Supreme Court Clarifies the Meaning of the Patent Venue Statute

On May 22, 2017 the U.S. Supreme Court issued its unanimous decision in TC Heartland, LLC v. Kraft Foods Group Brands, LLC. The Court reaffirmed its 1957 decision in Fourco Glass Co. v. Transmirra Products Corp., 353 U.S. 222, 226 (1957) and held that under the patent venue statute, 28 U.S.C. §1400(b), a domestic corporation “resides” only in its State of incorporation. In so ruling, the Court rejected the broader interpretation of the patent venue statute that the Federal Circuit has been applying for more than 25 years.

28 U.S.C. §1400(b) provides: “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.” Since 1897, patent infringement cases have been “in a class by themselves, outside the scope of general venue” statutes governing where lawsuits for other civil causes of action may be filed.

In 1988, Congress amended the general venue statute, 28 U.S.C. §1391(c), to provide 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.” Under the amended general venue statute, a lawsuit against a corporation that does business nationwide can be filed anywhere it is subject to personal jurisdiction.

In 1990 the U.S. Court of Appeals for the Federal Circuit, the specialized appellate court for patent cases, ruled in V.E. Holding Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574, that the 1988 amendment to the definition of “reside” in the general venue statute, §1391, also applies to the word “resides” in the patent venue statute, §1400(b).

Reading the broad 1988 amended definition of the word “reside” into the patent venue statute has resulted in corporations that sell their products nationwide being amenable to patent infringement suits in any state where personal jurisdiction exists. This, in turn, has led to the Eastern District of Texas, viewed to be a patent-holder friendly jurisdiction, to becoming the third busiest patent infringement court in the country. Approximately one-third of all patent infringement cases in 2016 were filed in the Eastern District of Texas.

What effect will this decision have?  The TC Heartland decision will decrease the number of cases filed in the Eastern District of Texas. Unless a domestic corporate defendant is (1) incorporated in Texas or (2) has committed acts of infringement and has a regularly established place of business in Texas, venue in a patent infringement case will not be proper in the Eastern District of Texas. There will, most likely, be an increase in patent cases filed in Delaware. Many corporations are incorporated under the laws of Delaware and, consequently, Delaware is the busiest patent infringement court in the country.  However, many corporations chose to “reside” in Delaware; they didn’t choose to be hailed into court in Texas.

For more information on this topic, contact your Intellectual Property counsel at Smith, Gambrell & Russell, LLP.

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