In 2017, few patent cases created as much buzz as TC Heartland LLC v. Kraft Foods Group Brands LLC lawsuit. Decided by the Supreme Court on May 22, many are still waiting to see what the Court’s decision will mean for the future of patent litigation, and, more specifically, how a plaintiff’s newly-limited choice of venue will affect litigation strategy and outcomes.
TC Heartland revolved around the interpretation of patent venue statute 28 U.S.C. § 1400(b), which reads that “[a]ny civil action for patent infringement may be brought in the judicial district where the defendant resides [emphasis added], or where the defendant has committed acts of infringement and has a regular and established place of business.” The Supreme Court had previously ruled in 1957 that a domestic corporation’s only “residence” is the state in which it is incorporated, however, a much broader definition of “resides” has been applied in patent infringement for over a quarter-century.
In 1990, the Federal Circuit held that a congressional change to the definition of “resides” in 28 U.S.C § 1391(c) -the general venue statute wherein a domestic corporation “resides” anywhere a court would have personal jurisdiction over a defendant – extended to patent infringement venues under Section 1400(b). This decision resulted in the need for only “minimum contacts” between a defendant and a state for venue to be proper in that state’s federal district courts. As a consequence, many patent infringement suits have been filed by plaintiffs in patent-friendly jurisdictions, such as the Eastern District of Texas, in hopes of a more favorable verdict.
In TC Heartland, TC Heartland LLC, a limited liability company organized and headquartered in Indiana, was sued by Kraft Foods for allegedly shipping infringing products into Delaware. Relying on the Federal Circuit’s broadened definition of “resides,” Kraft Foods brought suit in the District of Delaware, claiming that TC Heartland’s shipping of goods into the Delaware resulted in “minimum contacts” with the state and therefore gave the court personal jurisdiction of the the defendant. TC Heartland moved to transfer venue to Indiana, however the district court denied the motion finding venue proper under Section 1391(c). After the Federal Circuit denied TC Heartland’s petition for mandamus, the Supreme Court agreed to decide the issue.
In hearing the TC Heartland issue, the Court determined whether the meaning of “resides” in the patent venue statute was broadened by Congress years ago when amendments were made to the general venue statute. The Court took a firm stance in support of its 1957 ruling, where it “definitively and unambiguously” held that “resides” is limited to only to the state in which a company has been organized under Section 1400(b). To clarify the effect of Congress’ Section 1391(c) amendment, the Court stated that there was no indication showing that Congress intended for changes to Section 1931(c) to have any effect on Section 1400(b). As a result, venue is only proper in patent infringement suits in the states where a business is organized, or where a business has committed acts of infringement and has a regular and established place of business.
Many are left wondering what effect the TC Heartland ruling will have on the thousands of patent infringement cases that have already been filed in improper venues; others seek clarification on what is necessary to show a “regular and established place of business.” It is almost certain, however, that while we wait for answers to these questions to arise, we will see fewer and fewer cases filed in patent-friendly districts where only “minimum contacts” exist, and an increase in states such as Delaware where many companies have incorporated and where there is little argument over whether venue is appropriate.