On May 22, 2017, the U.S. Supreme Court issued a decision limiting the venues in which patent owners may bring infringement actions. The case before the Court, TC Heartland LLC v. Kraft Foods Group Brands LLC, concerned the federal statute governing venue in patent actions. The patent venue statute, 28 U.S.C. §1400(b), provides two alternatives for proper venue: "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." The TC Heartland decision addressed the first alternative by clarifying where a corporation "resides." The Supreme Court reversed a prior ruling of the U.S. Court of Appeals for the Federal Circuit and concluded that, "[a]s applied to domestic corporations, 'reside[nce]' in §1400(b) refers only to the State of incorporation."
The first part of the venue statute had previously been viewed broadly to allow suits to be brought in any court having personal jurisdiction over a defendant or where allegedly infringing sales were made and, as a result, patent owners began "forum shopping" for favorable jurisdictions. This result led to the popularity of the Eastern District of Texas, for example, where a disproportionate amount--approximately 40%--of all patent actions have been filed in recent years due to its plaintiff-friendly rules. The TC Heartland decision should result in a decrease in the number of actions filed in the Eastern District of Texas, including with respect to actions brought by non-practicing entities that are often known as "patent trolls." Consequently, there should be an increase in the number of patent infringement actions filed in business and judicial hubs throughout the country, such as New York, California, and Delaware.
The Supreme Court's decision does not resolve all issues surrounding venue in patent cases, and the ruling will have different effects on manufacturers, suppliers and retailers. There will likely be litigation over what constitutes a company's regular and established place of business. Further, U.S. corporations with mainly online operations will be most affected, since there is a significant reduction in the number of venues in which they may be sued. Nevertheless, large businesses such as national retailers and companies with geographically dispersed distribution centers may remain at risk to forum shopping.
Determining the proper venue for a case is now at the forefront of patent infringement litigation.
To read the full decision, please click here.
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