Supreme Court agrees to hear patent venue case filled with patent reform implications

Earlier today the United States Supreme Court granted certiorari in TC Heartland LLC v. Kraft Food Brands Group LLC. In deciding to hear this patent venue case the Supreme Court has agreed to decide whether 28 U.S.C. § 1400(b) is the sole and exclusive provision governing venue in patent infringement actions. This resolution of this question could have very large ramifications.

Ultimately, the question that the petitioner really wants the Supreme Court to address is whether the Eastern District of Texas, which is home to 20-25% of all patent litigations because it is perceived to be patent owner friendly, is a proper venue for patent owners to be choosing. If the Supreme Court issues a ruling that strikes down current patent venue rules there would be no need for patent venue reform efforts to continue in Congress. On the other hand, if the Supreme Court were to affirm the Federal Circuit in this case calls for legislative venue reform would likely become deafening.

The statutes in question will be 28 U.S.C. § 1400(b) and 28 U.S.C. § 1391(c). Pursuant to § 1400(b), a “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.” Pursuant to § 1391(c), a corporation is deemed to be a resident of “any judicial district in which such defendant is subject to the court’s personal jurisdiction…”

In Fourco Glass Co. v. Transmirra Products Corp., 353 U.S. 222 (1957), the Supreme Court held that § 1400(b) is not to be supplemented by § 1391(c) and that “§ 1400(b) is the sole and exclusive provision controlling venue in patent infringement actions…” While that might seem to end the inquiry on its face, the Federal Circuit has for 25 years ignored the Supreme Court ruling in Fourco Glass based on the belief that 1988 amendments by Congress “rendered the statutory definition of corporate residence found in § 1391 applicable to patent cases.” Thus, it is the belief of the Federal Circuit that Congress overruled the Supreme Court’s ruling in Fourco Glass, which Congress obviously has the authority to do.

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Federal Circuit Decision

Interestingly, for a case where the decision will be all about whether venue in the Eastern District of Texas is proper, this case originated in the District of Delaware. TC Heartland LLC petitioned for a writ of mandamus to United States Court of Appeals for the Federal Circuit for an order directing the United States District Court for the District of Delaware to either dismiss or transfer the patent infringement suit filed against it by Kraft Foods Group Brands LLC. The panel decision of the Federal Circuit denied the petition.

Kraft filed suit against Heartland in Delaware alleging that Heartland’s liquid water enhancer products infringe three of Kraft’s patents. Heartland moved to dismiss the complaint for lack of personal jurisdiction. It also moved to either dismiss the action or transfer venue to the Southern District of Indiana under 28 U.S.C. §§ 1404 and 1406.

Heartland, a limited liability company organized and existing under Indiana law and headquartered in Indiana, alleged that it is not registered to do business in Delaware, has no local presence in Delaware, has not entered into any supply contracts in Delaware or called on any accounts there to solicit sales. Heartland did, however, admit that it ships orders of the accused products into Delaware pursuant to contracts with two national accounts.

Heartland argued that it is entitled to a writ of mandamus based on two legal theories. First, it argues that it does not “reside” in Delaware for venue purposes according to 28 U.S.C. § 1400(b). Second, it argued that the Delaware district court lacks specific personal jurisdiction over it for this civil action. The Federal Circuit, in a decision written by Judge Moore and joined by Judges Linn and Wallach, concluded that a writ of mandamus was not warranted.

Judge Moore wrote:

The arguments raised regarding venue have been firmly resolved by VE Holding, a settled precedent for over 25 years. The arguments raised regarding personal jurisdiction have been definitively resolved by Beverly Hills Fan, a settled precedent for over 20 years. As a panel, we are bound by the prior decisions of this court.

Heartland attempted to make a novel, but rather frivolous, argument that certain minor amendments to § 1391 in 2011 somehow re-established the supremacy of the Congressionally overruled Supreme Court decision in Fourco Glass. More specifically, the 2011 amendments stated in § 1391(a) that the section was applicable “except as otherwise provided by law.” Heartland argued that because of Fourco Glass it was “otherwise provided” that § 1391(c) did not apply to patent cases.

Judge Moore explained the fallacy of Heartlands argument by saying:

Heartland asks us to presume that in the 2011 amendments Congress codified the Supreme Court’s decision in Fourco Glass Co. v. Transmirra Products Corp., 353 U.S. 222 (1957) regarding the patent venue statute that was in effect prior to the 1988 amendments. We find this argument to be utterly without merit or logic. The venue statute was amended in 1988 and in VE Holding, this court held that those amendments rendered the statutory definition of corporate residence found in § 1391 applicable to patent cases. In VE Holding, we found that the Supreme Court’s decision in Fourco with regard to the appropriate definition of corporate residence for patent cases in the absence of an applicable statute to be no longer the law because in the 1988 amendments Congress had made the definition of corporate residence applicable to patent cases. 28 U.S.C. § 1391(c) (1988) (“For the purposes of venue under this chapter”). In 1988, the common law definition of corporate residence for patent cases was superseded by a Congressional one. Thus, in 2011, there was no established governing Supreme Court common law ruling which Congress could even arguably have been codifying in the language “except otherwise provided by law.”

With respect to personal jurisdiction, Heartland did not dispute that Kraft’s patent infringement claims arose out of their shipments into Delaware. The Federal Circuit easily found those contacts sufficient to satisfy the minimum contacts requirement for personal jurisdiction to attach. Whether there is or is not personal jurisdiction over Heartland is not before the Supreme Court.

