By: Russell Franks and Franklin Smith
The Supreme Court’s recent opinion in TC Heartland, LLC v. Kraft Foods Group Brands, LLC, overturns almost three decades of Federal Circuit jurisprudence on the issue of where a patent holder may properly file suit. In a unanimous decision authored by Justice Thomas, the Court held that a corporation “resides” only in its state of incorporation for purposes of determining proper venue under 28 U.S.C. § 1400(b). As a result, a patentee seeking to sue a domestic corporation may only do so in (1) where the alleged infringer resides (i.e., its state of incorporation) or (2) in a venue the alleged infringer has committed an infringing act and has a regular and established place of business. See 28 U.S.C. § 1400(b). This departs from previous precedent allowing an alleged infringer to be sued in any district where a company was subject to personal jurisdiction (i.e., any district where it had committed an infringing act was a “residence” under the statute for venue purposes). The previous rule permitted a cottage industry to spring up in districts viewed as patentee friendly, such as the notorious Eastern District of Texas. The Supreme Court’s ruling will render many patentee’s hopes of filing in the Eastern District of Texas a relic of the past.
In TC Heartland, a patentee (Kraft Foods) brought suit against a competitor (TC Heartland) in the District of Delaware. TC Heartland, an Indiana corporation, challenged venue as improper by calling into question the term “resides” in 28 U.SC. § 1400(b). The District Court held that the venue was proper on the basis that the allegedly infringing material was shipped into the state of Delaware, which was TC Heartland’s only connection to the state. Following the traditional approach set forth in the Federal Circuit’s 1990’s VE Holding Corp. v. Johnson Gas Appliance Co., the District Court broadly construed “resides” based on the general venue statute, 28 U.S.C. §1391(c). This essentially provided that proper venue lies in any Court that holds personal jurisdiction. Because TC Heartland’s shipping of product into the state conferred personal jurisdiction, venue properly lied in Delaware. On appeal, the Federal Circuit affirmed the District Court’s ruling, holding its decision in VE Holding Corp. remained good law. The Supreme Court granted certiorari on the issue of where proper venue lies for a domestic corporation in a patent infringement action, i.e., where a domestic corporation “resides”. In reversing the Federal Circuit’s opinion, the Supreme Court held that “residence” as recited in the patent venue statute is limited to the state of incorporation. In other words, the number of Courts that have proper venue over an allegedly infringing company has been substantially restricted.
While it is too early to see the full effects of the Supreme Court’s holding in TC Heartland, we expect to see a few things. First, many alleged infringers will seek to dismiss or transfer their venue based on this new standard. Second, expect to see more patent infringement suits brought in the common states of incorporation and states that have recognized industries. For example, there will likely be a greater number of cases brought in Delaware, a common state of incorporation, as well as in technological hubs like Northern California and Michigan with the automobile industry. One thing is certain; the holding in TC Heartland will affect the flexibility that patent holders previously had with respect to choosing the jurisdictions viewed as most favorable.
Russell Franks is an Associate Attorney (IP Practice) in the Troy Office. Russell may be reached at 248-433-7574.
Franklin Smith is an Associate Attorney in the Troy Office. Franklin’s Practice expertise covers Intellectual Property & Trade Secrets Litigation, Intellectual Property, Patents and Trademarks. Franklin’s telephone number is 248-433-7393.
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