On May 22 2017 the Supreme Court in TC Heartland LLC v Kraft Foods Group Brands LLC issued a decision limiting venue in patent cases to districts in which the defendant is incorporated or where the defendant has committed acts of infringement and has a regular and established place of business. The TC Heartland decision overturns decades-long Federal Circuit precedent under which patent defendants have been sued in states other than those in which they are incorporated or have regular places of business.
The patent venue statute (28 USC Section 1400(b)) states that civil actions 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 1957 the Supreme Court in Fourco Glass Co v Transmirra Products Corp held that the word 'resides' in Section 1400(b) is limited to the defendant's state of incorporation.(1) However, in 1990, the Federal Circuit in VE Holding Corp v Johnson Gas Appliance Co held that 'resides' in Section 1400(b), as defined by the general venue statute (28 USC Section 1391) means any district where the defendant is amenable to personal jurisdiction.(2)
Petitioner TC Heartland is organised under the laws of Indiana and headquartered in Indiana. Respondent Kraft Food Brands Group is organised under the laws of Delaware and has a principal place of business in Illinois. Heartland shipped liquid water-enhancing products to Delaware. Kraft sued Heartland in the District of Delaware, alleging that those products infringed Kraft's patents. Heartland subsequently moved to dismiss the Delaware suit, arguing that Kraft:
- was not registered to do business in Delaware;
- had no local presence in Delaware; and
- did not solicit business in Delaware.
Following VE Holding, the Delaware district court found that Heartland was subject to venue in Delaware because it was subject to personal jurisdiction in Delaware.
Heartland appealed to the Federal Circuit for a writ of mandamus either to dismiss or transfer the Delaware suit. Among other things, Heartland argued that Fourco, not VE Holding, determined venue. The Federal Circuit followed VE Holding and rejected Heartland's arguments. Heartland then appealed the Federal Circuit's decision to the Supreme Court.
On December 14 2016 the Supreme Court granted certiorari.
In a May 22 2017 decision authored by Justice Thomas (and joined by all members of the Supreme Court except Justice Gorsuch), the Supreme Court held as follows:
"[W]e conclude that the amendments to §1391 did not modify the meaning of §1400(b) as interpreted by Fourco. We therefore hold that a domestic corporation 'resides' only in its State of incorporation for purposes of the patent venue statute."
In reaching that conclusion, the Supreme Court first reviewed the evolution of the patent venue and general venue statutes, including the case law interpreting those statutes in the patent context. Specifically, the Supreme Court noted the following:
- In enacting a patent-specific venue statute in 1897 – the predecessor to Section 1400(b) – Congress had "placed patent infringement cases in a class by themselves, outside the scope of general venue legislation". The predecessor statute had been interpreted by the Supreme Court to limit venue in patent suits to the defendant's state of incorporation or to the defendant's regular and established place of business.
- In 1948 Sections 1400(b) and 1391 were enacted. Unaltered since its enactment, Section 1400(b) states 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." (Emphasis added.)
At the time of its enactment, Section 1391 stated that:
"[A] corporation may be sued in any judicial district in which it is incorporated or licensed to do business or is doing business, and such judicial district shall be regarded as the residence of such corporation for venue purposes." (Emphasis added.)
- Although different courts came to different conclusions as to whether Section 1400(b) incorporated Section 1391's definition of 'residence', the Supreme Court decision in Fourco held that Section 1400(b) continued to limit 'residence' in patent suits to districts in which the defendant was incorporated, and that the enactment of Section 1391 (the general venue statute) did not change the fact that Section 1400(b) was designed to be a "standalone" patent venue statute that was "complete, independent and alone controlling in its sphere".
- In 1988 the definition of 'residence' in Section 1391 was amended and broadened to provide that:
"[F]or purposes of venue under this chapter, a defendant that is 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." (Emphasis added.)
Moreover, the Federal Circuit decision in VE Holding held that the broadened definition of 'residence' in Section 1391 was incorporated into Section 1400(b).
The Supreme Court then explained that:
"Congress has not amended §1400(b) since Fourco, and neither party asks us to reconsider our holding in that case. Accordingly, the only question we must answer is whether Congress changed the meaning of §1400(b) when it amended §1391."
The Supreme Court answered that question in the negative, noting that although the 1988 amendment to Section 1391 purported to provide a 'default rule' that applied for all venue purposes, the previous version of Section 1391 at issue in Fourco also purported to provide such a default rule, and that the patentee in Fourco had failed to persuade the Supreme Court in 1957 that the default definition of 'resides' in Section 1391 should apply to Section 1400(b). The Supreme Court further noted that "[t]his particular argument is even weaker" now than it was at the time of Fourco, as the current version of Section 1391 – unlike the version in Fourco – "includes a saving clause expressly stating that it does not apply when 'otherwise provided by law'". The Supreme Court explained:
"On its face, the version of §1391(c) at issue in Fourco included no exceptions, yet this Court still held that 'resides' in §1400(b) retained its original meaning contrary to §1391(c)'s default definition. Fourco's holding rests on even firmer footing now that §1391's saving clause expressly contemplates that certain venue statutes may retain definitions of "resides" that conflict with its default definition. In short, the saving clause makes explicit the qualification that this Court previously found implicit in the statute."
As to the Federal Circuit decision in VE Holding, the Supreme Court rejected Kraft's argument that the current version of Section 1391 "ratified" that decision. In that regard, the Supreme Court observed that Congress in 2011 further amended the wording of Section 1391 to read "almost identically" to the original version of the statute, and that "nothing in the text suggests congressional approval of VE Holding".
In a footnote, the Supreme Court noted that:
"[T]he parties dispute the implications of petitioner's argument for foreign corporations. We do not here address that question, nor do we express any opinion on this Court's holding in Brunette Machine Works, Ltd. v. Kockum Industries, Inc., 406 U.S. 706 (1972) (determining proper venue for foreign corporation under then existing statutory regime)."
For further information on this topic please contact Christopher Loh or Giancarlo L Scaccia at Fitzpatrick, Cella, Harper & Scinto by telephone (+1 212 218 2100) or email ([email protected] or [email protected]). The Fitzpatrick, Cella, Harper & Scinto website can be accessed at www.fitzpatrickcella.com.