May 23, 2017
In TC Heartland LLC v. Kraft Foods Group Brands LLC, the Supreme Court limited venue in patent suits against domestic corporations to: (1) the corporation’s state of incorporation or (2) a location where the corporation both committed infringing acts and has a regular and established place of business.
The Supreme Court’s holding abrogated a series of Federal Circuit decisions which allowed for venue in patent cases wherever a corporate defendant was subject to personal jurisdiction. This included any district in which the corporation purposely shipped an accused product through an established distribution channel. See VE Holding Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574 (Fed. Cir. 1990); Beverly Hills Fan Co v. Royal Sovereign Corp., 21 F.3d 1558 (Fed. Cir. 1994). The Court declined to decide how, if at all, the decision would apply to unincorporated entities or alien corporations. Justice Thomas wrote the opinion, which all Justices joined, except Justice Gorsuch, who took no part in the decision of the case.
At issue in the case was the meaning of the word “resides” in the patent venue statute (28 U.S.C. § 1400(b)). The Court held that a domestic corporation “resides” only in that corporation’s state of incorporation. The Court considered the lengthy history of the patent venue statute in reaching its conclusion.
In 1942, Congress enacted a statute providing for federal venue generally (28 U.S.C. § 1391) and recodified a patent-specific venue statute (as 28 U.S.C. § 1400(b)). The general venue statute provided for venue in any judicial district where a corporate defendant was doing business and defined such a place as the corporation’s residence. The patent venue statute provided for venue only where the corporation “resides” or where the defendant both committed infringing acts and had a regular and established place of business. The patent venue statute did not define the word “resides.” This left open the question of how the term should be construed, including whether the definition of residence in the general venue statute should define the term “resides” in the patent venue statute.
In Fourco Glass Co. v. Transmirra Products Corp., 353 U.S. 222, 226 (1957), the Court determined that the word “resides” in the patent venue statute is limited to the corporate defendant’s state of incorporation only. The Court also concluded that the general venue statute does not supplement the patent venue statute and that the patent venue statute exclusively governs venue in patent cases.
Fourco controlled the venue inquiry in patent cases until 1990, when the Federal Circuit in VE Holding interpreted the 1988 amendments to § 1391 as abrogating Fourco by broadening patent venue to any district in which the defendant was subject to personal jurisdiction. The Federal Circuit’s decision concluded that the addition of the words “[f]or purposes of venue under this chapter” in the 1988 amendments to § 1391 required § 1391 to supplement § 1400 because both statutes are in the same chapter.
In 2011, Congress again amended the general venue statute. This time Congress stated that the general venue statute shall provide for venue “except as otherwise provided by law.” 28 U.S.C. § 1391(a). Congress also amended the definition of residence in the general venue statute to state that it shall define residence “for all venue purposes” (removing the “[f]or purposes of venue under this chapter” language that was added in the 1988 amendment, upon which the Federal Circuit relied heavily on in VE Holding). 28 U.S.C. § 1391(c).
In this case, the Supreme Court recognized the history discussed above, and heavily relied on Fourco for its conclusion. The Court reasoned that Congress never intended to change the definition of residence in the patent venue statute that the Court announced in Fourco. The Court first reasoned that if Congress had intended to overrule Fourco it would have amended the patent venue statute itself, but Congress has not done so.
Second, the Court reasoned that if Congress intended to change the patent venue statute by amending the general venue statute, it would provide “a relatively clear indication of its intent in the text of the amended provision.” The Court did not find a clear intent to overrule Fourco in the amendments to the general venue statute. Focusing on the 2011 amendments, the Court reasoned that the language “for all venue purposes” was not added to overrule Fourco. At the time Fourco was decided, the general venue statute recited “for venue purposes,” yet the Court still concluded that the general venue statute did not modify the patent venue statute. The Court found no material difference between the phrasings “for venue purposes” at the time of Fourco and “for all venue purposes” in the 2011 amendments.
The Court also noted that the current general venue statute was less likely to modify patent venue statute than the version at issue in Fourco because the general venue statute now states that it does not govern if venue is “otherwise provided by law.” The Court therefore concluded that Congress intended no change to Fouro and “[a]s applied to domestic corporations, “reside[nce]” in § 1400(b) refers only to the State of incorporation.”
The full impact of the Court’s decision remains to be seen. Although the decision clearly limits the residence of a domestic corporation in patent cases to the state of incorporation, the decision does not address other venue questions such as: (i) the scope of the remainder of § 1400(b), which allows for venue in patent cases “where the defendant has committed acts of infringement and has a regular and established place of business[;] (ii) where an unincorporated entity “resides” for purposes of § 1400(b); or (iii) where an alien corporation “resides” for purposes of § 1400(b). Much litigation is likely to ensue over these questions.