The Supreme Court Revisits Patent Venue

On December 14, 2016, the Supreme Court granted cert in TC Heartland v. Kraft Foods.  This widely anticipated case brings to the front the question of patent venue and the problem of “Forum selling,” the alleged practice of some jurisdictions creating a favorable environment for litigation and its benefits for the local bar and community.

Krafft, an Illinois company, filed a patent infringement suit against TC Heartland, an Indiana company, in district court in Illinois. TC Heartland filed a mandamus motion arguing that the Illinois court lacked personal jurisdiction and venue should be changed to Indiana. The district court denied the motion, and the Federal Circuit affirmed. The Supreme Court granted cert on the question: “Whether the patent venue statute, 28 U.S.C. § 1400(b), which provides that patent infringement actions ‘may be brought in the judicial district where the defendant resides[,]’ is the sole and exclusive provision governing venue in patent infringement actions and is not to be supplemented by the statute governing ‘[v]enue generally,’ 28 U.S.C. § 1391, which has long contained a subsection (c) that, where applicable, deems a corporate entity to reside in multiple judicial districts.”

In 1957, in its decision in Fourco Glass v. Transmirra Products, the Supreme Court ruled that the patent venue provision was independent of the general venue provision of the Federal Rules of Civil Procedure. Therefore,  a corporate patent defendant can be sued only where it is incorporated. However, in 1990, the Federal Circuit ruled that the Fourco decision had been implicitly overruled in 1988 when Congress amended 1391 to apply “for purposes of venue under this chapter” and defined corporate residence to include any place where there is personal jurisdiction over the defendant. TC Heartland is arguing that the 1990 Federal Circuit opinion, V. E Holding v. Johnson Gas, was wrongly decided.

Complicating the matter is Congressional amendments to 1391(c) in 2011, as part of the America Invents Act.  These amendments altered language in 1391(c) to make it applicable “for all venue purposes” and amended 1391(a) to apply to “all civil actions.” The Federal Circuit in TC Heartland’s appeal held that Congress made these amendments recognizing that the appeals court was correct in V.E. Holding that Congress has overruled FourCo in 1988.  Now the Supreme Court will decide whether it was in fact overruled by Congress.

Confronting the Court is a murky question of determining what Congress did based on what it legislated. Legislative history is generally disfavored, but will certainly play some role in the argument and perhaps in the final decision. But that history is also hazy. Ultimately, the Court may fall back on policy and the concern over forum selling in patent litigation. Will the Eastern District of Texas, an original and continuing haven for patent litigation, be checked or vindicated in this case from the Mid-West?

The answer to this question may rest on the ongoing struggle between the Federal Circuit and the Supreme Court over the appropriateness of special rules for patent law. However, in this case, the positions are reversed. Typically, the Federal Circuit seeks special rules for patents, such as in the case of injunctive relief with the Supreme Court reversing. Here, the Federal Circuit reasons that the general rules of civil procedure apply contrary to the specialized rule for patent venue that the Supreme Court recognized in FourCo.  Surprisingly, the Federal Circuit and the Supreme Court might agree in this case. That now leaves Congress to make another round of amendments to prevent the alleged practice of forum selling.