Today, the U.S. Supreme Court issued its decision in TC Heartland v. Kraft Foods that limits the venue — i.e., geographical location–of where patent cases may be brought.  For decades prior to this decision, venue was construed broadly to be essentially anywhere a defendant has minimum contacts.  By today’s decision, venue is  construed narrowly as limited to where the defendant either (i) is incorporated or (ii) has a regular and established place of business in which the defendant committed acts of infringement.

This ruling may substantially limit the number of patent cases that may be brought in the perceived patent-friendly Eastern District of Texas.  This also may increase the number of patent cases brought in patent-savvy Delaware, because that is where most companies are incorporated.  The decision also may make it harder to sue multiple defendants in a single action, because it may be difficulty to establish proper venue over all defendants.

This decision also takes more wind out of the sales of those seeking legislative changes to U.S. patent law.  Whether rightly or wrongly (we express no view here), the E.D. Texas has been used as an example of patent litigation abuse, venue shopping and the need for patent reform.  This decision may end that concern and follows other court decisions addressing patent litigation issues as well as the FTC’s patent assertion entity study that did not find the widespread patent litigation abuse that had fueled legislative efforts. (see, e.g., our Apr. 29, 2014 post on Supreme Court making it easier to get attorneys fees in patent cases and our Oct. 7, 2016 post on the FTC’s PAE study).

Decision

This case concerns the specific venue statute for patent litigation, 28 U.S.C. §1400(b), that states as follows (with relevant language in bold):

Any civil action for patent infringement 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. [emphasis added]

In 1957, the Supreme Court ruled that a U.S. corporation “resides” only in the State in which it is incorporated. Fourco Glass Co. v. Transmirra Products, 353 U.S. 222, 226 (1957).  But, in 1990, the Federal Circuit ruled that an amendment to a general venue statute required construing “resides” to mean anywhere a court would have personal jurisdiction over the defendant.  VE Holding Corp. v. Johnson Gas Appliance, 917 F.2d 1574 (Fed. Cir. 1990).  Given the somewhat low-threshold for personal jurisdiction–whether a defendant has “minimum contacts” within the court’s geographical reach–the patent venue statute was swung wide-open to permit proper venue in almost any U.S. district court.  Some view this as giving way to patent owner’s filing many patent cases in the perceived patent-friendly Eastern District of Texas.

The Supreme Court today has substantially shut the venue door by limiting “resides” to the State where a defendant is incorporated.  Accordingly, the geographical location where a patent case may be filed will be limited to (1) a district court in a State where a defendant is incorporated or (2) a  district court in a location where a defendant has a regular and established place of business in which it committed acts of infringement.

This substantially narrower view of venue may see more cases brought in Delaware, rather than E.D. Texas, given the high number of business that incorporate in Delaware for general business reasons (e.g., more favorable and predictable corporate law).  This ruling also may make it more difficult for multiple defendants to be sued in a single action since it may be harder for the narrow venue provision to cover all defendants.