The team is joined by Guest Kats Rosie Burbidge, Stephen Jones, Mathilde Pavis, and Eibhlin Vardy, and by InternKats Verónica Rodríguez Arguijo, Hayleigh Bosher, Tian Lu and Cecilia Sbrolli.

Monday, 22 May 2017

BREAKING: Supreme Court limits US patentee's forum shopping capabilities

What do you mean I need to curtail my
forum shopping habit?
Hot off the presses in DC this morning is the much-awaited decision in TC Heartland LLC v Kraft Foods Group Brands LLC (2017).  In a unanimous (8-0) decision, the justices found in favor of TC Heartland in holding that 28 U.S.C. §1400(b)  - the patent venue statute - is to be interpreted narrowly.  The provision states 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.” (empahsis added)
The Court held that "resides" means the State of incorporation (see Fourco Glass Co v Transmirra Products Corp 352 US 222 (1957)).  It does not extend to mere business activity.  

A broader definition of "residence" set out in the the general venue statute - 28 U.S.C. §1391(c) - had been amended twice to provide that "“[e]xcept as otherwise provided by law” and “[f]or all venue purposes,” a corporation 
“shall be deemed to reside, if a defendant, in any judicial district in which such defendant is subject to the court’s personal jurisdiction with respect to the civil action in question.” (emphasis added)
The question for the Court was whether this definition overrode §1400(b).  The answer was "no". Delivering the opinion of the Court, Justice Thomas wrote:
"In Fourco, this Court definitively and unambiguously held that the word “reside[nce]” in §1400(b) has a particular meaning as applied to domestic corporations: It refers only to the State of incorporation. Congress has not amended §1400(b) since Fourco, and neither party asks us to reconsider our holding in that case. Accordingly, the only question we must answer is whether Congress changed the meaning of §1400(b) when it amended §1391. When Congress intends to effect a change of that kind, it ordinarily provides a relatively clear indication of its intent in the text of the amended provision. See United States v. Madigan, 300 U. S. 500, 506 (1937)
. . .
The current version of §1391 does not contain any indication that Congress intended to alter the meaning of §1400(b) as interpreted in Fourco. Although the current version of §1391(c) provides a default rule that applies “[f]or all venue purposes,” the version at issue in Fourco similarly provided a default rule that applied “for venue purposes.” 353 U. S., at 223 (internal quotation marks omitted). In this context, we do not see any material difference between the two phrasings
. . .
Fourco’s holding rests on even firmer footing now that §1391’s saving clause expressly contemplates that certain venue statutes may retain definitions of “resides” that conflict with its default definition. In short, the saving clause makes explicit the qualification that this Court previously found implicit in the statute. "  (emphasis added)
Heartland had challenged the decision by Kraft Foods to commence infringements proceedings in Delaware (where Kraft is incorporated) on the basis that Heartland shipped the allegedly infringing products into the state.  Heartland, otherwise, had no meaningful local presence in Delaware.  Heartland applied to dismiss the case or transfer venue to Indiana, where it is headquartered.  The case has now been remanded.

So will this be the blow to the much loved (by patentees, anyway) Eastern District of Texas that so many defendants have been dreaming of?  Is this a further blow to patent trolls in the US?  Will patentees look to other global venues where forum shopping presents more opportunities, for example in Europe and under Article 33 of the UPCA?  Or is this just balance returning to forum shopping in the US and it will be business as normal? What do readers think?  

5 comments:

Mike Dunford said...

Based on the wording of the statute, venue will only be appropriate where a defendant is incorporated in the Eastern District of Texas, or "has committed acts of infringement and has a regular and established place of business" there. 28 USC §1400(b). The "and" is going to be the key, and more-or-less puts the stake in the heart of ED Tex's patent practice.

Whether this is entirely a good thing remains to be seen. Patent suits are complicated, and the US (still) does not have a dedicated trial court for patent proceedings. And there are a lot of federal courts in the USA where the judges have absolutely no experience with patent cases. (My home jurisdiction of D. Haw. is a good example of this.)

Mark Fox said...

The US does not need to have a dedicated trial court for patent proceedings. The US Court of Appeals for the Federal Circuit was created in 1982 to ensure there was uniformity among US Federal trial court decisions in patent cases. This case is one of venue and not inconsistency in the application of substantive patent law. True, under the ambiguity created by 28 USC §1400(b) the Eastern District of Texas created a 'cottage industry' which grew along with the rise of the NPE (or troll if you prefer). But the outcome of this case points to the real question here: 'Are the recent decisions of the US Supreme Court eroding the value to the entire US patent system?' This is an important question raised by the retired Former Chief Judge for the Federal Circuit Paul Michel, as shown on http://www.clause8.tv

Anonymous said...

We can be sure that Paul Michel is happy with the outcome of this case, because he filed an amicus brief in support of petitioner.

ex-examiner said...

What surprises me is that the defendant was not incorporated in the State of Delaware; pretty well every US company that I had professional dealings with, was incorporated there, apparently due to its favourable registration arrangements.

THE US anon said...

ex-examiner,

What surprises me is that the Court failed to take note** that neither party was incorporated AT ALL.

Both of the parties were LLC's.

The legal question answered by the Court is purely an advisory opinion. At the federal level in the United States, such advisory opinions carry no force of law.

See: https://en.wikipedia.org/wiki/Advisory_opinion#United_States

**Other than an oblique comment in a footnote. This aspect appears to control, and yet the Court could not restrain itself because "patents."

Subscribe to the IPKat's posts by email here

Just pop your email address into the box and click 'Subscribe':