New U.S. Supreme Court decision changes venue rules in patent cases

published in McAfee & Taft tIPsheet | June 1, 2017

By Jessica John Bowman

Early last week, the U.S. Supreme Court reversed the Federal Circuit in an 8-0 decision that will make it easier for companies to defend patent infringement lawsuits. In TC Heartland LLC v. Kraft Foods Group Brands, LLC, the Supreme Court interpreted the patent venue statute, 28 U.S.C. § 1400(b). That statute provides that a defendant in a patent infringement case may be sued “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.” For the past 25 years, the Federal Circuit has interpreted this statute broadly, holding that a defendant corporation could be sued in any judicial district in which it is subject to personal jurisdiction. As a result, following the Federal Circuit’s prior decision, defendants in patent litigation cases were often forced to appear and litigate in inconvenient forums far from their base of operations.

TC Heartland, the defendant in this Supreme Court case, is an Indiana company that was sued for patent infringement in the state of Delaware. TC Heartland asked the district court to transfer the case to Indiana on the grounds that it was not registered to conduct business in Delaware, and had no local presence in that state. The district court rejected this argument, relying on the Federal Circuit’s opinion and concluding that because TC Heartland had shipped infringing products into Delaware, it was subject to jurisdiction in that state. TC Heartland urged the Supreme Court to overturn the Federal Circuit’s interpretation of the patent venue statute. The Supreme Court did so, ruling that the Federal Circuit had erred when it broadened the scope of the patent venue statute.

Practical effect of the Supreme Court decision

The court’s decision will have the effect of limiting a plaintiff’s ability to strategically file infringement cases in places that are viewed as sympathetic to plaintiffs. Before the Heartland decision, plaintiffs could “forum shop” for the most favorable place to file suit, even if the defendant had no connection with that forum other than a few sales of the allegedly infringing product. Now, defendants can only be sued in their state of incorporation, or in those jurisdictions where the defendant has both committed acts of infringement and has a regular and established place of business. As a result of this decision, certain forums like the Eastern District of Texas, a popular forum for patent plaintiffs in recent years, will see fewer patent cases. Other states where a large number of companies are incorporated, such as Delaware, may see an increase in patent litigation. As for pending cases, a flurry of motions to dismiss or transfer will likely follow the Supreme Court’s ruling, and further progress on those cases will likely be delayed while the courts assess whether they should continue to hear the patent-infringement cases that are currently before them.

For companies that are incorporated in and have their primary place of business in Oklahoma, the court’s ruling will make patent litigation less expensive and more convenient. A company that might have settled rather than litigate thousands of miles from its home base may now want to consider the benefits of defending a case in its home state. However, those companies that are located primarily in Oklahoma, but are incorporated elsewhere, may still be sued in their state of incorporation, even if that state is far from their normal base of operations.