A New Limit on Patent Litigation Venue
A recent U.S. Supreme Court case limited patent litigation venues to a much narrower set of options. Patent venue is now limited solely to the state where the defendant is incorporated and/or states where it operates a regular and established place of business.
For several years, patent plaintiffs have strongly preferred a small handful of venues around the country. In 2015, almost 65 percent of patent cases were filed in just five district courts. The Eastern District of Texas has been by far the most popular venue, with more than 40 percent of all U.S. patent cases filed there last year. One key reason that patent plaintiffs have preferred the Eastern District of Texas is that it was an early adopter of special local rules for patent cases. Generally speaking, local rules specific to patent cases move patent cases forward more quickly. This can be disadvantageous to defendants. Plaintiffs can take as much time as they want to prepare their cases before filing. Once the case is filed, the defendant must work hard and swiftly to catch up. The Eastern District is also comprised of smaller cities and towns. Many companies who get sued there have no regular place of business there and feel like outsiders.
On May 22, in an 8-0 decision, the U.S. Supreme Court substantially limited the patent venue statute. In TC Heartland, LLC v. Kraft Foods Group Brands, LLC., case no. 16-341, Kraft Foods sued its competitor, TC Heartland, in the District of Delaware alleging patent infringement. TC Heartland moved to transfer the case to Indiana, the state in which it was both incorporated and headquartered. TC Heartland was not registered to do business in Delaware and had no local presence in Delaware.
The parties’ dispute involved two separate venue statutes. 28 U.S.C. § 1400 is the venue statute specifically for patent infringement cases. It limits venue to a district: (1) where the defendant "resides" or (2) where the defendant has committed acts of infringement and has a regular and established place of business. The Supreme Court noted that TC Heartland had "no meaningful local presence" in Delaware, although it did "ship the allegedly infringing products to the state." Accordingly, only the first half of § 1400 was at issue: where did TC Heartland "reside"?
In determining the meaning of "resides," the District Court relied on the general venue statute, 28 U.S.C. § 1391, which broadly defines residency as any "judicial district in which such defendant is subject to the court’s personal jurisdiction." The Supreme Court, however, relying on its own precedent and the language of § 1391, determined that "resides" in § 1400 is limited solely to the state in which the defendant is incorporated.
Practically speaking, defendants can now challenge being sued for patent infringement in any venue where they are not incorporated and do not operate an established place of business. Patent plaintiffs will want to consider the pros and cons of their now more limited slate of proper venues. Many districts have local patent rules like those in the Eastern District of Texas. Over 20 other district courts have local rules specific to patent litigation. The District of Kansas is also currently considering adopting special patent rules.
For more information, please contact our patent litigation partners: David Axtell, David Barnard, Kevin Conneely, Scott Eidson, Katie Moerke, Keith Moheban, Ruth Rivard, Penny Slicer or Vicki Smith.