Business Method Patents

edtx

By Lauren Rucinski

On May 22, the Supreme Court tightened the reigns on where a patent infringement case with a corporate defendant can be filed, uprooting nearly three decades of common practice. TC Heartland LLC v. Kraft Food Brands Grp. LLC, No. 16-341 (May 22, 2017).

The specific statute for patent infringement venue states that a defendant may be sued in a judicial district (1) where the defendant resides or (2) where the defendant has committed acts of infringement and has a regular place of business.[1] Sixty years ago, the Supreme Court interpreted the patent venue statute to require that a domestic corporation only be sued in its state of incorporation. In Fourco Glass Co. v.Transmirra Products Corp., 353 U. S. 222, 226 (1957).  However, subsequent changes to venue rules in the 1990’s opened the door for a corporation to be sued anywhere it has sufficient contact. This change fostered forum shopping, allowing patent holders to seek out and develop patent friendly locations.

In TC Heartland, a corporate-defendant incorporated under the laws of Indiana was sued for allegedly infringing products in a Delaware district court. The Indiana corporation moved to transfer venue to the district court in Indiana. The Indiana corporation argued that under the patent infringement venue statute and the Supreme Court’s hold in Fourco, venue in Delaware was improper. The Delaware district court rejected the corporation’s argument and the Federal Circuit denied the petition for a writ of mandamus. The Supreme Court overruled the Federal Circuit, holding instead that the patent venue statute alone should control venue in patent infringement proceeding and that it is not to be supplemented by the general venue statute. The decision marks a drastic change from prior practices. Before the decision, the options for venue against a domestic corporation for patent infringement were quite numerous. For example, if a corporation ships an alleged infringing product to a state, that used to satisfy the venue requirements to file suit in that jurisdiction. The broad interpretation of venue allowed plaintiffs to cherry pick where the suite is filed. This is no more evident than the patent infringement “rocket docket” in the Eastern District of Texas.[2]  This Court, which is situated in the small town of Marshall, Texas, population c. 24,000, handles more patent lawsuits than federal district courts in San Francisco, Chicago, and New York. Marshall has often been referred to as the U.S. “patent litigation capital.” A combination of speedy infringement trials created by a series of local rules and allegedly plaintiff-friendly juries lead many plaintiffs to file patent infringement suites in this small, seemingly random Texas town.

The TC Heartland effectively nixes the “patent litigation capital” title in Marshall. The definition of a corporate residence is limited to the jurisdiction of incorporation and the general venue statute does not expand jurisdiction under the patent venue statute.

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[1] 28 USC 1400(b).

[2] For a New York Times article on Marshall and the patent infringement cases it hears, see http://www.nytimes.com/2006/09/24/business/24ward.html.