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TC Heartland v. Kraft Foods: Patent Venue Comes Home

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29 May 2017
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May 29, 2017

TC Heartland LLC v. Kraft Foods Group Brands, 581 U.S. ___ (2017) (Thomas, J.).
Response by Gaston Kroub
Geo. Wash. L. Rev. On the Docket (Oct. Term 2016)
Slip Opinion | Washington Post | SCOTUSblog

TC Heartland v. Kraft Foods: Patent Venue Comes Home

For many years, patent venue was a fringe issue. Yes, there were complaints about the number of patent cases filed in the Eastern District of Texas,1 a venue widely considered as pro-patentee.2 One of the factors that contributed to the Eastern District’s pro-patentee reputation was the willingness of judges in the District to deny motions to transfer filed on convenience grounds. Defendants, such as large consumer electronics companies, who were frequently haled into the Eastern District would publicly complain about the alleged burden of being forced to defend themselves in that forum.

Rather than simply complain, however, companies unhappy with the outsized role of the Eastern District of Texas in patent litigation began to agitate for venue reform. Their efforts were most prominently discussed as part of broader patent reform proposals, and various statutory patent venue modifications were proposed. At the same time, a second line of attack was developed, based on a legal challenge to the way patent venue was understood by the Federal Circuit. As articulated in 1990, VE Holding Corp. v. Johnson Gas Appliance Co.3 held that the 1988 amendment to the general venue statute, 28 U.S.C. § 1391(c), expanded the universe of permissible venues in patent cases. Ultimately, the latter line of attack proved fruitful, as VE Holding was reversed by the Supreme Court in its recent TC Heartland4 decision.

The Court’s decision was penned by Justice Thomas, and joined by all seven of his colleagues who heard the case.5 Because of TC Heartland, patent venue for domestic corporations6 will no longer be appropriate in any venue where the defendant would be subject to personal jurisdiction. Instead, patent suits would only be proper for venue purposes if 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.”7 Corporations not incorporated in Texas, and without a “regular and established place of business” in the Eastern District of Texas, are ostensibly breathing easier as a result.

How VE Holding Expanded Venue in Patent Cases for Over Twenty-Five Years

Section II(A) of the Court’s opinion provides a detailed review of the historical development of the patent venue statute, culminating in the 1948 revision by Congress that resulted in the still-in-force 28 U.S.C. § 1400(b).8 Concurrent with the 1948 revision of § 1400(b),

Congress also enacted the general venue statute, § 1391, which defined “residence” for corporate defendants. That provision stated that “[a] corporation may be sued in any judicial district in which it is incorporated or licensed to do business or is doing business, and such judicial district shall be regarded as the residence of such corporation for venue purposes.”9

Disputes about the meaning of the word “resides” in § 1400(b) led to the Court’s decision in Fourco Glass Co. v. Transmirra Products Corp.,10 concluding “that for purposes of § 1400(b) a domestic corporation ‘resides’ only in its State of incorporation.”11

Section II(B) of the Court’s opinion enumerates how the Federal Circuit relied, in its VE Holding decision, upon a 1988 amendment to “the general venue statute, § 1391(c)” to conclude “that § 1391(c), ‘on its face,’ ‘clearly applies to § 1400(b), and thus redefines the meaning of the term ‘resides’ in that section.’”12 Accordingly, rather than limiting patent venue (as Fourco did) to the defendant’s state of incorporation or to the situs of infringement where the defendant also had a “regular and established place of business,” VE Holding expanded permissible venue for patent cases involving a defendant corporation to “any judicial district in which it is subject to personal jurisdiction at the time the action is commenced.”13 That decision, while squarely at odds with the Court’s prior decision in Fourco, paved the way to the expansive view of patent venue that dominated patent practice—and led to the rise of the Eastern District of Texas as a popular venue—for a period of over twenty-five years.

TC Heartland Reverses VE Holding and Fourco Returns as Controlling Authority on Patent Venue

For all the hullabaloo about the Eastern District of Texas’ outsized role in patent cases, it is interesting that the actual case before the Court arose out of a different district, Delaware.14 For its part, TC Heartland15 is organized under Indiana law and headquartered in Indiana, and argued that it was not subject to venue in Delaware even though it “does ship the allegedly infringing products into the State.”16 The District Court denied TC Heartland’s motion to dismiss or transfer venue, and “the Federal Circuit denied a petition for a writ of mandamus . . . .”17 Continuing a trend of summary reversals of the Federal Circuit in other areas of patent law, the Court has no hesitation in reversing the Federal Circuit’s decision in VE Holding.18 First, the Court notes “Congress has not amended § 1400(b) since Fourco, and neither party asks us to reconsider our holding in that case.”19 Next, the Court decides “[t]he current version of § 1391 does not contain any indication that Congress intended to alter the meaning of § 1400(b) as interpreted in Fourco.”20 Importantly, the Court found “there is no indication that Congress in 2011 ratified the Federal Circuit’s decision in VE Holding. If anything, the 2011 amendments undermine that decision’s rationale.”21 Accordingly, “[a]s applied to domestic corporations, ‘reside[nce]’ in § 1400(b) refers only to the State of incorporation.”22 In short, the Court’s interpretation of the specific patent venue statute, § 1400(b), as interpreted in Fourco is now (again) law, so that domestic corporations can only be sued for patent infringement “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.”23

The Consequences of a More Restrictive Patent Venue Regime

Already, at least one district court has sua sponte vacated a summary judgment hearing in a pending case and ordered the parties to brief “whether venue is proper” post TC Heartland.24 There are a host of other pending cases where venue could be addressed, whether in the form of motions to dismiss where the defendant has not yet answered, or where the district court is willing to entertain post-answer motions on the issue. In short, TC Heartland’s impact has been immediate, and will undoubtedly engender more venue-related litigation efforts in pending cases.

