Supreme Court Reaffirms its Interpretation of the Patent Venue Statute
On Monday May 22, 2017, the United States Supreme Court decided TC Heartland LLC v. Kraft Foods Group Brands LLC. Justice Thomas wrote the 8-0 opinion. In TC Heartland LLC, the Court reaffirmed its original interpretation of 28 U.S.C. Section 1400(b), holding “that a domestic corporation ‘resides’ only in its State of Incorporation for the purposes of the patent venue statute.”
This holding will likely have a tremendous impact on patent litigation because of the limits it places on where a patent suit can be brought. As part of the background to this case, the Federal Circuit, in 1990, held that the then newly adopted 28 U.S.C. Section 1391 broadened the 1400(b) patent venue statute. In so holding, the Federal Circuit made selling or advertising a product in an area sufficient enough contact with that area to satisfy the venue requirements of 1400(b). Thus, the Federal Circuit enabled plaintiffs to sue for patent infringement in the court of their choice.
As a result of this 1990 decision, approximately 40% of all patent litigation cases were resolved in the famed “rocket docket” in the United States District Court for the Eastern District of Texas. It was an ideal venue for plaintiffs because the Eastern District of Texas was known for its plaintiff-friendly juries and strict, efficient judges.
Alternatively, the Eastern District of Texas posed a difficulty for defendants because they often had no more than minimal contacts with the Eastern District of Texas. However, if the plaintiff decided to sue them there, defendants would often have no choice but to defend themselves in those unfriendly courts.
However, the patent “rocket dockets” (the Eastern District of Texas, the Eastern District of Virginia, and the District Court of Delaware) will likely run out of fuel as the result of the recent May 2017 holding. The case involved TC Heartland LLC, an Indiana-based company, that was sued in the District Court of Delaware for patent infringement by Kraft Foods. TC Heartland argued venue was improper in Delaware and the case should be transferred to Indiana, where TC Heartland LLC was incorporated. Seeing this case as an opportunity to restrict and return to the original understanding of Section 1400(b), over forty companies, including FedEx, eBay, Oracle, and Walmart, rallied to TC Heartland’s side by filing an Amici Curiae brief. The Court ultimately agreed with TC Heartland and overturned the Federal Circuit’s interpretation of the patent venue requirements.
By reaffirming 28 U.S.C. Section 1400(b)’s original meaning, the Supreme Court has restricted where patent infringement cases can be brought. For example, if company A alleges that company B, which is incorporated in Oklahoma, infringes one of company A’s patents, company A can only sue company B in the appropriate federal district court in Oklahoma. Previously, company A could have sued company B in any federal district court where company B sold or advertised its allegedly infringing products.
In conclusion, by limiting the places a plaintiff can sue, the Supreme Court’s decision is a major step in protecting the interests of defendants. However, the decision creates difficulties for well-intentioned plaintiffs by requiring them to litigate patent disputes in the defendant’s “home” state. Only time will tell of the full impact of the decision.