On May 22, 2017, the United States Supreme Court issued an 8-0 decision, which will have a significant impact on the number of patent infringement cases filed in districts in States in which large or technology-based companies, or other frequent targets of patent litigation, are incorporated. This includes New Jersey, Delaware, California, and Illinois.
The patent infringement litigation venue statute, 28 U.S.C. 1400(b), provides that “[a]ny 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 regular and established place of business.” In TC Heartland v. Kraft Foods Group Brands, No. 16-341, 581 U.S. __(2017), the Supreme Court held that for purposes of 28 U.S.C. § 1400(b), as applied to domestic corporations, “‘reside[nce]’ in § 1400(b) refers only to the State of incorporation.”
A brief history of patent venue law highlights the importance of this decision. In 1988, Congress amended the general venue statute, 28 U.S.C. § 1391(c), to provide that for venue purposes, “a defendant that is a corporation shall be deemed to reside in any judicial district in which it is subject to personal jurisdiction at the time the action is commenced.” Subsequently, the United States Court of Appeals for the Federal Circuit held that this amendment also applied to the patent venue statute and that a patent infringement defendant could be sued wherever it was subject to personal jurisdiction at the time of the suit. VE Holding Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574 (Fed. Cir. 1990). Because personal jurisdiction is expansive, large domestic corporations could be sued virtually anywhere in the United States. This lead to what many regarded as rampant forum-shopping. For example, in 2016, almost 40 percent of new patent cases were filed in the Eastern District of Texas.
In TC Heartland, the Federal Circuit followed its own precedent and declined to issue a writ of mandamus to compel the Delaware district court to dismiss or transfer the case because defendant was not incorporated in Delaware. Following the Supreme Court’s reversal of the Federal Circuit, a patent infringement defendant that is a domestic corporation will now be deemed to be a resident only of the state in which it is incorporated. The decision does not affect the other part of the patent venue statute, which permits venue in a state in which the defendant has committed acts of infringement and has a regular and established place of business.
In a footnote, the Supreme Court made clear it was not addressing the issue of venue for foreign corporations. 28 U.S.C. § 1391(c)(3) governs general venue for non-resident defendants: “[A] defendant not resident in the United States may be sued in any judicial district, and the joinder of such a defendant shall be disregarded in determining where the action may be brought with respect to other defendants.” Because TC Heartland expressly does not affect venue for non-resident defendants, venue for foreign parent corporations will continue to be proper in any district. However, as a practical matter, district courts are likely to seek to avoid multiple litigations and foreign parents are likely to be joined as defendants in venues where the domestic subsidiary is incorporated or where the subsidiary has a regular and established place of business.
The heart of the Supreme Court’s decision is that, for the purposes of patent infringement cases, domestic corporations only “reside” in the state of incorporation. New Jersey corporations, especially those in the pharmaceutical and technology sectors, who are frequently targets of patent infringement suits, will no longer be forced to defend these suits in jurisdictions outside their state of incorporation or where they have a “regular and established place of business.”