Manufacturing & Distribution Client Advisory – Location, Location, Location…No More!

    By Stephen E. Noona, Manufacturing & Distribution

    Location, Location, Location,..No More!

    TC Heartland LLC v. Kraft Foods Grp. Brands LLC, 197 L. Ed. 2d 816 (U.S. May 22, 2017):

    Because it cannot help itself, the Supreme Court recently dealt another blow to patentees. In TC Heartland LLC v. Kraft Foods Grp. Brands LLC, 197 L. Ed. 2d 816 (U.S. May 22, 2017), the Court severely restricted where patent infringement lawsuits may be filed. In doing so, the Court overruled three decades of settled Federal Circuit case law in an attempt to limit the ability of patent holders to select a favorable forum and to provide potential defendants greater control over the jurisdictions in which they have to defend themselves. In the end, however, the Courts attempt to disperse patent litigation may end up also concentrating that litigation in places where corporations incorporate to the exclusion of Districts that have a tried and true record of effectively and efficiently managing the complexities of patent litigation.

    Venue for patent infringement actions is governed by 28 U.S.C. 1400(b). That statute provides that a patent infringement suit 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.” For many decades, the Federal Circuit had construed the word residesthe same as the resides in the general venue statute, 28 U.S.C. 1391(c)(2), which provides that a defendant corporation resides in any judicial district in which such defendant is subject to the courts personal jurisdiction with respect to the civil action in question. This allowed patent owners to sue domestic corporations for patent infringement in practically any jurisdiction in which the defendant conducted infringing activities by selling or offering products or services. VE Holding Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574 (Fed. Cir. 1990). While the Federal Circuits broad interpretation of Section 1400(b) directly contradicted an earlier decision by the Supreme Court in Fourco Glass Co. v. Transmirra Prods. Corp., 353 U.S. 222 (1957) (holding that Section 1400(b) is the sole and exclusive provision governing jurisdiction in patent cases and that domestic corporations reside solely in the state in which they are incorporated), the Federal Circuit reasoned that Congresss amendments to Section 1391(c) in 1988 overruled the Supreme Courts earlier decision in Fourco and therefore, the broad interpretation of the patent venue provision was proper.

    TC Heartland Decision

    In TC Heartland, the Supreme Court flatly rejected the Federal Circuits interpretation, finding that Congresss amendments to Section 1391 did not change the holding in Fourco that domestic corporations reside solely in their state of incorporation, rejecting over three decades of Federal Circuit precedent. Because the Federal Circuit hadimported principles from the general venue statute as prohibited by Fourco, the Court rejected the broad venue rule of VE Holding. The Court also relied on the principle that, when a statute has received a settled construction, Congress ordinarily must provide a relatively clear indication of its intent to alter this construction to shoot down the argument that Congress 1988 amendment of the venue statute meant to overrule Fourco. As a result, Fourco is the law of the land; corporations reside only in its place of incorporation and the broad interpretation of the general venue statute is inapplicable to patent cases.

    What is the practical effect of TC Heartland? Patent holders will now most likely sue defendants on their home turf. Going forward, patent owners may only file suit against a domestic corporation in a jurisdiction in which either (i) the defendant is incorporated or (ii) the defendant both has committed acts of infringement and has a regular and established place of business. Dockets that are magnets for patent cases for good reasonsi.e. Eastern District of Virginias Rocket Docket, or for bad reasons, i.e., Plaintiff and Patent Troll-Friendly Eastern District of Texas, will see a decline in patent infringement cases. Other jurisdictions, like the District of Delaware, where many companies are incorporated, will see a significant increase of cases.

    The contents of this publication are intended for general information only and should not be construed as legal advice or a legal opinion on specific facts and circumstances. Copyright 2024.