IP Venue, Does the Course Really Matter?

Another case up at the US Supreme Court just closed briefing last month. Oral arguments were heard on March 27, 2017 and we can expect a decision sometime between now and June. TC Heartland, LLC v. Kraft Foods Group Brands, LLC involves the question of whether an appropriate venue for patent infringement defendants can be “any judicial district in which such defendant is subject to the court’s personal jurisdiction with respect to the civil action in question” under 28 USC §1391(c) or is it restricted to either: (i) the venue where infringement was committed and defendant has an established business or (ii) the corporation’s place of incorporation?

This case has implication for patent (and potentially other intellectual property) litigants filing suit against entities in venues other than where infringement has been committed or their state of incorporation. Intellectual property matters have their own specific venue statute. 28 USC §1400 delineates a court’s powers to hear disputes with respect to “patents, copyrights, mask works and designs.” Other forms of intellectual property are treated in subsection (a), while patents are treated in subsection (b). Each subsection, however, allows for venue to be proper in a judicial district where the defendant “resides.”

The specific question in TC Heartland is whether §1400 incorporates the Code’s generic definition of “residence” spelled out in §1391(c). Section 1391(c) defines “residency” for defendant-entities as “in any judicial district in which such defendant is subject to the court’s personal jurisdiction with respect to the civil action in question…” In this case, Respondent Kraft Foods, a Delaware corporation, sued for patent infringement against Petitioner, TC Heartland an Indiana LLC, in the District Court of Delaware. Personal jurisdiction was found appropriate because TC Heartland ships accused infringing products directly to Delaware. Petitioner sought a motion to transfer venue from the district court, which was denied, as was TC Heartland’s petition for writ of mandamus to the Federal Circuit. (Since VE Holdings v. Johnson Gas Appliance, the CAFC has incorporated §1391(c)’s venue provision into §1400(b) thus making venue appropriate whenever the defendant is subject to the court’s personal jurisdiction). At the end of last year, the US Supreme Court granted certiorari.

Petitioner argued that US Supreme Court precedent, Fourco Glass Co. v. Transmirra Products Corp. (1957), which calls for a different reading of §1400(b), is still intact. Petitioner argued that §1400 has been misconstrued over time by the CAFC since VE Holdings, i.e., once §1391 was amended in 1988. TC Heartland pointed to the legislative history of the specific patent venue statute including more limiting language in terms of residency or “inhabitance” as a singular place of incorporation. Petitioner also points to language in Fourco, stating that the Supreme Court “held that, as applied to corporate entities, the phrase ‘where the defendant resides’ in §1400(b) ‘mean[s] the state of incorporation only,’ id. at 226.” Petitioner’s Principal, pp2 & 10. TC Heartland argued that the practical effect of this more liberal interpretation of §1400 has been heavy forum shopping. Citing a Lex Machina 2015 study, TC Heartland stated that the ED of Texas has seen an excessive concentration of patent litigation.

Thus, it is clear that at least some believe that the playing course matters because in 2015, more than 40% of patent cases were brought in the ED Texas, which suggests that some forum shopping is occurring. However, another question that persists is: of the 2,540 cases filed in the ED of Texas in 2015, how many relied upon §1391(c)’s residence clause for venue? It could be the case that infringement is regularly “committed” in the ED of Texas, a place where the defendant has an established place of business, for those defendants given their retail relationships and/or manufacturing facilities. So, though it poses an interesting question, it is unclear whether the outcome of TC Heartland, even if Petitioner were successful, would change this trend to any significant degree.

This is the point alluded to by Respondent as well. Respondent, Kraft Foods, argued that the CAFC correctly interpreted §1400(b) because the 1988 amendments to §1391(c) essentially overruled Fourco making §1391(c) purely definitional, i.e., a generic provision defining where corporate defendants reside “for the purposes of venue under [the entire] chapter...” Respondent Brief, pp4-6. This is also consisted with the 2011 amendments to §1391(c) applying “For all venue purposes” to that subsection. During oral arguments, Respondent argued that the “except as otherwise provided by law” provision in §1391(a) applies only to subsection (b), not (c). Kraft Foods also responded to the forum-shopping argument stating that such policy arguments are not justification for departing from the plain text of the statute. Respondent cited the American Intellectual Property Law Association amicus which explains that Petitioner’s proposed interpretation of “residence” to “solely the place of incorporation” would not solve the abnormal concentration of patent litigation in certain districts because if so interpreted nearly half of the infringement cases filed by operating companies would still be filed in either the D Del, CD Cal, D NJ, and ED TX; i.e., the focus would shift likely from Texas to Delaware. Both Respondent and the AIPLA point to better venues for change (pun intended), i.e., pending congressional proposals that seek to revise patent venue, e.g., HR 9, Innovation Act, 114th Cong. §3(g))(2015) and S. 2733, Venue Equity and Non-Uniformity Elimination Act of 2016, 114th Cong. §2(a)(2016).

Ergo, to the extent that the course one plays on does matters, TC Heartland as well as pending congressional initiatives will have implication on all types of IP litigants, companies, patent trolls, solo inventors, universities and the like. Stay tuned for more updates.