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Litigation Venue Changes

Posted Thursday, June 1, 2017 by Kyle Straughan

For the past decade, the Eastern District of Texas has been a hotbed of patent litigation, in large part due to its perception as being patent-owner friendly. However, on Monday, May 22, 2017 the Supreme Court in a unanimously issued a decision that will dramatically shift the venues of future patent litigation. The case came down to two apparently conflicting statutes. First, is 28 U. S. C. §1400(b) which states that a patent infringement action may be brought against a corporation in the judicial district where the defendant resides, interpreted in Fourco Glass Co. v. Transmirra Products Corp., 353 U. S. 222, 226 (1957) as being its place of incorporation, or where the defendant has committed acts of infringement and has a regular and established place of business. Second is 28 U. S. C. §1391(c), which states that for venue purposes a corporation shall be deemed, if a defendant, to reside in any judicial district in which it is subject to the court’s personal jurisdiction with respect to the action in question. The issue in the present case was whether the definition from §1391(c) supplanted §1400(b) and the court’s previous decisions.

The Petitioner, TC Heartland LLC, is a corporation organized and headquartered in Indiana, while the respondent, Kraft Foods Group Brands LLC, is organized under Delaware law and has a principle place of business in Illinois. Kraft sued TC for allegedly infringing its patented products, and chose the District Court for the District of Delaware as the venue. TC moved to dismiss the case or transfer to the Southern District of Indiana on the grounds of improper venue under the venue provisions in §1400(b). The lower courts disagreed and concluded that §1391(c) now supplied the proper definition of where a corporation “resides;” stating that because the District of Delaware could exercise personal jurisdiction over TC, then TC essentially resided there under §1391(c) and in turn §1400(b).

The Supreme Court reversed, finding that the more general venue statute, §1391(c), had not supplanted the patent specific venue statute, §1400(b). The court observed that Congress typically makes special note when it intends such reversal, and did not when it adopted the newest version of §1391(c) in 2011. The court also noticed that the newest provision of §1391(c) includes language stating that it does not apply when “otherwise provided by law,” in this case, by §1400(b). As a result, the court held that §1400(b) is the governing statute.

While this decision may seem innocuous at first glance, its effects will be wide ranging. The Electronic Frontier Foundation reports that in 2015 the Eastern District of Texas handled over 2500 patent suits. Following this decision, defendants will only be subject to jurisdiction there if they are incorporated in Texas or have a regular and established place of business there. However, this decision does mean that many future lawsuits will likely be brought in Delaware, where many U.S. Corporations are incorporated.

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