Burr & Forman

05.23.2017   |   Blog Articles, Non-Compete & Trade Secrets Law, Patent, Supreme Court

Supreme Court Reins in Venue for Patent Cases

For nearly three decades, patent owners have been able to file patent infringement lawsuits in any court that had personal jurisdiction over the accused infringer.  This broad approach to venue led to the rise of remote patent litigation hotbeds, like the Eastern District of Texas, to which the defendant had little relation, other than perhaps shipping allegedly infringing products to that jurisdiction.  That all came to a screeching halt on May 22, 2017, when the U.S. Supreme Court released its decision in TC Heartland LLC v. Kraft Foods Group Brands LLC, limiting patent venue to the judicial district where the defendant (1) is incorporated, or (2) has committed acts of infringement and has a regular and established place of business.

The patent venue statute, 28 U.S.C. § 1400(b), states that a patent infringement lawsuit 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.”  However, the general venue statute, 28 U.S.C. § 1391(c), states that “for 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.”  In its 1990 VE Holding Corp. holding, the Court of Appeals for the Federal Circuit found that because § 1391(c) applies “for purposes of venue under this chapter,” the definition of corporate residence applies to the patent venue statute.  In other words, for patent venue purposes, the Federal Circuit found that a corporate defendant “resides” in any judicial district in which it is subject to personal jurisdiction.  In 2011, Congress amended § 1391 to state 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.”  § 1391(a).  § 1391(c)(2) also states that “[f]or all venue purposes,” certain entities, “shall be deemed to reside, if a defendant, in any judicial district in which such defendant is subject to the court’s personal jurisdiction.”  In TC Heartland, the Federal Circuit found that the 2011 amendments to § 1391 did not affect its VE Holding decision, and that § 1391 still defines corporate residency for purposes of § 1400(b).

In reversing the Federal Circuit, the Court began by citing its 1957 decision in Fourco Glass Co. v. Transmirra Products Corp., in which the Court rejected the argument that § 1400(b) incorporates the broader definition of corporate “residence” contained in § 1391(c).  Since § 1400(b) has not changed since Fourco, the Court addressed whether the amendments to § 1391 changed the meaning of § 1400(b), as interpreted in Fourco.  Unanimously answering ‘no,’ the Court noted that Congress typically provides a clear indication when it intends to change the meaning of a statute.  The Court also noted that although § 1391(c) states that the default venue rule applies “for all venue purposes,” the version of § 1391 examined in Fourco contained similar language, which was found not to modify the meaning of § 1400(b).  Moreover, the current version of § 1391 includes the exception that it does not apply when “otherwise provided by law.”  Because § 1400(b) is a separate venue statute specifically for patent cases, this section includes a definition of corporate residency that is “otherwise provided by law.”  Thus, the Court found that the amendments to § 1391 actually confirm the Fourco holding that, for patent venue purposes, a corporation “resides” only in its state of incorporation.  The Court’s decision is likely to significantly limit the judicial districts in which a patent plaintiff can file suit.

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