Will court upend patent venue rules?

Last month, the U.S. Supreme Court heard oral argument in TC Heartland v. Kraft Foods Group Brands - a case that many legal scholars and industry leaders have characterized as a potential turning point for current forum shopping trends in patent infringement cases, and a potential death knell to patent litigation as we have come to know it in the Eastern District of Texas.

TC Heartland, a liquid sweetener company, was sued by Kraft Foods Group Brands LLC for patent infringement in the District of Delaware, but because Heartland had no facilities in Delaware, it sought to have the case transferred to the Southern District of Indiana, where it is based. TC Heartland's request was denied, and the case ultimately made its way to the Supreme Court, teeing up the question of whether patent cases were subject to specialized venue statutes, or whether the more general venue provisions apply to patent infringement cases as well.

The interplay between the specific patent venue statute (28 U.S.C. Section 1400(b)) and the general venue statute (28 U.S.C. Section 1391) is a core issue in this case. Under Section 1400(b), venue for patent cases is proper "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." Although the term "resides" is not defined in Section 1400, "corporate residence" is defined in the general venue provisions of Section 1391.

Soon after the two statutes were codified in 1948, the question of how they interacted became a point of controversy. In 1957, the Supreme Court decided the case of Fourco and held that Section 1400(b) was the "sole and exclusive provision controlling venue in patent infringement actions." But the U.S. Court of Appeals for the Federal Circuit revisited the issue in 1990 after a series of amendments to Section 1391. In VE Holding, the Federal Circuit read Section 1391 to define corporate residence for purposes of Section 1400 venue, and the test for venue in patent infringement cases became whether the defendant was subject to personal jurisdiction in the district of the suit at the time the action commenced. This broader take on venue has since allowed patent holders to bring suit in virtually any judicial district in the U.S.

In the three decades since the VE Holding decision, a substantial majority of patent cases are now concentrated in only a small number of venues, with more than half of all cases nationwide being brought in the Eastern District of Texas. Many commentators believe that the Supreme Court's decision to grant certiorari in the TC Heartland case signals significant future changes in the law on venue selection in patent cases. A reversal of the Federal Circuit's decision in TC Heartland would almost assuredly lead to fewer patent infringement filings in the Eastern District of Texas and an increase in patent cases in districts where more companies are incorporated or tend to have their corporate headquarters, such as the District of Delaware, the Northern District of California, the Central District of California, the Southern District of New York, and the Northern District of Illinois. The case has drawn enormous interest, including the submission of 30 amicus briefs, most of which advocate for overturning VE Holding.

Based on oral arguments held March 27, however, it is unclear whether that change will occur - in fact, the only clear takeaway from oral argument is that the question of where the justices fall on the issue of patent venue selection is very much an open one.

Rather than mechanically relying on its own precedent in Fourco (as some thought the court would do), the justices voiced apprehension in upending current venue practices. For instance, Justice Elena Kagan noted during the plaintiff-petitioner TC Heartland's oral argument that "for 30 years the Federal Circuit has been ignoring our decision" in Fourco but for more than 30 years the practice has gone against the court's decision as well. Justice Ruth Bader Ginsburg also showed some discomfort with overturning the broader venue rule by stating that Congress had already passed a general venue statute that defined residency when it made the venue statute apply "for all venue places - all venue purposes." She also asked for examples of venue statutes as narrow as the patent venue statute, noting that she was not aware of any other contexts in which such narrow venue provisions applied. A different issue that seemed to be top of mind for the justices (especially for Justice Stephen Breyer) was the question of whether TC Heartland, which is an LLC not a corporation, was the appropriate party to bring a case over where corporate defendants may be sued in patent cases.

On the other hand, the justices also appeared to be skeptical of the position presented by the defendant-respondent Kraft Foods. Many of their questions to Kraft's counsel were focused on the lack of congressional intent to overrule the Supreme Court's decision in Fourco. Ginsburg and Kagan both made observations regarding an American Law Institute proposal that had recommended that Congress repeal Section 1400, noting that Congress' failure to explicitly repeal Section 1400 might point to congressional intent in leaving the Fourco decision intact. Chief Justice John Roberts noted that the inclusion of "except as otherwise provided by law" in the general venue statute (Section 1391) seemed to suggest that Congress did not intend for the statute to overturn Fourco. Breyer and Justice Sonia Sotomayor also raised statutory interpretation issues, in effect asking what would be left of Section 1400 under the more expansive view of Section 1391.

While the Eastern District of Texas was mentioned during oral argument, the questions by the justices suggest that the practical realities of patent forum shopping trends are unlikely to factor into the Supreme Court's ultimate decision. Justices Anthony Kennedy and Sotomayor made observations about forum shopping and the concentration of patent infringement suits in Texas, and Kagan asked Kraft's counsel why so many patent cases were being litigated in the Eastern District of Texas. But these few questions barely scratched at the surface of an issue that had been the primary focus of almost every amicus brief submitted in the case.

What transpired during the TC Heartland oral argument appears to disprove the notion held by some that this decision was a foregone conclusion from the start and that the Supreme Court would use the case as an excuse to finally correct recent trends in patent venue selection. Instead, the questions posed by the justices suggest that the court is more concerned with the jurisprudential and statutory interpretation questions presented in the case and will go through the complicated task of wading through the history of congressional amendments and competing Federal Circuit and Supreme Court decisions. Regardless of the outcome, the Supreme Court's decision in TC Heartland will surely send ripples through the patent litigation world and will have a significant impact on how - and where - patent infringement cases are litigated in the future.