IP Law Daily Domestic corporations ‘reside’ in state of incorporation; patent venue statute governs exclusively
Monday, May 22, 2017

Domestic corporations ‘reside’ in state of incorporation; patent venue statute governs exclusively

By Jody Coultas, J.D.

The Federal Circuit erred in holding that the District of Delaware could exercise personal jurisdiction over Indiana corporation TC Heartland LLC in a patent infringement suit filed by Kraft Foods Group Brands LLC, according to a unanimous decision of the U.S. Supreme Court. The patent venue statute, 28 U.S.C. §1400(b), is the exclusive law controlling venue in patent cases, and is not supplemented by the general venue statute, 35 U.S.C. §1391(c), the court decided. A corporation thus "resides" only in its state of incorporation for the purpose of the patent venue statute and not in "any judicial district in which such defendant is subject to the court’s personal jurisdiction," as broadly stated in the general venue statute (TC Heartland LLC v. Kraft Foods Group Brands LLC, May 22, 2017, Thomas, C.).

Kraft sued TC Heartland for patent infringement in the U.S. District Court for the District of Delaware, alleging that TC Heartland’s liquid sweeteners infringed three of its patents. TC Heartland, organized under Indiana law and headquartered in Indiana, shipped the allegedly infringing products into Delaware.

TC Heartland sought dismissal for lack of personal jurisdiction or a transfer to the Southern District of Indiana. Heartland asserted that it did not "reside" in Delaware, for the purpose of venue, under Section 1400(b). Additionally, TC Heartland argued that the Delaware district court lacked specific personal jurisdiction over it. The district court denied Heartland’s motion and Heartland sought a writ of mandamus.

The U.S. Court of Appeals for the Federal Circuit refused to order the District of Delaware to dismiss or transfer the case. Because amendments to 35 U.S.C. §1391 did not codify the common law definition of "corporate residence" for venue determinations in patent cases, and because the district court could legitimately exercise personal jurisdiction over TC Heartland, the court denied the request for a writ of mandamus.

TC Heartland’s petition for certiorari was granted in December 2016. The question presented was: "Whether 28 U.S.C. §1400(b) is the sole and exclusive provision governing venue in patent infringement actions and is not to be supplemented by 28 U.S.C. §1391(c)."

After addressing the legislative history of the patent venue statute and general venue statute, the Court concluded that the patent venue statute, §1400(b), alone controls venue in patent proceedings. The patent venue statute "was adopted to define the exact jurisdiction of the federal courts in actions to enforce patent rights." The purpose of the statute would be undermined by interpreting it "to dovetail with the general provisions relating to the venue of civil suits." In Fourco Glass Co. v. Transmirra Products Corp., 353 U. S. 222, 226 (1957), the Supreme Court concluded that a domestic corporation "resides" only in its State of incorporation under §1400(b). Fourco states that §1400(b) does not incorporate the broader definition of corporate "residence" contained in the general venue statute, 28 U. S. C. §1391(c). The fact that §1391(c) states that it covers "all actions" was not enough to overcome the fundamental point that Congress designed §1400(b) to be "complete, independent and alone controlling in its sphere."

Since the decision in Fourco, Congress has amended §1391(c) twice. In 1988, Congress amended §1391(c) to state that it applied "[f]or purposes of venue under this chapter." In VE Holding Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574 (1990), the Federal Circuit held that the definition of corporate residence in §1391(c) applied to the patent venue statute. A 2011 amendment then changed the language preceding the definition of corporate residence from "For the purposes of venue under this chapter …" to "For all venue purposes …."

The Federal Circuit in this case reaffirmed VE Holding, reasoning that the 2011 amendment provided no basis to reconsider its prior decision. Thus, the present case was whether the amendments to the definition of corporate resident supplanted the definition announced in Fourco and allowed a plaintiff to bring a patent infringement lawsuit against a corporation in any district in which the corporation is subject to personal jurisdiction.

Based on the legislative history of the venue statues and the definitive holding in Fourco, the court concluded that §1400(b) is the sole and exclusive provision governing venue in patent cases and not augmented by §1391(c). The Supreme Court in Fourco definitively and unambiguously held that "residence" in §1400(b) only refers to the State of incorporation. Congress has never indicated that it meant to change the meaning of §1400(b) when it amended §1391. Although the current version of §1391(c) provides a default rule that applies "[f]or all venue purposes," the version at issue in Fourco also provided a default rule that applied "for venue purposes." The court was not persuaded in Fourco that §1391(c) supplanted §1400(b), and the addition of the word "all" to the already comprehensive provision did not suggest that Congress intended the court to reconsider that conclusion. Also, §1391(c) includes a saving clause expressly stating that it does not apply when "otherwise provided by law," which it did not have when Fourco was decided. The saving clause makes explicit the qualification that the Supreme Court previously found implicit in the statute.

The court also noted that there was no indication that Congress had ratified the Federal Circuit’s decision in VE Holding in its 2011 amendments to §1391(c). Because 28 U.S.C. §1400(b) allows patent infringement cases to be instituted 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," the District of Delaware will likely absorb cases that would otherwise be subject to the personal jurisdiction of other courts under the general venue statute. Because "residence" in §1400(b) refers only to the State of incorporation, the court reversed the judgment of the Federal Circuit and remanded the case for further proceedings consistent with this opinion.

The opinion is likely to reduce the number of patent cases filed in the Eastern District of Texas, a forum seen as friendly to patent owners.

The case is No. 16-341.

Attorneys: James W. Dabney (Hughes Hubbard & Reed LLP) for TC Heartland LLC. William M. Jay (Goodwin Procter LLP) and John D. Luken (Dinsmore & Shohl LLP) for Kraft Foods Group Brands LLC.

Companies: TC Heartland LLC; Kraft Foods Group Brands LLC

MainStory: TopStory Patent

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