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TC Heartland LLC v. Kraft Foods Group Brands LLC: The Supreme Court Decision Will Essentially Eliminate Patent Forum Shopping, Allowing Patent Holders To Defend At Home

On May 22, 2017, the Supreme Court published its decision in TC Heartland LLC v. Kraft Foods Group Brands LLC, 581 U.S. __ (2017), concerning venue in a patent infringement suit.  The question before the Court was whether the 2011 amendment to the general venue statute 28 U.S.C. §1391 replaces the definition announced in Fourco, and in so doing would allow a plaintiff to bring a patent infringement lawsuit against a corporation in any district in which the corporation is subject to personal jurisdiction.  Petitioner TC Heartland, is organized under Indiana law and headquartered in Indiana.  Respondent Kraft Foods, organized under Delaware law sued for patent infringement in Delaware, alleging that TC Heartland's product sold in Delaware infringed one of Kraft's patents.

The patent venue statute 28 U.S.C. §1400(b), provides 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 established place of business." In Fourco Glass Co. v. Transmirra Products Corp., 353 U. S. 222, 226 (1957), the Supreme Court concluded that for purposes of §1400(b) a domestic corporation "resides" only in its state of incorporation.  In reaching that conclusion the Supreme Court rejected the argument that §1400(b) incorporates the broader definition of corporate "residence" contained in the general venue statue §1391(c). 

By way of history, Congress enacted the patent specific venue statue in 1897 (§1400(b)'s predecessor), placing patent infringement cases in a class by themselves outside of the scope of the general venue statue (§1391), establishing that a corporation was understood to "inhabit" only the state in which it was incorporated. §1400(b) has never been amended.  Fourco interpreted "residence" to mean state of incorporation. 

The general venue statute §1391 has been amended twice since Fourco.  In 1988, Congress expanded the general venue statute §1391 to "[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."  The Federal Circuit in VE Holding Corp. v. Johnson Gas Appliance Co., 917 F. 2d 1574 (1990) concluded that expansion of §1391(c) applied to §1400(b) and thus redefined the meaning of the term "resides" to the broader "personal jurisdiction" interpretation. 

Since the 1988 expansion and the Federal Circuit's VE Holding decision, patent troll litigation has flourished, encouraging forum shopping and benefitting patent-holder friendly districts such as the Eastern District of Texas.  Patents infringement suits in this expanded view could be brought anywhere that a defendant was subject to personal jurisdiction (essentially anywhere the alleged infringing product was sold), as opposed to limiting suits to only to the defendant's state of incorporation.

In 2011, Congress adopted the current version of §1391 (again leaving §1400 unaltered).  The 2011 amendment reworded the current version of §1391 almost identically to the original version of the statute before VE Holding.

The Supreme Court in TC Heartland has reversed the Federal Circuit, holding that "residence" in §1400(b) refers only to the state of incorporation consistent with its decision in Fourco.  This will prove to be good news for patent holders, as it will now allow them to defend patent infringement suits at home.

Susan L. Crockett, Esq.

 

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