Supreme Court Limits Where Patent Cases Can Be Filed

TC Heartland LLC v. Kraft Foods Group Brands LLC, No. 16-341, 581 U.S. ___ (2017)

May 23, 2017

By: Eric P. Carnevale and Craig R. Smith

The Supreme Court has issued its highly anticipated opinion in TC Heartland, significantly limiting the appropriate venues in which a defendant may be sued for patent infringement.  For the past 30 years, the Federal Circuit has held that a corporation can be sued in any judicial district in which it is subject to personal jurisdiction.  This has allowed patent owners to file litigations in forums that they believe will provide favorable outcomes, even if the defendants have little connection to that judicial district.  The TC Heartland case is the death knell for this type of forum shopping by plaintiffs.  The Supreme Court ruled that a defendant may be sued only in the state in which they are incorporated, or where they have committed alleged acts of infringement and have a regular and established place of business.

Kraft, a Delaware corporation with a principal place of business in Illinois, sued TC Heartland in Delaware in 2013, alleging infringement of three patents directed to “liquid water enhancer products.”  TC Heartland was neither incorporated nor licensed to do business in Delaware.  However, TC Heartland admitted to sufficient sales to confer personal jurisdiction over it in that judicial district.  TC Heartland moved to dismiss for improper venue.

Venue in patent cases is established by Section 1400(b) of Title 28 of the U.S. Code.  It 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.”  Long-standing Federal Circuit precedent held that the definition of “resides” in that section was set by Section 1391 of Title 28, which states that “[e]xcept as otherwise provided by law” and “[f]or all venue purposes” a corporation “shall be deemed to reside, if a defendant, in any judicial district in which such defendant is subject to the court’s personal jurisdiction with respect to the civil action in question.”

The district court in TC Heartland relied on this Federal Circuit precedent in finding that venue under Section 1400(b) was appropriate as TC Heartland “resided” in Delaware because it was subject to the court’s personal jurisdiction.  TC Heartland filed a writ of mandamus to the Federal Circuit, which affirmed the district court.  TC Heartland then filed a writ of certiorari, bringing the case before the Supreme Court.

TC Heartland argued that the patent venue statute was not intended be read so broadly, and that courts had incorrectly allowed amendments to the general venue statute to amend the patent venue statute by implication.  The predecessor to Section 1400(b), passed in 1897, limited patent venue only to districts “inhabit[ed]” by the defendant corporation, or districts where the corporation had committed acts of infringement and maintained a regular place of business.  At that time, a corporation was understood to only “inhabit” the state in which it was incorporated.  A later recodification changed “inhabit[s]” to “resides,” but a 1952 Supreme Court decision held that this did not change the scope of the statute.

The Supreme Court’s construction stood until 1988, when amendments to the general venue statute provided that “[f]or the 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 at the time the action is commenced.”  The Federal Circuit held that because Sections 1391 and 1400 were under the same “chapter” of the U.S. Code, the amendments to the general venue statute were intended to redefine the patent venue statute as well.  The Federal Circuit reaffirmed this interpretation following the 2011 amendments to the general venue statute, which modified the language to its current form.

In TC Heartland, the Supreme Court rejected the Federal Circuit’s long-standing interpretation of the venue statutes.  Amendment of a settled statutory construction by implication is disfavored by the Court absent the clear intent of Congress.  Here, there was no indication that Congress’s 1988 amendments to the general venue statute were intended to affect patent venue.  Thus, the Supreme Court’s 1952 construction of the patent venue statute controls, and a corporation “resides,” for patent venue purposes, only in the state of its incorporation.

The Supreme Court rejected Kraft’s arguments favoring amendment by implication.  While the general venue statute purports to apply “[f]or all venue purposes,” the version of the general venue statute in force at the time of the Supreme Court’s 1952 construction was effectively the same.  To the extent the phrase “[f]or purposes of venue under this chapter” could have been construed to apply to patent venue statute, that language was removed in the current version of the general venue statute.  In fact, the Court found that the 1988 and 2011 amendments to the general venue statute weakened any argument that it was intended to redefine the patent venue statute because the 1988 amendments added a “saving clause” stating that it was not intended to apply when venue was “otherwise provided by law.”  The patent venue statute qualifies as “otherwise provided by law.”

TC Heartland will substantially limit the appropriate venues in which patent cases can be brought, and is expected to greatly diminish the importance of plaintiff-favorite venues such as the Eastern District of Texas.  At the same time, popular states for incorporation, such as Delaware, are likely to see upticks in new patent case filings, particularly for cases involving small or mid-sized defendants that do not have nation-wide places of business.  It remains to be seen whether TC Heartland will affect an overall decrease in patent litigation, or merely shift the loci of patent cases to other venues.