TC Heartland v. Kraft Foods: “Residency” in Patent Infringement Suits

Author: Conor McElroy

On May 22, 2017, the U.S. Supreme Court ruled that residency for domestic corporations is determined by its state of incorporation for venue purposes in patent infringement suits. The unanimous decision (from which Justice Neil Gorsuch abstained) reversed the Federal Circuit’s finding that the general venue statute, 28 U.S.C. § 1391(c), and its requirements for residency, applied to patent infringement suits. Instead, the Court ruled that the patent venue statute, 28 U.S.C. §1400(b), is the exclusive statute governing venue in patent infringement actions.

The case, TC Heartland LLC v. Kraft Foods Group Brands LLC, 581 U.S. ____ (2017) involved Kraft Foods (“Respondent”), organized under Delaware law with a principal place of business in Illinois, filing a patent infringement suit against TC Heartland (“Petitioner”), which is headquartered in Indiana and organized under Indiana Law, in the District Court for the District of Delaware. Petitioner argued venue was improper in Delaware since it did not meet the definition of “resid[e]” as set forth in §1400(b) and interpreted in Fourco Glass Co. v. Transmirra Products Corp., 353 U.S. 222 (1957).  The Federal Circuit upheld the District Court’s rejection of Petitioner’s argument based on amendments to 28 U.S.C. §1391 which deem a defendant to have “residency” if it is subject to personal jurisdiction, a test which was met here based on Petitioner’s shipments of allegedly infringing products into Delaware.

In reversing, the Supreme Court analyzed §1400(b), past and present versions of §1391, and case law interpreting the statutes.  According to § 1400(b), “[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 a regular and established place of business.” For the definition of “resides,” the Court looked to Fourco, which determined “resides” for purposes of §1400(b) only includes the state of incorporation. The inquiry could not end there however. According to the Federal Circuit, subsequent amendments to §1391 have made it applicable to patent infringement cases. Section 1391(c) now provides that, “[f]or all venue purposes,” entities, “whether or not incorporated, shall be deemed to reside, if a defendant, in any judicial district in which such defendant is subject to the court’s personal jurisdiction with respect to the civil action in question.” Therefore, as concluded by the Federal Circuit, §1391(c), not Fourco, provides the definition of “resides” in §1400(b). To bolster this conclusion, the Federal Circuit cited VE Holding Corp. v. Johnson Gas Appliance Co., 917 F. 2d 1574 (1990), which ruled that similar earlier amendments to §1391 affected the meaning of §1400(b).

The Supreme Court held that the Fourco interpretation of §1400(b) is still the authority. “The current version of §1391 does not contain any indication that Congress intended to alter the meaning of §1400(b) as interpreted in Fourco,” Justice Clarence Thomas wrote in the opinion of the unanimous Court. According to the Court, Congress customarily provides a clear indication that it intends to make a change of that kind in the text of the amended provision. With no such indication present here, it was clear to the Court that §1400(b) was not altered by changes to §1391. Furthermore, the Court also noted that the 2011 change to §1391 includes a savings clause stating that it does not apply when “otherwise provided by law.” As a result, the Court held that §1391 “expressly contemplates that certain venue statutes may retain definitions of ‘resides’ that conflict with its default definition.” Therefore, the venue provision found in §1400(b), and the definition of “resides” found in Fourco, apply to patent infringement suits.

A copy of the Court’s slip opinion can be found here.

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