The Federal Circuit’s pending decision in Kraft Foods, LLC v. TC Heartland, LLC regarding the determination of proper venue in patent litigation cases follows a year in which nearly half of all patent cases were filed in the notoriously plaintiff-popular, Eastern District of Texas. According to a 2015 Lex Machina report, the District of Delaware trailed in second place with less than 10% of the patent cases filed, followed by the N.D. Ill., N.D. Cal. and C.D. Cal. in which collectively 11.8% of patent infringement actions were filed.
In the TC Heartland case, Kraft Foods filed suit in the District of Delaware in January 2014 alleging that TC Heartland’s (“TC”) sale of certain liquid water enhancer products infringed three patents. After its motion to dismiss for lack of personal jurisdiction was denied, TC, an Indiana-based liquid sweetener company, filed a petition for a writ of mandamus to effectively overturn precedent that allows patent suits to be brought in virtually any district. More than two dozen major companies have backed the petition.
The determination of venue in a patent action is largely governed by 28 U.S.C. §1400(b), which provides that “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.” The issue before the Federal Circuit is the interaction between that section and 28 U.S.C. §1391(c), the general venue statute.
To understand the dynamic between those statutes, it is helpful to start with the Supreme Court’s 1957 decision in Fourco Glass Co. v. Transmirra Products Corp. Fourco held that §1400(b) is the “sole and exclusive provision controlling venue in patent infringement actions,” and that by extension, the “residence of a corporation for purposes of §1400(b) is its place of incorporation.” Section §1400(b) unequivocally governed venue determination in patent actions until Congress passed the Judicial Improvements and Access to Justice Act of 1988, and amended §1391(c)’s preamble language to read, “[f]or purposes of venue under this chapter.”
Following that amendment, the Federal Circuit in VE Holding Corp. v. Johnson Gas Appliance Co., determined that §1391(c) redefines the meaning of “resides” in §1400(b), to allow a patent infringement case to be brought in any forum that has personal jurisdiction over the defendant corporation. Now, almost thirty years after the VE Holding decision, TC argues that the terms of §1400(b) are not to be supplemented by §1391(c) and that the VE Holding decision no longer applies as a result of the Federal Courts Jurisdiction and Venue Clarification Act of 2011.
If the Federal Circuit agrees with TC, venue may be limited to the site of a corporation’s incorporation or to a location where the corporation commits acts of alleged infringement and has a regular and established place of business. Interestingly, the Federal Circuit’s consideration of the venue issue runs parallel to legislative proposals in the Innovation Act (H.R. 9) aimed at curbing forum shopping. Taking a somewhat different tack, the Innovation Act may restrict venue to where the defendant resides, research or development occurred, or the product was manufactured.