Supreme Court drastically changes where patent infringement cases can be filed

On May 22 2017 the Supreme Court issued a unanimous decision in TC Heartland LLC v Kraft Foods Group Grands LLC, greatly restricting the venue for patent infringement litigation. The court held that a domestic corporation resides only in its state of incorporation for purposes of the patent venue statute, reversing several decades of a more expansive interpretation.

The issue was whether Kraft Foods had selected the proper venue for suing TC Heartland for infringement. TC Heartland asserted that the venue was improper in the District of Delaware because TC Heartland did not ‘reside’ and did not have a regular place of business in Delaware. The District of Delaware denied TC Heartland's motion to dismiss or transfer the case to the Southern District of Indiana. The Federal Circuit affirmed denial, using an expansive definition of ‘reside’.

Title 28 USC Section 1400(b) provides the exclusive venue provision for patent infringement cases. Section 1400(b) states: "any 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."

This provision has remained unchanged for nearly 70 years. However, the general venue statute, 28 USC Section 1391, has changed over time. In particular, Section 1391(c) changed by providing venue for all civil action generally where a defendant is subject to the court's personal jurisdiction. In VE Holding Corp v Johnson Gas Appliance Co in 1990, the Federal Circuit interpreted the revision in Section 1391(c) to apply to the definition of ‘reside’ in Section 1400(b).

The Supreme Court reversed and held that the venue was not proper because TC Heartland did not reside in Delaware. The court specifically rejected the Federal Circuit's VE Holding decision and held that "a domestic corporation 'resides' only in its State of incorporation for purpose of the venue statute".

This is a significant decision because it has the potential to affect a vast number of patent infringement cases currently filed in courts throughout the United States and where such cases will be filed in the future. For example, a plaintiff or defendant in a patent infringement case in the Eastern District of Texas, which has the most pending patent infringement cases, may now be subject to move to a new district court.

Patent owners can no longer select a venue simply based on where personal jurisdiction can be found. This restricts the venues for a patent infringement case to only the state of incorporation or effectively where infringement occurs and the defendant has an established, on-the-ground presence.

The net result of this decision will be a redistribution of patent infringement cases throughout the United States. Whereas the Eastern District of Texas has seen three to five times as many patent cases filed  than any other court (2,523 cases in 2015 and 1,654 in 2016), Delaware ‒ a common choice for incorporation ‒ is likely to become the busiest patent court in the nation, with many other courts about to see significant increases as well. The redistribution of cases will affect:

• case duration;
• assessments of likelihood of success and damages in particular cases;
• case costs; and
• case efficiency in venues that do not routinely handle patent cases.

This redistribution also has the potential to increase uncertainty in the application of patent eligibility determinations, exceptional case awards and other hot-button patent issues as more and different courts are asked to render decisions.

Finally, many will surmise that this decision is overtly aimed at addressing defendants' outcry regarding the alleged success of plaintiffs in the patent docket in the Eastern District of Texas. It remains to be seen whether spreading patent cases throughout the country will actually provide defendants with more successful outcomes or simply overburden other courts such as the District of Delaware. It is distinctly possible that plaintiffs' successful outcomes will be distributed across other venues that will then allegedly become ‘patent owner friendly’. However, it does prove that no patent decision is safe in the courts today – even with decades-long precedent regarding venue.