Congress’ 2011 amendments to 28 U.S.C. § 1391 did not overrule Federal Circuit precedent holding that the definition of corporate residence in the general venue statue, § 1391(c), applies to the patent venue statute, 28 U.S.C. § 1400
In re: TC Heartland LLC, No. 2016-105 (Fed. Cir. Apr. 29, 2016)
The defendant TC Heartland, an Indiana company, requested the federal court in Delaware to dismiss a lawsuit filed against it in Delaware for lack of personal jurisdiction and venue or to transfer venue to Indiana—where TC Heartland was organized and headquartered. It argued that it was not registered to do business in Delaware, and only two percent of its products were shipped to the state. Thus, TC Heartland argued that the case should not be venued in Delaware because it did not “reside” in Delaware. However, the district court denied the motion holding that under 28 U.S.C. § 1391(c) a corporation resides for venue purposes anywhere it does business and is subject to personal jurisdiction. The district court relied on the Federal Circuit’s holding in VE Holding Corp. v. Johnson Gas Appliance Co. 917 F.2d 1574 (Fed. Cir. 1990), in which the court held that the special residency provision of § 1391(c) superseded the residency provision of 28 U.S.C. § 1400 which had been construed narrowly by the Supreme Court’s decision in Fourco Glass Ltd. v. Transmirra Products Corp., 353 U.S. 222 (1957). TC Heartland sought review, arguing that Congress’ 2011 amendment to the venue statutes nullified the Federal Circuit’s ruling in VE Holding.
The Federal Circuit disagreed and declined to order the case transferred to Indiana. The court rejected TC Heartlands’ arguments that Congress’ 2011 amendments to 28 U.S.C. § 1391 effectively overruled VE Holding’s determination that the definition of corporate residence in § 1391(c), applies to the patent venue statute, § 1400. Although Congress amended the language preceding the definition of corporate residence in § 1391 from, “For the purposes of venue under this chapter . . .” to “For all venue purposes,” the court held that the amendment broadened the definition of corporate residence, rather than narrowed it.
The Federal Circuit similarly rejected TC Heartlands’ argument that Congress’ 2011 amendment intended to overrule VE Holding because Congress added the introductory phrase, “except otherwise provided by law” to § 1391. TC Heartland contended that by this amendment Congress intended to codify federal common law concerning corporate “residency.” The Federal Circuit found, however, that there was no established Supreme Court common law that could have been codified by the 2011 amendment, and that numerous Congressional reports demonstrated Congress’ continued recognition that VE Holdings is the prevailing law.
For all of the foregoing reasons, the Federal Circuit held that, for venue purposes, a corporate defendant continues to “reside” in any jurisdiction where personal jurisdiction exists.
As to personal jurisdiction, the Federal Circuit reaffirmed its 1994 Beverly Hills Fan Co. v. Royal Sovereign Corp. decision, holding that personal jurisdiction exists if a non-resident defendant purposefully ships accused products into the forum through an established distribution channel and the cause of action for patent infringement is alleged to have arisen out of those activities. The Federal Circuit clarified, as in Beverly Hills Fan, that a forum state properly exercising jurisdiction could also hear claims for infringing acts occurring outside of the forum state.