Venue Matters? Yes, Venue Matters - Section 1400(b)
This May the US Supreme Court rendered a decision in TC Heartland v. Kraft Foods Group Brands asking 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 defendant-corporation’s place of incorporation? The Court unanimously answered that the latter prevails, for patent cases venue is restricted to either where infringement occurred or the defendant-corporation’s place of incorporation. (Justice Gorsuch took no part in the decision).
As background, intellectual property matters have their own specific venue statute. 28 USC §1400. Particular to patents §1400(b) states that “[a]ny 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 of “residence” spelled out in §1391(c)? Section 1391(c) defines “residency” for defendant-entities established place of business.” The specific question in TC Heartland is whether §1400 incorporates the Code’s generic definition 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 Petitioner, TC Heartland an Indiana LLC, for patent infringement in the District Court of Delaware. The District Court and Court of Appeals for the Federal Circuit found venue was appropriate based upon the incorporation of the generic venue statute into 1400(b). However, the Supreme Court rejected this analysis holding that §1400(b) is the sole and exclusive provision controlling venue in patent matters.
Writing for the US Supreme Court, Justice Thomas articulated that the patent venue statute (§1400) does not incorporate the definition of “residence” from the general venue statute (§1391). The Court found the issue highly analogous to issues raised in Stonite Products Co. v. Melvin Lloyd Co., 315 US 561 (1942) and Fourco Glass Co. v. Transmirra Products Corp., 353 US 222 (1957).
The Court addressed the scope of §1400(b)’s predecessor in Stonite holding that "the patent venue statute constituted ‘the exclusive provision controlling venue in patent infringement proceedings’ and thus was not supplemented or modified by the general venue provisions. [] In the Court’s view, the patent venue statute ‘was adopted to define the exact jurisdiction of the federal courts in actions to enforce patent rights,’ a purpose that would be undermined by interpreting it ‘to dovetail with the general provisions relating to the venue of civil suits.’ " at 4-5. In essence, the Court seems to critically ask why have a separate venue statute for IP matters if one is to simply borrow meaning from the generic venue statute anyway?
As to other SCOTUS precedent, Fourco involved the lower courts’ divergence from the solidarity of the patent venue statute as well. At that time, the Court reiterated its holding in Stonite that §1400(b) should be the “sole and exclusive provision controlling venue” in patent matters. at 5.
Since Fourco, §1391 was amended twice including arguably increasingly broadening language in the precursor to the generic statute’s definitional language. Respondent Kraft Foods argued that these amendments enlarged the scope of §1391 to reach the patent venue code, §1400, thus altering the meaning of “where the defendant resides.” This was an argument the CAFC adopted but the Supreme Court rejected. In its analysis, the Court reasoned that the changes in language were only slight and immaterial in this context.at 8. Moreover, Congress’ silence in choosing not to amend §1400(b) specifically, while twice amending §1391, gives reason to infer congressional contentment with the Fourco doctrine. "Congress has not amended §1400(b) since Fourco, and neither party asks us to reconsider our holding in that case. Accordingly, the only question we must answer is whether Congress changed the meaning of §1400(b) when it amended §1391. 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. [citing US v. Madigan]." at 8. I.e., the Court did not buy Respondent’s (nor the CAFC’s) argument that the Federal Circuit’s 1990 precedent – VE Holdings incorporating the generic venue statute’s definition of residence into §1400(b) – was ratified by Congress’ failure to amend §1400 when it last amended §1391 in 2011. See also, Id. at 9-10. Additionally, the Court found the savings clause in the generic venue statute (§1391) to cause the generic to “not apply when [venue is] ‘otherwise provided by law,’” e.g., like in §1400; thus, designating the generic’s distinctiveness from the patent venue statute. at 9.
After TC Heartland, it is unclear whether this more limited reading of the patent venue statute will reduce forum shopping or the popularity of certain districts like ED TX for filings since Texas, for example, houses so many retailers that can count as “established businesses” (under §1400(b)) that “offer to sell” quite a few patented devices (under 35 USC §271(a)). So, while Petitioner TC Heartland “won the battle” – ensuring us that venue does really matter in patent disputes – we cannot be so confident that future defendants will “win the war” over forum shopping. Still, patent litigants will need to take note that appropriate venue is not as much of a given as it used to be; suits will be limited to venues where at least infringement occurred or the defendant’s state of incorporation.
