In its decision of May 22, 2017 in Heartland v. Kraft, the United States Supreme Court held that the specific venue provisions applicable to Patent infringement (28 U.S.C. 1400 (b)) limited the courts in which a domestic corporation could be sued for patent infringement to those in the state in which the corporation was incorporated or those where it committed an act of infringement and there was also personal jurisdiction. Prior decisions of the Federal Circuit based on the general venue statute (28 USC 1391) that had allowed a broader group of courts to try patent cases in which a domestic corporation was a defendant had been a misreading of the law. The consequence of the decision is likely to be a reduction of the number of cases brought, for example in the Eastern District of Texas, against out-of-state corporations and an increase in the number of cases in either states such as Delaware where many corporations are incorporated, or those states where places of business are located.
Venue and Jurisdiction in General
When considering where a lawsuit is to be brought in the United States, two issues need to be considered: first whether a particular court has the power to try a case brought before it (that it has jurisdiction over the subject matter and the parties); and second, whether it is the most appropriate court to try the case (whether the venue is proper). In patent infringement cases, subject matter jurisdiction is not normally an issue since it is clear that such cases are to be tried by the federal district courts. The question of whether a particular court has personal jurisdiction is sometimes an issue. A federal district court has personal jurisdiction not only over parties present in the state in which it sits, but also outside these limits if a statute so provides. Most states have enacted so-called “long arm” statutes, which subject to a constitutional requirement that the party in question must have some minimum contact with the state in question to meet the Constitutional requirement of providing for “due process” for those brought before a court, provide a basis for federal courts bringing parties that are physically located outside their states when the action complained of has caused harm within the state. The Federal Rules of Civil Procedure provide a basis for the federal courts to apply state long arm statutes and thus obtained personal jurisdiction over parties outside the states in which they sit.
However, in addition to considering whether the court has the power to try a case, consideration must also be given to the question of whether it is appropriate to do so taking into account the convenience of the parties.
For cases arising under the federal laws, 28 USC 1391(b) provides a general rule relating to venue that, subject to a few exceptions, an action may be brought only in:
- a judicial district where any defendant resides, if all defendants reside in the same state,
- a judicial district in which a substantial part of the events or omissions giving rise to the claim occurred, or a substantial part of property that is the subject of the action is situated, or
- a judicial district in which any defendant may be found, if there is no district in which the action may otherwise be brought.
However, 28 USC 1391(c) provides a broad definition of “deemed residency” that provides that venue is proper in any court having personal jurisdiction over a defendant and, as noted above, this can cover much more than the home states of the parties.
The Special Patent Venue Provision
A special provision for venue in patent infringement cases states:
- Any 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 business1.
The Court of Appeals for the Federal Circuit has consistently read the “deemed residency” provisions of the general federal venue statute as applying to the special patent venue statute, despite a 1957 Supreme Court decision that the predecessor of the current definition of “deemed residency” did not apply to the patent venue provisions. The Federal Circuit read amendments to the definition of deemed residency as overruling the 1957 Supreme Court decision, with the consequence that certain district courts, such as that for the Eastern District of Texas, have become favored locations for trying patent infringement actions with defendants from other states having been deemed to be resident in Texas under these provisions.
The Case in Suit
Concern about the concentration of patent litigation in a few courts led to some questioning of whether the Federal Circuit’s broad interpretation of the patent venue provision was correct and on December 14, 2016, the Supreme Court granted certiorari in TC Heartland, LLC v. Kraft Foods Group Brands LLC., to consider the question:
- Whether 28 U.S.C. § 1400(b) is the sole and exclusive provision governing venue in patent infringement actions and is not to be supplemented by 28 U.S.C. § 1391(c).
That is to say, whether the deemed residency provision of 28 USC 1381(c) did in fact apply to the patent venue statute or whether the word “residency” in that provision meant actual residency.
On May 22, 2017 in a unanimous decision authored by Justice Thomas, the Supreme Court held that “residency” under the patent venue statute for persons resident in the United States meant actual residency and that the “deemed residency” of the general venue statute did not apply to patent infringement cases.
Justice Thomas noted that in 1957 in Fourco Glass Co. v. Transmirra Products Corp.2, the Supreme Court reviewed the history of the patent venue statute and concluded that for purposes of §1400(b) a domestic corporation “resides” only in its state of incorporation, rejecting the argument that §1400(b) incorporates the broader definition of corporate “residence” contained in the general venue statute. Congress had not amended §1400(b) since Fourco, but it had twice amended §1391. The only question before the Court therefore was to decide whether Congress changed the meaning of §1400(b) when it amended §1391. Justice Thomas noted that “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.” In the present case, it had not done so.
In Fourco, the Supreme Court had held that the patent venue provision that had been present in the statutes since 1897, when Congress had resolved a conflict between district courts by limiting venue in patent infringement cases to states in which the defendant resides or commits an act of infringement, and was now codified as 28 USC 400(b). It retained a meaning distinct from the default definition contained in §1391(c), even though the latter, by its terms, included no exceptions. And even though the deeming provisions of the general venue statute had been amended since then, including addition and later removal of the word “all” in the statute, the Supreme Court did not see that there had been any material difference in meaning and thus the Fourco decision should be followed and domestic corporations be subject to suit for patent infringement in their states of incorporation or where they commit acts of infringement.
The outcome is likely to be a shift of the situs of patent litigation away from some of those that have achieved prominence recently to a wider number of courts, and possibly more pressure for some specialized training in patent matters for judges in those courts that will see an increase in patent litigation.