The United States Supreme Court recently restricted where patent owners may file suits for patent infringement against domestic corporations, reversing the Federal Circuit by finding that domestic corporations reside only in their State of incorporation. The Court’s decision, however, leaves open the question of what constitutes a defendant’s "regular and established place of business" for purposes of venue in patent suits.

The venue statute for patent infringement actions, 28 U.S.C. § 1400, 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 TC Heartland LLC v. Kraft Foods Group Brands LLC, the Supreme Court held that, under this statute, a domestic corporation "resides" only in its State of incorporation.

Background

Kraft Foods, a Delaware corporation with its principal place of business in Illinois, sued TC Heartland for patent infringement in the U.S. District Court for the District of Delaware. Although TC Heartland ships the allegedly infringing product into Delaware, it is not registered to conduct business in Delaware and has no meaningful local presence there. Rather it is a corporation organized under Indiana law and headquartered in Indiana.

Accordingly, TC Heartland moved to dismiss or transfer the case to Indiana. The court denied TC Heartland’s motion and TC Heartland filed a petition for a writ of mandamus with the Federal Circuit. After the Federal Circuit denied this motion, TC Heartland appealed the decision to the Supreme Court.

In reaching a decision, the Supreme Court reviewed its 1957 decision in Fourco Glass v. Transmirra Products, that for purposes of the patent venue statute, 28 U.S.C. § 1400, a domestic corporation "resides" only in its State of incorporation. In Fourco, the Supreme Court rejected a Second Circuit decision finding that the patent venue statute incorporated the broader definition of "residence" found in the general venue statute, 28 U.S.C. § 1391(c).

In 1988, however, Congress amended the general venue statute to provide that "for purposes of venue under this chapter," a defendant corporation resided in any judicial district where it was subject to the court’s personal jurisdiction. In 1990, the Federal Circuit in VE Holding Corp. v. Johnson Gas Appliance Co. found that under the 1988 amendments, Section 1391(c) applied to Section 1400(b), because Section 1400(b) fell within the relevant chapter, and accordingly redefined the meaning of "resides" in that section.

Since VE Holdings and subsequent Federal Circuit personal-jurisdiction case law, venue has existed almost anywhere that an allegedly infringing product can be found. As a result, certain districts perceived as friendly to patent owners, such as the Eastern District of Texas, hear a disproportionate number of the patent-infringement actions in the United States.

On appeal, TC Heartland asked the Supreme Court to determine whether the patent venue statute is the sole and exclusive provision governing venue in patent infringement actions, or whether it may be supplemented by the general venue statute.

The TC Heartland Decision

The Supreme Court reversed the Federal Circuit, holding that the general venue statute does not supplant the venue statute specifically applicable to patent infringement suits. The Supreme Court explained that in Fourco, it unambiguously held that "resides" in the patent venue statute has a particular meaning as applied to domestic corporations: It refers only to the State of incorporation. The Court reasoned that Congress, in its 1988 amendments to general venue statute, did not intend to alter the meaning of the patent venue statute as interpreted earlier in Fourco. The Court further found that 2011 Congressional amendments to the general venue statute did not ratify the Federal Circuit’s VE Holding decision.

Strategy and Conclusion

This case reverses longstanding practice on where patent owners may sue domestic corporations for alleged patent infringement, restricting the "residence" of a domestic corporation to its State of incorporation for venue purposes. In many cases, this decision may limit where a plaintiff may bring a patent infringement action, and may significantly decrease the number of suits in popular venues. But TC Heartland did not address certain issues, such as proper venue for foreign corporations and unincorporated entities sued for patent infringement. TC Heartland also leaves unanswered questions concerning a domestic corporation’s "regular and established place of business," where venue may also be appropriate in addition to the place of a corporation’s "residence."

Further Information The Supreme Court's decision can be found here.

Originally printed in LES Insights on May 30, 2017..