On May 2017, the Supreme Court handed down one of the most significant patent law decisions of the last several years in T.C. Heartland L.L.C. v. Kraft Food Brands, L.L.C. This case directly impacts the proper venue in which to bring patent infringement cases, and therefore could drastically change the landscape of patent litigation as it stands.
The main crux of this case dealt with the conflicting language between 28 U.S.C. §1400 and §1390. Pursuant to § 1400(b), a “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.” Pursuant to § 1391(c), a corporation is deemed to be a resident of “any judicial district in which such defendant is subject to the court’s personal jurisdiction…” A Federal Circuit case in the 1990’s, VE Holding Corp. v. Johnson Gas Appliance Co., held that §1391(c) applied to patent infringement actions. At this same time Congress amended the general venue statute of §1391(c) to read:
“[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 practical affect of this was to curb the pervasive practice of venue shopping in patent infringement cases. Certain districts, such as the Eastern District of Texas, have become famous for their overwhelmingly high number of patent infringement cases, expert judges, and specially designed local rules to create a quicker patent docket. Despite the defendants in these cases normally not being incorporated, or committing the infringing acts as well as having a principal place of business in the district, the state’s long arm statutes allowed them to exercise personal jurisdiction over any defendant “purposely availing themselves of the benefits and rights” of the venue. In many cases involving Internet companies allegedly infringing on patents, this nexus was found through simply having some number of users on your site which lived in Texas.
With patent infringement suits frequently being filed in venues which would normally not be proper, but for long-arm statutes exercising personal jurisdiction, this recent ruling stands to have a significant impact. After this case, the term “resides” was re-affirmed as meaning “the state in which a business is incorporated”. [TC Heartland LLC v. Kraft Foods Group Brands LLC 581 US ___ (2017)] Therefore, the proper venues to file a patent infringement case include : 1) the state in which the infringing business is incorporated (or individual live); or 2) where the infringing act occurred and the business has a regular established place of business. This should make for a steep decline in patent cases filed in Eastern District of Texas, but should greatly increase such cases in states where businesses are most frequently incorporated; areas such as California, or especially Delaware.
While this case can be seen as the Supreme Court’s response to what has been happening in the Eastern District of Texas, there are two sides to every coin. While patent venue shopping has become a significant impediment to efficient and effectual patent litigation, the Eastern District of Texas had specifically designed itself to deal with these types of cases. Their judges were educated, juries familiar with the technical and complex subject matter these cases usually contain, and the docket rules were specifically designed to speed up otherwise tedious and protracted litigation process.
In conclusion, patent holders should be aware of this update to the law, and keep it in mind when deciding their enforcement strategies regarding potential infringements occurring in potentially undesirable, or less than practical venues to bring litigation.