U.S. Supreme Court Upends Nearly 30 Years of Patent Venue Law

May 22, 2017
Firm Publication

Earlier today, the U.S. Supreme Court issued its much-anticipated decision in TC Heartland LLC v. Kraft Foods Group Brands LLC officially reinstating a more restrictive standard for where patent holders can file patent infringement lawsuits. In a unanimous decision delivered by Justice Thomas, the Supreme Court toppled nearly 30 years of Federal Circuit law governing where patent suits can be filed. No longer will a patent owner be able to sue an accused infringer in any district court where the accused infringer is subject to personal jurisdiction. Instead, patent owners will only be able to file patent infringement lawsuits in (1) districts within the state where the accused infringer is incorporated, or (2) districts where there has been an act of infringement by the accused infringer and where the accused infringer has a regular and established place of business.

Terry Clark patent Heartland v Kraft

In TC Heartland LLC v. Kraft Foods Group Brands LLC, the patent owner, Kraft Foods Group Brands LLC, filed a patent infringement suit against TC Heartland LLC in the U.S. District Court for the District of Delaware. TC Heartland is organized under Indiana law and headquartered in Indiana but ships the allegedly infringing products into Delaware. TC Heartland moved to transfer venue to Indiana, claiming venue was improper in Delaware because TC Heartland does not “reside” in Delaware and has no “regular and established place of business” in Delaware as required under the patent venue statute, 28 U.S.C. § 1400(b). The District Court rejected those arguments, and the Court of Appeals for the Federal Circuit denied a petition for a writ of mandamus, relying on its 1990 holding in VE Holding Corp. v. Johnson Gas Appliance Co., 917 F.3d 1574 (1990) that a corporation is deemed to reside in any judicial district in which such corporation is subject to the court’s personal jurisdiction with respect to the civil action in question as set forth in the general venue statute, 28 U.S.C. § 1391(c).  

The Supreme Court granted certiorari and reversed, holding that for purposes of § 1400(b) a domestic corporation “resides” only in its state of incorporation. In reaching its conclusion, the Supreme Court rejected the Federal Circuit’s 1990 holding in VE Holding Corp. v. Johnson Gas Appliance Co. that the patent venue statute incorporates the broader definition of corporate “residence” contained in the general venue statute. As a result, a patent owner can no longer bring a patent infringement lawsuit against an accused infringer corporation in any district in which the corporation is subject to personal jurisdiction.  

The Supreme Court’s decision should have an immediate impact on patent litigation across the United States. For nearly 30 years, patent owners have been able to file suits essentially anywhere a defendant corporation sold products. As a result, over a third of the more than 4,500 patent suits filed in 2016 were filed in the Eastern District of Texas, which is perceived to have favorable rules and juries for patent owners, despite very few corporate defendants having any presence in that jurisdiction. The Supreme Court’s ruling will not only bar many patent owners from filing cases in the Eastern District of Texas, but likely will result in the transfer of many pending cases out of the Eastern District of Texas. This will come as unsettling news for non-practicing entities, who have accounted for the overwhelming majority of patent cases filed in the Eastern District of Texas in recent years.  

While the Eastern District of Texas is likely to see fewer patent cases as a result of the Supreme Court’s decision, the District of Delaware is likely to see an increase in patent cases given Delaware is a common place of incorporation for domestic corporations. In addition, the Supreme Court’s decision will make it more difficult for patent owners to sue multiple defendants in a single jurisdiction. This too will make life more difficult for non-practicing entities, as they will be forced to litigate in multiple jurisdictions.

It’s certainly possible this is not the last word on patent venue, but until Congress decides to act in response to the Supreme Court’s decision, forum shoppers will have fewer options, and life will be tougher for patent owners, particularly non-practicing entities.