In TC Heartland LLC v. Kraft Foods Group Brands LLC,1 the U.S. Supreme Court unanimously reversed the U.S. Court of Appeals for the Federal Circuit, holding that "residence" for venue purposes in patent infringement cases refers only to the state of incorporation, as applied to domestic corporations. The Court's decision upends a quarter-century practice of patentees choosing the litigation venue based on an alleged infringer's sales. Justice Gorsuch did not take part in the decision. Justice Thomas delivered the Court's opinion.
Background
The Court's opinion arises from Kraft Foods Group Brands LLC's suit alleging patent infringement by competitor TC Heartland LLC. Kraft sued TC Heartland, a corporation organized under Indiana law and headquartered in Indiana, in the District of Delaware. TC Heartland shipped the allegedly infringing products into Delaware, but is not registered to conduct business in Delaware and has no meaningful local presence in the state. TC Heartland moved either to dismiss the infringement suit or to transfer the case to the Southern District of Indiana, arguing that venue was improper in Delaware.
Relying on Federal Circuit precedent, the district court rejected the petitioner's arguments,2 and the Federal Circuit denied a petition for a writ of mandamus.3 The Federal Circuit concluded that statutory amendments effectively amended the patent venue statute, 35 U.S.C. Section 1400(b),4 to define "resides" in accordance with the general venue statute, 35 U.S.C. Section 1391(c).5 Under this interpretation, because the District of Delaware could exercise personal jurisdiction over TC Heartland, which shipped allegedly infringing products into the state, the company "resided" in Delaware under Section 1391(c) and, therefore, also under Section 1400(b). The Supreme Court disagreed and reversed.
The Court's Analysis
In its reversal, the Supreme Court focused on the history of the relevant statutes, starting with the Judiciary Act of 1789, which covered patent cases as well as other civil suits, and permitted suit in a federal district court if the defendant was "an inhabitant" of that district or could be "found" for service of process in that district. In 1897, Congress enacted a patent-specific venue statute, placing patent infringement cases "in a class by themselves"6 and permitting suit in the district in which the defendant was an "inhabitant." The term "inhabit" was understood at the time to mean only the state in which the defendant was incorporated.
The Court addressed this Section 1400(b) predecessor statute in Stonite Products Co. v. Melvin Lloyd Co.,7 finding that the patent venue statute "alone should control venue in patent infringement proceedings."8 Recodified in 1948 as Section 1400(b), the provision provides that patent infringement suits "may be brought in in the judicial district where the defendant resides."9 The general venue statute, enacted at the same time, defines "residence" for corporate defendants as the district of incorporation, or where a corporation is licensed to do or is doing business.10
Following the 1948 legislation, confusion existed as to whether Section 1400(b)'s use of the word "resides" incorporated the Section 1391(c)'s definition of corporate residence. In Transmirra Prods. Corp. v. Fourco Glass Co.,11 the Supreme Court rejected the interpretation that Section 1391(c) defined residence for purposes of Section 1400(b), affirmed that Section 1400(b) "is the sole and exclusive provision controlling venue in patent infringement actions"12 and that "resides" equated with "inhabit[s]" of the pre-1948 statute.
This legal landscape remained unaltered until 1988, when Congress amended the general venue statute to apply "[f]or the purposes of venue under this chapter." The Federal Circuit concluded that the general venue amendment refined the meaning of the term "resides" in the patent venue statute, and equated "resides" in Section 1400(b) with "residence" in Section 1391(c), thus giving patentees venue in "any judicial district in which [a] defendant is subject to the court's personal jurisdiction."
In today's decision, the Supreme Court rejected this interpretation and reversed the Federal Circuit. Referring to its 1956 decision in Fourco, the Court reiterated that "reside[nce]" in Section 1400(b) has a particular meaning as applied to domestic corporations and is to only be understood as the company's state of incorporation. The Court found that the current version of the general venue statute contains no indication that Congress intended to alter the meaning of Section1400(b) and found that position weakened by the 2011 clause, which expressly states that the general venue statute does not apply when "otherwise provided by law."
Takeaways
The TC Heartland decision makes clear that in order for venue to be proper over a domestic company, one of two conditions must be met: 1) the defendant must reside (i.e., be incorporated) in the venue; or 2) the defendant must be deemed to "[have] committed acts of infringement and [have] a regular and established place of business" in the venue.
The requirement to meet one of these two prongs may increase the number of cases filed in the District of Delaware, where many companies are incorporated, and place additional burden on this district's already busy docket. It is also possible that other districts, such as the Eastern District of Texas, where roughly forty percent of infringement suits have been filed in the last two years, will see a drop in patent complaints. To avoid the likely backlog that will occur in the District of Delaware, patentees may decide to file more suits in various venues around the country. However, a patentee's ability to "forum shop" will be limited, pursuant to the new venue requirements set forth in TC Heartland. TC Heartland gives alleged infringers a procedural tool to avoid having to fight patent assertions in venues where their connection to the venue is strained.
Although the Court's opinion clarifies corporate residence for domestic companies, the Court explicitly omitted foreign corporations from the analysis. As a result, there may be further litigation as to the precise scope of Section 1400(b) with respect to foreign defendants.
