On Friday, March 11, 2016, the Federal Circuit heard oral arguments in In re TC Heartland, LLC on the issue of venue in patent cases in light of the Federal Courts Jurisdiction and Venue Clarification Act of 2011 amendments to 28 U.S.C. § 1391. Kraft Foods sued TC Heartland in Delaware, and TC Heartland moved to dismiss the action on the basis that venue was not proper in Delaware. The district court denied TC Heartland’s motion, whereupon TC Heartland filed a petition for a writ of mandamus in the Federal Circuit. Although the outcome of the case is far from certain, the potential impact of an opinion granting the writ could be significant and could have implications that could affect parties to recently filed patent infringement lawsuits.
The history of the venue statute is a complicated one. Arguably, the Federal Circuit’s holding in V.E. Holding Corp. v. Johnson Gas Appliance Co. is the controlling law for determining proper venue in a patent infringement action. 917 F.2d 1574 (Fed. Cir. 1990). In that case, the Federal Circuit held that § 1400(b), which provides for venue in patent infringement actions in any “district where the defendant resides,” applies the test for corporate residency as found in § 1391(c). At the time the Federal Circuit decided V.E. Holding Corp., § 1391 stated that a defendant resides in any district where it is subject to personal jurisdiction and that this definition of residency applied “for purposes of venue under this chapter” (i.e., that it applied to all venue provisions in the chapter, including that in § 1400). The net result of this analysis was that, for corporations, venue was proper in any district that could exercise personal jurisdiction over the defendant. In 2011, however, Congress amended § 1391(c) by deleting the provision that provided that it applied “for purposes of venue under this chapter” with a statement that § 1391 controls for venue “[e]xcept as otherwise provided by law.”
In its mandamus petition, TC Heartland argued that § 1391(c)’s residency test is no longer controlling for the purposes of venue in patent infringement actions because the 2011 amendment limits § 1391’s effect when venue is “otherwise provided by law.” According to TC Heartland, the venue provision of § 1400(b) supersedes § 1391 and is now the proper test for venue. This provision states that an action may be brought in the “district where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business.” Moreover, because TC Heartland argues that corporate residence has been interpreted by the U.S. Supreme Court to mean the location where a corporation is incorporated, TC Heartland’s view of venue would limit the locations where a corporation can be sued to the site of its incorporation or a location where it commits acts of alleged infringement and has a regular and established place of business. Should the court agree with TC Heartland that the decisional law of the Supreme Court exempts patent infringement actions from the venue provisions of § 1391, the panel could grant the mandamus petition and dramatically limit the number of jurisdictions available to plaintiffs.
Although the outcome of TC Heartland’s petition is to be determined, parties to recently filed patent infringement actions should consider the potential impact that a grant of the petition may have. Plaintiffs should take heed of the obvious impact of the grant, and defendants might consider filing a Fed. R. Civ. P. 12(b)(3) motion to dismiss for improper venue if, given the appropriate factual circumstances, it appears that venue would not be proper in a district under TC Heartland’s view of the venue statutes. If the Federal Circuit agrees with TC Heartland’s arguments, it could decline to address whether V.E. Holding was properly decided and instead view TC Heartland’s petition as presenting a question of first impression in view of the 2011 amendments to the venue statutes. If this is the case, a defendant who did not raise improper venue in a responsive pleading may be viewed to have waived the defense, an outcome that may have been avoided but may not be undone.
To download an audio version of the oral arguments, click here.
This advisory is published by Alston & Bird LLP’s Intellectual Property practice area to provide a summary of significant developments to our clients and friends. It is intended to be informational and does not constitute legal advice regarding any specific situation. This material may also be considered attorney advertising under court rules of certain jurisdictions.