Are the Days of E.D. Texas Waning?

On March 27, 2017, the Supreme Court heard arguments regarding an issue that has long plagued defendants in patent cases: are the venue rules applied by the Federal Circuit at odds with the patent statute and Supreme Court precedent? TC Heartland LLC v. Kraft Foods Group Brands, LLC, No.16-341.

The Kraft case addresses 28 U.S.C. Section 1400(b), which provides that a patent suit “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.” In 1957, the Supreme Court held that “resides,” as used in Section 1400(b), means the state where the defendant is incorporated. Fourco Glass Co. v. Transmirra Products Corp., 353 U.S. 222 (1957). The Fourco Court also held that Section 1400(b) is “the sole and exclusive” statute governing patent venue and was not supplemented by Section 1391(c), the general venue statute.

But in response to a change to the general venue statute, 28 U.S.C. Section 1391(c) in 1988—to provide that an entity “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”—the Federal Circuit has held that Section 1391 broadened the residency requirement in Section 1400(b) to include any district “where there would be personal jurisdiction over the corporate defendant.” See VE Holding Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574 (Fed. Cir. 1990). This ruling opened the doors to patent litigations in far-flung jurisdictions, and is credited by many as the genesis for popular plaintiff jurisdictions such as the E.D. Texas.

In Kraft, plaintiff Kraft initially brought its patent infringement suit against TC Heartland in the District of Delaware. TC Heartland, headquartered in Indiana, moved to change venue to the Southern District of Indiana, arguing that Delaware had no jurisdiction over it under the patent statute as construed in Fourco. The District of Delaware denied the motion and the Federal Circuit rejected TC Heartland’s petition for writ of mandamus. TC Heartland filed a petition for writ of certiorari.

TC Heartland has argued that venue for patent cases is narrower than the general venue statute and that, according to the Supreme Court in Fourco, venue is limited in patent infringement suits to jurisdictions where a defendant is incorporated. In contrast, Kraft has argued that revisions to Section 1391 effectively broadened the patent venue statute to include any court with personal jurisdiction over a defendant.

Although several amicus briefs focused on the policies against forum shopping, the Supreme Court did not appear inclined to address that policy issue during oral arguments, rather centering on traditional statutory analysis. Both parties and the Court are faced with precedent from the Federal Circuit since the Johnson Gas case in 1990 that is flatly inconsistent with Supreme Court precedent in Fourco. Some justices, such as Justice Ginsburg, appeared troubled that TC Heartland’s very narrow interpretation—limiting venue to where the entity is domiciled (e.g., incorporated or comparably organized)—is far more restrictive than that applied in non-patent lawsuits.

By granting certiorari, the Supreme Court signaled that Kraft’s victory below, albeit based on nearly 30 years of Federal Circuit precedent, may be on shaky grounds. Whether the Supreme Court accepts TC Heartland’s request to narrow available venues so dramatically, or adopts some middle ground between Fourco and the current standard of personal jurisdiction, remains to be seen. The conclusion may dramatically shift where patent cases are filed and tried, and even may affect the number of suits filed, to the extent that a Fourco-rule will draw cases to defendants’ home venues and away from what many perceive to be more plaintiff-friendly jurisdictions.