Will the Patent Venue Statute be Reinterpreted?

Heartland is an Indiana limited liability company that is not registered to do business in Delaware and does not have any regular or established place of business in Delaware. It was sued for patent infringement in the District of Delaware and its motion to dismiss or transfer the action under 28 U.S.C. §1406 was denied. In the pending Federal Circuit mandamus action it filed,  In re TC Heartland, Heartland has asked the court to reconsider its interpretation of the patent venue statute 28 U.S.C. §1400(b).

For a court to adjudicate a case, it has to have jurisdiction, both personal jurisdiction over the defendant and subject matter jurisdiction. But the place, or venue, where the case will be adjudicated depends upon where venue is proper. The patent venue statute,  28 U.S.C. §1400(b), provides that a 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.

“For the past several decades, the limitations of §1400(b) have been given essentially no weight” because 28 U.S.C. §1391(c), the general venue statute, provides a very broad definition of the term “resides.” Under §1391(c), a defendant is deemed to “reside” in any venue where the defendant is subject to that court’s personal jurisdiction. Thus, “when §1400(b) and §1391(c) are read together, it appears that patent cases can be filed in any venue with personal jurisdiction over the defendant.” (See the story  Patent Venue: Limits on Venue in Patent Infringement Litigation.) 

The pending Federal Circuit mandamus action of In re TC Heartland asks the court to reconsider its interpretation of “resides” in the patent venue statute 28 U.S.C. §1400(b). Heartland points out that, in the Federal Courts Jurisdiction and Clarification Act of 2011, Congress repealed §1391(c)’s preamble language – “For purposes of venue under this chapter” – and replaced it with – “Except as otherwise provided by law.”  It argues that the purpose of the 2011 change was to make clear that the rules of §1391 are merely general default venue rules that apply unless a particular federal statute, like the patent venue statute, provides special venue rules that govern. The effect of not importing the more liberal definition of §1391(c) ‘residency’  would mean that  a corporation “resides” where it is incorporated or has a registered office – not anywhere it is subject to personal jurisdiction.

Three factors made patent holders and their attorneys flock to the Eastern District of Texas: (1) the district’s relatively rapid litigation timetable puts pressure on defendants to settle; (2) the perception that juries are plaintiff-friendly; and (3) knowledgeable judges.  If the Federal Circuit accepts Heartland’s arguments and reverts to the holding of Fourco Glass Co. v. Transmirra Prods. Corp., 353 U.S. 222 (1957), that “§1400(b) is the sole and exclusive provision controlling venue in patent infringement actions… not to be supplemented by the provisions of 28 U.S.C. §1391(c),”  it will be more difficult for plaintiffs to establish venue in the Eastern District of Texas.

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

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