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United States Supreme Court Clarifies Patent Venue in TC Heartland LLC Reversal

By: Stephen B. Brauerman, Sara E. Bussiere, Megan McGovern

 

In TC Heartland LLC v. Kraft Foods Group Brands LLC, No. 16-341, 581 U.S. _____ (2017), the United States Supreme Court interpreted the patent venue statute, 28 U.S.C. § 1400(b), and held that “a domestic corporation ‘resides’ only in its State of incorporation for purposes of the patent venue statute.”  As a result, a patent holder may only file an action for patent infringement in an alleged infringer’s state of incorporation or in a venue where the alleged infringer committed an act of infringement and has an established place of business.  The primary impact of this decision is that plaintiff-friendly districts, like the Eastern District of Texas, where few accused infringers are incorporated or conduct business, are no longer eligible venues for patent infringement actions.

In TC Heartland, the Supreme Court considered whether recent amendments to 28 U.S.C. § 1391, the general venue statute, which states that a corporation resides “in any judicial district in which such defendant is subject to the court’s personal jurisdiction with respect to the civil action in question[,]” changed the meaning of “resides” in § 1400(b).  28 U.S. C. §§ 1391(a), (c).  As discussed below, the Court held that it does not.

Kraft Food Group Brands LLC (“Respondent”), a Delaware corporation with its principal place of business in Illinois, filed a patent infringement suit in the United States District Court for the District of Delaware against TC Heartland LLC (“Petitioner”), an Indiana corporation with its principal place of business in Indiana.  Petitioner moved to transfer venue to the District Court for the Southern District of Indiana.  Citing Fourco Glass Co. v. Transmirra Products Corp., Petitioner argued venue was improper in Delaware because it did not “reside” in Delaware and did not have a “regular and established place of business” in Delaware under 28 U.S.C. § 1400(b).  Section 1400(b) 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.” 28 U.S.C. § 1400(b).

The District Court rejected Petitioner’s argument on the basis, inter alia, that § 1391(c) defines “resides,” as determined by the Federal Circuit in VE Holding Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574 (Fed. Cir. 1990).  See Kraft Foods Group Brands LLC v. TC Heartland, LLC, 2015 WL 5613160 (D. Del. Sept. 24, 2015), adopting Report and Recommendation, 2015 WL 4778828 (D. Del. Aug. 13, 2015).  Because Petitioner resided in Delaware pursuant to § 1391(c), it also resided in Delaware for purposes of § 1400(b).  The Federal Circuit denied a petition for a writ of mandamus on the same basis.  In re TC Heartland LLC, 821 F.3d 1338 (Fed. Cir. 2016).

The Supreme Court reversed.  In analyzing the inter-play between §1400(b) and § 1391, the Court reviewed the legislative history of both statutes.  At the outset, the Court noted that when Congress enacted a patent-specific venue statute, it “placed patent infringement cases in a class by themselves, outside the scope of the general venue legislation.”  The Court further observed that the original patent-specific venue statute permitted suit in the district in which the defendant was an “inhabitant” or in which the defendant committed acts of infringement and has a regular and established place of business.  A corporation was understood to “inhabit” only the state in which it was incorporated.

In 1948, Congress enacted § 1391, a general venue statute, which defined “residence” for corporate defendants as any district in which the corporation is incorporated or licensed to do business or is doing business.  In 1957, the U.S. Supreme Court held in Fourco Glass Co. v. Transmirra Products Corp. that § 1400(b) “is the sole and exclusive provision controlling venue in patent infringement actions, and . . . is not to be supplemented by . . . §1391(c)” despite the fact that § 1391 embraced “all actions.”  353 U.S. 222, 226 (1957).  After the Court’s ruling in Fourco, Congress amended §1391.  The revised statute applied “[f]or purposes of venue under this chapter.”  Accordingly, the Federal Circuit in VE Holding Corp. v. Johnson Gas Appliance Co. concluded that the provision “clearly applies” to § 1400(b) and redefined the meaning of “resides” in that section.  917 F.2d at 1578.  In 2011, Congress adopted the current version of § 1391, which provides that “[e]xcept as otherwise provided by law,” “this section shall govern the venue of all civil actions brought in district courts of the United States.”  In denying the Petition for Writ of Mandamus, the Federal Circuit reaffirmed its more than 20-year old decision in VE Holding Corp. and applied the definition of “resides” set forth in § 1391(c) to § 1400(b).  In re TC Heartland LLC, 821 F.3d 1338.

The Supreme Court concluded in an 8-0 decision[1] that §  1391(c) does not define “resides” in § 1400(b).  In doing so, the Court reinstated the standard it announced 60 years ago in Fourco: “a domestic corporation ‘resides’ only in its State of incorporation for purposes of the patent venue statute.”  The Supreme Court held: “When Congress intends to effect a change of that kind, it ordinarily provides a relatively clear indication of its intent in the text of the amended provision. . . . The current version of §1391 does not contain any indication that Congress intended to alter the meaning of §1400(b) as interpreted in Fourco.”

The Supreme Court’s TC Heartland decision promises to effect substantial changes to where patent infringement actions get litigated.  The historically plaintiff-friendly Eastern District of Texas will become easier to avoid absent consent and more suits will likely go to the District of Delaware (where many companies are formed) and to California, where many technology companies maintain substantial operations.

 

 

[1] Justice Gorsuch did not participate in the decision.

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