Judge Bryson of the US Court of Appeals for the Federal Circuit, sitting by designation in the US District Court for the Eastern District of Texas, found that the 2011 changes to 28 USC § 1391 did not negate the Federal Circuit’s interpretation of the relationship between 28 USC §§ 1400(b) and 1391 in regards to venue determination. Proper venue for corporations in patent/copyright cases still includes all venues where a corporation conducts business. Script Security Solutions, L.L.C. v. Amazon.com, Inc., Case No. 2:15-CV-1030 (E.D. Tex., Mar. 17, 2016) (Bryson, J).
Script Security Solutions sued Amazon.com in the Eastern District of Texas for patent infringement. Amazon.com moved to dismiss the case for improper venue, arguing that it did not “reside” in the jurisdiction as required under the special patent venue statute 28 USC § 1400(b).
The Federal Circuit had previously ruled in VE Holding v. Johnson Gas Appliance (1990) that the definition of “resides” in §1391(c) expressly read into § 1400(b), because the statue stated that the residency provision applied “for purposes of venue under this Chapter ,” which included § 1400(b). At that time, § 1391 stated that “resides” included any place in which personal jurisdiction applied (e.g., any place a corporation did business).
Amazon.com argued that the 2011 changes in § 1391 made the analysis of VE Holding obsolete and reverted the analysis to the 1957 definition of “resides” for § 1400(b) found by the Supreme Court of the United States in Fourco Glass v. Transmirra Products. There, the Supreme Court had found that the pre-1988 version of the general venue statute of § 1391 did not control the specific patent venue statute of § 1400(b), and that residency only existed where the business was incorporated. Amazon.com further argued that the new § 1391(a) language, “except as otherwise provided by law,” now at the beginning of the post-2011 statute, indicated that the general statute of § 1391(c) defers to the specific statute § 1400(b)’s definition of “resides” and obviates the ruling of VE Holding.
Judge Bryson disagreed. He explained that the language of “except as otherwise provided by law” was present in § 1391 at the time of the VE Holding ruling, and had just moved from § 1391(b) to § 1391(a) in 2011—a move that had no effect on interpretation. The phrase only allows for statutes specific for certain causes of action to control where venue lies. But §1391(c) is a definitional statute, and § 1400(b) provides no contrary definition for “resides.” Therefore there was no conflict between the two sections, and the phrase “except as otherwise provided by law” did not apply. Judge Bryson also explained that the 2011 language in § 1391(c) actually broadened its reach. The 1988 language provided that § 1391(c) was applicable to Chapter 87, while the new language expands § 1391(c) “for all venue purposes,” ensuring that its definition applies to § 1400(b).
Practice Note: In the pending mandamus case In re TC Heartland LLC, the Federal Circuit is considering essentially the same issue. During oral argument on March 11, 2016, the Court expressed doubt regarding mandamus petitioner’s argument that §1391(c) no longer applied to § 1400(b). The Court noted that the 2011 changes expanded the reach of § 1391(c), that “except as otherwise provide by law” was not new language for the § 1391 statute, and that the 2011 modifications to § 1391 incorporated the common law created by VE Holding. While the Federal Circuit’s decision in in TC Heartland remains pending, this opinion by Judge Bryson may foreshadow it.
The day after Judge Bryson’s decision, Senator Jeff Flake (R-AZ) introduced the Venue Equity and Non-Uniformity Elimination Act of 2016 to revise § 1400(b). Under the proposed revisions, patent invalidity and infringement suits could “be brought only in the district of the defendant’s principal place of business or incorporation.” However, as the Federal Circuit pointed out at oral argument in TC Heartland, at least five other bills in the last decade have been earmarked to similarly change venue standards post-VE Holding and have failed to pass.