Furthermore, for cases not yet filed, patentees will have to reconfigure their choice of forum analysis in light of this decision. If the defendant is a domestic corporation, bringing patent suits in the state of incorporation unquestionably complies with the directives of TC Heartland. Since many corporations are incorporated in Delaware, there is a strong likelihood that filings in that already busy—some would say overburdened—district court will increase. While venue would not be an issue in cases where patentees make the decision to sue in the defendant’s state of incorporation, there will still be situations where defendants attempt to transfer the case to a different district on convenience grounds. For example, a Silicon Valley-based technology company incorporated in Delaware and sued for patent infringement in that district could elect to try and have the case transferred to the Northern District of California on convenience grounds.

A second option for patentees in some cases will be to file their patent suits in jurisdictions where the defendant has “committed acts of infringement and has a regular and established place of business.”25 In those cases, however, there will always be the chance that the issue of what a “regular and established place of business” can include becomes contested between the parties. Here again, motions to transfer on convenience grounds remain a risk factor for patentees hoping to have their choice of forum respected as well.

With respect to foreign corporations, individuals, and LLC’s accused of patent infringement, the venue question is a bit murkier, as TC Heartland’s holding was expressly limited to domestic corporations. What is clear, however, is that in the Supreme Court’s view patent law has a specific venue statute, § 1400(b), which controls in any patent case.

Ultimately, as with any Supreme Court opinion, it will take some time before practitioners and scholars can evaluate the full impact of this decision. In the near term, it will be interesting to see how this decision impacts existing cases, even as future patentees consider how to maintain as much flexibility as possible with respect to venue selection going forward. In the meantime, however, many regular patent defendants can’t be blamed if they start dreaming of staying home the next time they are sued.

Gaston Kroub is a founding partner of Kroub, Silbersher, and Kolmykov PLLC, a NYC-based IP litigation boutique with a focus on patent cases involving a range of technical areas. A former partner at two large international law firms, Gaston serves as lead counsel in a variety of intellectual property litigation matters for a diverse clientele, and is a weekly columnist on intellectual property issues for Above the Law. He has written and spoken on a number of patent law issues for a variety of publications and audiences, both domestically and abroad.

  1. See Petition for Certiorari at 5, TC Heartland v. Kraft Foods Brands Group, No. 16-341 (U.S. May 22, 2017). According to the Petition for Certiorari, over 40% of patent cases filed nationwide in 2015 were filed in this one court, out of the 94 potential district courts.
  2. While the Eastern District of Texas’ attractiveness to patent plaintiffs was originally centered on its reputation as a “rocket docket” with patent-friendly judges and juries, the sheer volume and concentration of cases filed by patentees inevitably led to at least the loss of the District’s “rocket docket” reputation. Additionally, over time the win rates for patentees, particularly at trial, moderated to the point that the main reason for patentees to file in the Eastern District of Texas was because it was the least worst choice in a decidedly anti-patent litigation climate since at least the passage of the America Invents Act (“AIA”) in 2011.
  3. 917 F.2d 1574 (1990).
  4. TC Heartland v. Kraft Foods Group Brands, No. 16-341, slip op. (U.S. May 22, 2017).
  5. See id. Justice Gorsuch was not yet confirmed when the case was heard, and did not participate in the decision.
  6. See id. at 2 n.1. TC Heartland itself is an LLC, rather than a corporation, but, due to some pleading irregularities, it was treated as a corporation by the lower court. For purposes of the opinion, the Court confined its analysis “to the proper venue for corporations.”
  7. Id. at 5 (citing 28 U S.C. § 1400(b) (1952)).
  8. See id. at 3–6.
  9. Id. at 5 (citing 28 U.S.C. § 1391(c) (1952)).
  10. 353 U.S. 222, 226 (1957).
  11. TC Heartland, slip op. at 1.
  12. Id. at 6–7 (citing VE Holding Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574, 1578 (1990)).
  13. Id. at 6 (citing Judicial Improvements and Access to Justice Act, § 1013(a), 102 Stat. 4669 (1988)).
  14. In fact, the consensus opinion among patent practitioners is that because of this decision, Delaware is the likeliest venue to see even more patent filings, since it is such a popular state of incorporation.
  15. Putting aside the issue discussed in footnote 6 above.
  16. TC Heartland, slip op. at 2.
  17. Id. at 3 (citing In re TC Heartland LLC, 821 F.3d 1338 (2016)).
  18. See id. at 7–10.
  19. Id. at 8.
  20. Id.
  21. Id. at 9 (emphasis added).
  22. Id. at 10.
  23. 28 U.S.C. § 1400(b) (1952).
  24. See Columbia Ins. Co. v. Integrated Stealth Tech. Inc., No. 3-16-cv-03091 (C.D. Ill. May 23, 2017) (order directing parties to brief whether venue is proper).
  25. 28 U.S.C. § 1400(b) (1952).

    26. Recommended Citation Gaston Kroub, Response, TC Heartland v. Kraft Foods: Patent Venue Comes Home, Geo. Wash. L. Rev. On the Docket (May 27, 2017), http://www.gwlr.org/tc-heartland-v-kraft-foods-patent-venue-comes-home/.

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