of 2016).
TC Heartland's Position
For many years, U.S. Supreme Court precedent (e.g., Fourco Glass Co. v. Transmirra Products Corp.) prohibited courts from supplementing the venue provisions of 28 U.S.C. §1400(b) with the residency definitions set forth in 28 U.S.C. §1391(c). However, in 1988, Congress added the clause "[f]or purposes of venue under this chapter…" to the beginning of 28 U.S.C. §1391(c). Soon thereafter, the Federal Circuit (in VE Holding Corp. v. Johnson Gas Appliance Co.) interpreted this change as an expression of Congress' intent that 28 U.S.C. §1391(c) should, thereafter, be read in conjunction with 28 U.S.C. §1400(b)—because both statutes are located in Chapter 87 (Title 28) of the United States Code.
TC Heartland argues that VE Holding was rendered a nullity by the 2011 amendments to 28 U.S.C. §1391(c). Those amendments: (1) replaced the 1988 "[f]or purposes of venue under this chapter…" language with "[f]or all venue purposes"; and (2) introduced a new 28 U.S.C. §1391(a) (which provides that "[e]xcept as otherwise provided by law…(1) this section shall govern venue in all civil actions brought in district courts of the United States"). TC Heartland also asserts that, regardless of the 2011 amendments, VE Holding should be reexamined by the Federal Circuit,en banc, because it directly conflicts with Fourco.
Kraft's response (adopted by the district court) is that the new language in 28 U.S.C. §1391(c) is at least as broad as the prior 1988 language, and that 28 U.S.C. §1400(b) does not conflict with Section 1391 (and, thus, does not "otherwise provide"—as set forth in the new 28 U.S.C. §1391(a)).
The Underlying Policy Debate
While the arguments advanced by the parties largely focus on the interpretation of the statutory language and legal precedent, the underlying policy issues concerning the scope of venue in patent cases has attracted most of the interest in this case. Indeed, several amicus briefs have been filed urging the Federal Circuit to enact stricter patent venue laws—so as to make it more difficult for patent owners to "forum shop" for jurisdictions perceived to be advantageous to plaintiffs.
Oral argument was held on March 11, 2016. According to observers, the Federal Circuit panel appeared to treat TC Heartland's arguments with skepticism. Indeed, Judge Moore reportedly stated, "Boy, doesn't this feel like something the legislature should do?" In addition, the panel indicated that, even if it were so inclined to overturn its precedent in VE Holding, it could only be done by the full 12-judge en banc panel of the Federal Circuit. The panel's decision is pending.
On March 17, 2016, U.S. Senator Jeff Flake (R-Az) introduced a U.S. Senate Bill entitled the "Venue Equity and Non-Uniformity Elimination Act of 2016"—that would strike the current patent venue statute (28 U.S.C. §1400(b)), and would largely restrict patent suits (including declaratory judgment actions) to jurisdictions: (1) where the defendant has its principal place of business or is incorporated; (2) where the defendant has committed an act of infringement and a regular established physical facility that gives rise to the act of infringement; or (3) where an inventor of the patent-in-suit conducted research/development that lead to the claimed invention.
See here to read the Petition for Writ of Mandamus filed by TC Heartland LLC on October 23, 2015.