Supreme Court Narrows Patent Venue Law in TC Heartland, Likely Limiting Future Suits in the Eastern District of Texas

In TC Heartland LLC v. Kraft Foods Group Brands, LLC., 581 U. S. ____ (2017), the Supreme Court substantially narrowed the law of patent venue, preventing a patent owner from filing an infringement suit against a defendant in any district court where the defendant is subject to personal jurisdiction. Instead, patent owners will only be able to bring suit in districts in states where a defendant is incorporated, or in districts where there has been an act of infringement and the defendant has a regular and established place of business.

The ruling required the Supreme Court to reconcile two venue statutes: 28 U.S.C. § 1391, which sets forth the requirements for venue generally, and 28 U.S.C. § 1400(b), which sets forth venue requirements specific to patent infringement. The patent venue statute, 28 U.S.C. § 1400(b), stipulates that “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 business.” However, the general venue statute, 28 U.S.C. § 1391, allows a patent owner to file suit in any judicial district where the defendant “resides;” under 28 U.S.C. § 1391(c)(2), a corporate defendant is deemed to “reside” in any district in which the corporation would be subject to personal jurisdiction.

Past Supreme Court precedent, Fourco Glass Co. v. Transmirra Products Corp., 353 U.S. 222 (1957), had established that §1400(b) is not supplemented by §1391. However, in 1988, Congress amended §1391, to state that  “[f]or 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 found, in VE Holding Corp. v. Johnson Gas Appliance Co., 917 F. 2d 1574 (1990), that this amendment had made §1391 applicable to patent infringement actions. Congress again amended §1391 in 2011, 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.”

In this case, Kraft sued TC Heartland in the District of Delaware, where TC has no meaningful presence but does have the minimum contacts necessary for personal jurisdiction.  TC moved to dismiss or transfer the case based on improper venue, citing §1400(b). The District Court rejected these arguments based on Federal Circuit precedent and the Federal Circuit denied a writ of mandamus.

The Supreme Court decided, in a unanimous opinion, that Fourco was still good law and that §1400(b) is not supplemented or replaced by §1391. The Supreme Court based this decision on the fact that Congress never indicated that it had intended to overrule Fourco when it amended §1391 to apply to “all venue purposes” in 1988. Further, if Congress had overruled Fourco by amending §1391 to apply to “all venue purposes,” then, by essentially the same reasoning, Congress had reestablished Fourco by clarifying that §1391 applied “except as otherwise provided by law.”

The most significant effect of this case is expected to be a substantial reduction in the number of patent lawsuits filed in the Eastern District of Texas, which is often chosen for patent litigation because it is perceived to be friendlier to patent owners. Approximately 35% of all patent litigations currently pending have been filed in the Eastern District of Texas, and this case is likely to create a flood of motions to dismiss for improper venue or motions to transfer to a new district.

However, the District of Delaware, also a patent-owner-friendly district, is expected to take up the mantle of the Eastern District of Texas as the patent forum of choice. The District of Delaware is already a very popular patent forum (often the second most active for patent litigation), and as many corporations are incorporated in Delaware there are likely to be few questions of improper venue even under §1400(b).