A Poor Choice by the Supreme Court

In Kraft’s opposition to the petition for certiorari, counsel for Kraft pointed out that this case is a poor vehicle for the Supreme Court to decide the issued complained about by Heartland relating to forum shopping. Kraft unsuccessfully argued:

Even if this Court were inclined to wade into the patent venue dispute, this case would be a poor vehicle. It presents none of the forum-shopping concerns discussed by Petitioner. Respondent developed and practices the patented inventions and sued Petitioner, a nationwide infringer, not in Texas but in the jurisdiction where Respondent is incorporated and suffered injury and where Petitioner purposefully directed sales of its infringing product. App. 2a. It is telling that Petitioner could muster no more than a cursory argument in favor of a § 1404(a) discretionary venue transfer.

Kraft is, of course, correct. Obviously, this case has nothing to do with forum shopping whatsoever. TC Heartland shipped allegedly infringing products into Delaware and was sued in Delaware. How that can or should be surprising is a real mystery.

What is really doing on is this case is being used by those with an agenda to attempt to make a statement about what is happening in the Eastern District of Texas, in a patent owner friendly district court. That the Supreme Court would take this case and force Kraft to play an unwilling and unjustifiable role in a macabre judicial protest with heavy political overtones is unconscionable.

Conclusion

I have no doubt that the Supreme Court will wrongly decided this patent case, as they almost always do. But if logic, reason and sanity play any role in the outcome of this most unnecessary matter it will result in the Federal Circuit being affirmed. Unfortunately, because the politics of patent reform and the patent troll not in the room matter more to the Supreme Court than anything else it will cost Kraft unnecessary legal fees and push back resolution of this infringement matter. Trial was scheduled to begin in January 2017.

Gene Quinn Gene Quinn is a patent attorney and a leading commentator on patent law and innovation policy. Mr. Quinn has twice been named one of the top 50 most influential people [...see more]

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author as of the time of publication and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com.

Join the Discussion

8 comments so far.

Eric Berend
December 31, 2016 11:52 am
@ 7.:

You disingenuous sot. How dare you read such lying words into what ‘staff’ wrote?! The issue is WHERE THE COMMERCE OCCURS – not, where the inventor resides.

Screw-off, bucko – and I will take the risk of being banned right here, right now for using stronger language than usual in calling you out as a patent-enemy posing as an interested party, in an inventor-friendly forum.

YOU have some God*mned nerve, portraying yourself here as a competent, experienced IP attorney, while serving up yet more covert opprobrium. F-off you TROLL – understand? It’s clear now, that you are simply, one of the enemy.

Period.
Paul F. Morgan
December 17, 2016 01:18 pm
P.S. If what you really want is bringing suit where the patent owner resides, that is not provided by either the current venue interpretation of the Fed. Cir. or by 28 U.S.C. § 1400(b).
Paul F. Morgan
December 17, 2016 12:39 pm
“staff:” Please read 28 U.S.C. § 1400(b) and then specifically explain how your “parade of horribles” will occur under that statute AND be worse than being dragged away to East Texas now, where very few plaintiffs or defendants reside, or have any principal place of business there, or have any significant infringements there?
As for “employees or relatives [of a party] on the jury,” obviously they are not normally allowed on the jury.
staff
December 16, 2016 05:41 pm
‘calls for legislative venue reform’

plain English translation: calls to further weaken and destroy invention rights so large multinationals can finish off their small competitors

It has been tradition in America since its founding and in western society for centuries before, and a fundamental axiom, that when a right such as a property right is trespassed the party damaged has a right to sue in any reasonable venue, such as where the crime was committed. To deny inventors the right to bring suit where they are infringed (robbed) and where the infringer has a meaningful tie deprives them of longstanding and traditional American property rights. No doubt our large infringers would rather have their small competitors travel to a distant venue to considerably increase our legal expenses and where their employees or relatives of are on the jury and where they have substantial sway on local courts such as by judge selection. If so, then stay where you are and don’t infringe outside of your home venue. But when your infringement wanders outside that limited boundary then you deserve what you get. When thieves win America loses. Just because they call it ‘reform’ doesn’t mean it is.

For our position and the changes we advocate (the rest of the truth) to truly reform the patent system, or to join our effort, please visit us at https://aminventorsforjustice.wordpress.com
or, contact us at [email protected]
Joachim Martillo
December 15, 2016 04:01 pm
Where is the regular and established place of business of a corporation that operates entirely on the Internet or Web and that only has a virtual office?
Paul F. Morgan
December 15, 2016 02:05 pm
In 2015 more than 43% of patent infringement cases were filed in East Texas District Courts, per briefs with citations filed in this case, although ironically this case was not.
Paul F. Morgan
December 15, 2016 09:43 am
E.D. TX is not “home to 20-25% of all patent litigations.” Very few patent owner plaintiffs or defendants there have any actual “home” there. They have to work out of small town E.D. TX local counsel offices, a major business there. Also, the percentage of all U.S. patent suits that are filed in E.D. TX is higher than that.
Nor would the Supreme Court be issuing “a ruling that strikes down current patent venue rules.” It would merely overrule a Fed. Cir. decision that years ago held moot a specific venue statute for patent suits that Congress had left on the books [then and ever since, with no Congressional expression of any intent to overrule it], contrary to normal rules of statutory construction. What is surprising is that no one since cert was refused the original party in that Fed. Cir. decision no one had seriously tried to challenge it? Getting a mandamus action this far is not easy – this was a long shot to get cert granted. That was not done lightly by the Supremes.
Revitalization of this patent venue statute 28 U.S.C. § 1400(b) will revive a lot of old case law on venue disputes interpreting that statute that we have not seen for a very long time!
JNG
December 14, 2016 11:00 pm
Gene – in a way, given that the FACTs are bad for the patent (r)deformers on this one, its possible the SCOTUS won’t be terribly interested in reading 1000 sponsored… “amicus” briefs urging reform from ED TX to reach a distorted end. IMO they have may prematurely played their hand on this one and blown it that way.