22 May 2017 in Newsletter
U.S. Supreme Court Ruling Changes 30 Years of Patent Venue Law
By: Califf Cooper
On May 22, 2017, in the long-awaited and much-anticipated decision of TC Heartland LLC v. Kraft Foods Group Brands LLC, the U.S. Supreme Court narrowed the patent venue statute holding that “a domestic corporation ‘resides’ only in its State of incorporation.” The ruling curbs patent forum shopping and deals a big blow to the patent litigation hotbed of the Eastern District of Texas.
Kraft Foods brought a patent infringement case against TC Heartland in Delaware. TC Heartland attempted to move the case to Indiana, the state where it is incorporated on the basis that venue was not proper in Delaware. TC Heartland was denied relief from the district court and Federal Circuit because TC Heartland’s products were sold in Delaware even though 98% of TC Heartland’s products were sold outside of Delaware. TC Heartland appealed to the Supreme Court.
In an 8-0 decision, the Supreme Court upended 30 years of patent venue law and overturned the Federal Circuit’s holding in VE Holding Corp. v. Johnson Gas Appliance Co., 917 F. 2d 1574 (1990) that a patent infringement suit is proper in any court that has personal jurisdiction over the defendant. The short 10-page opinion analyzed the history of the venue statutes and amendments ultimately concluding that the Court’s prior decision in Fourco Glass Co. v. Transmirra Products Corp., 353 U. S. 222, 226 (1957) was correct. A domestic corporation resides only in its State of incorporation.
The decision, authored by Justice Thomas, did not mention forum shopping, patent trolls/non-practicing entities, or the Eastern District of Texas (where 35% of all patent infringement lawsuits are filed). Under previous law, a defendant could be sued in any district where acts of patent infringement occurred. This allowed so-called patent trolls to file suit in plaintiff-friendly courts, mainly the Eastern District of Texas. The decision will have a huge impact on the number of patent litigation suits that can be filed in the Eastern District of Texas. Conversely, the number of suits filed in the District of Delaware, a popular state for businesses to incorporate, will increase. It should also be noted that this ruling does not affect foreign corporations.
With this ruling, pursuant to § 1400(b), a patent infringement action may now only be filed in the judicial district where the defendant is incorporated or where the defendant has committed acts of infringement and has a regular and established place of business. The latter portion of the patent venue statute could mean an uptick in patent infringement suits against retailers that sell infringing products and have a regular and established place of business in the Eastern District of Texas.
The landscape for patent infringement cases in the United States was drastically changed with this ruling.