TC Heartland: Supreme Court Makes Venue Shopping More Difficult for Patent Trolls

In the highly anticipated case on patent-venue shopping, TC Heartland LLC v. Kraft Foods Group Brands LLC, No. 16-341 (S. Ct. May 22, 2017), the Supreme Court reversed and remanded the decision of the Federal Circuit, putting a stop to an interpretation of the venue statutes that had allowed patent trolls and plaintiffs to bring their cases in plaintiff-friendly venues as opposed to where the defendant resided. 

In the 8-0 decision, Justice Thomas explained in the Court’s opinion that the venue statute controlling patent cases is one distinct from the general venue statutes. Venue in patent cases is controlled by 28 U.S.C. § 1400(b), which provides that “[a]ny 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 and has a regular and established place of business.” 28 U.S.C. § 1400(b) (emphasis added). The Court held that “where the defendant resides” means the State in which the defendant is incorporated.

The last time that the Supreme Court had interpreted § 1400(b) was in 1957 in Fourco Glass Co. v. Transmirra Products Corp., 353 U.S. 222. In Fourco, the Court concluded that for purposes of § 1400(b), a domestic corporation “resides” only in its State of incorporation. What the Court had already rejected in Fourco was the argument that § 1400(b) incorporates the broader definition of corporate “residence” contained in the general venue statute, 28 U.S.C. §1391(c), which includes within its coverage an entity over which a district court has personal jurisdiction. Reasoning that because Congress has not amended §1400(b) after its decision in Fourco, it still stands that § 1400(b) remains the controlling statute on patent venue, and the proper interpretation of “resides” remains the same—the State of incorporation for a domestic corporation. Because Congress did not amend the general venue statute, 28 U.S.C. § 1391, with any indication of an intent to alter the meaning of §1400(b) as interpreted by Fourco, the Court expressly rejected the Federal Circuit’s decision in VE Holding Corp. v. Johnson Gas Appliance Co., 917 F. 2d 1574 (Fed. Cir. 1990), which had led to the unintended effect of precipitating years of venue shopping in patent cases and a high concentration of patent cases in plaintiff-friendly venues. TC Heartland, slip. op. at 6-8. After reversing the Federal Circuit’s decision, the Court remanded the case back to the Federal Circuit for further proceedings consistent with the Court’s opinion.

Although not directly addressed in the Supreme Court’s opinion, the disproportionate number of patent plaintiff and troll cases brought in the Eastern District of Texas certainly will be directly impacted. It is likely that in the coming months, the Eastern District of Texas will entertain a number of motions seeking to dismiss or transfer patent cases to districts where the defendants reside.

Want to learn more? Register for “There’s No Place Like Home for Patent Infringement Actions,” Finnegan’s webinar discussing the Supreme Court’s decision in TC Heartland.