Further Venue Guidance for Patent Infringement Suits

Author: Conor McElroy

As anticipated, the Supreme Court’s May 22, 2017 TC Heartland LLC v. Kraft Foods Group Brands LLC, 581 U.S. ____ (2017) ruling, which recognized 28 U.S.C. §1400(b) as the exclusive statute governing venue in patent infringement actions, has presented district and circuit courts with the opportunity to provide further guidance on §1400(b). Section 1400(b) states, “[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.” Before TC Heartland, the vast majority of cases only addressed the first prong (“where the defendant resides”) due to the fact that the first prong’s standard was relatively easy to meet. Essentially, venue was proper anywhere a defendant was subject to personal jurisdiction. TC Heartland changed the analysis by determining that “resides” for purposes of §1400(b) only includes the state of incorporation. As a result, more litigants increasingly rely on the second prong (“where the defendant has committed acts of infringement and has a regular and established place of business”), which is therefore, being addressed and analyzed more by the courts.

On September 11, 2017, the U.S. District Court for the District of Delaware issued two decisions regarding venue challenges in patent cases. In Boston Sci. Corp. v. Cook Grp., Inc., No. 15-980-LPS-CJB, 2017 U.S. Dist. LEXIS 146126 (D. Del. Sept. 11, 2017) and Bristol-Myers Squibb Co. v. Mylan Pharms., Inc., No. 17-379-LPS, 2017 U.S. Dist. LEXIS 146372 (D. Del. Sept. 11, 2017), the District Court gave instructions on various aspects of post-TC Heartland §1400(b), including the burden of proof for a venue challenge, and whether TC Heartland effected an intervening change of law for waiver purposes. As for its analysis of the second prong of §1400(b), the court looked to the words of the statute, as well as some of the few decisions that applied the second prong, and determined that a permanent and continuous physical presence is required. In further elaborating, the Court noted circumstances that did not amount to a permanent and continuous presence. Specifically, simply doing business in a district or being registered to do business in a district, merely demonstrating that a business entity has sufficient “minimum contacts” with a district for purposes of personal jurisdiction, maintaining a website that allows consumers to purchase a defendant’s goods within the district, and simply shipping goods into a district are all insufficient to demonstrate that a defendant has a regular and established place of business in the district. In Boston Scientific, the court granted the defendants’ motion to transfer the case because there was not a regular and established place of business in Delaware, while in Bristol-Myers Squibb, the court ordered further discovery into how the defendant operated its business.

On September 21, 2017, the Federal Circuit also issued post-TC Heartland guidance. In In re Cray Inc., No. 2017-129, 2017 U.S. App. LEXIS 18398 (Fed. Cir. Sept. 21, 2017), the court reversed the District Court for the Eastern District of Texas’s denial of motion to transfer. In doing so, the court identified three general requirements relevant to the §1400(b) “regular and established place of business” venue inquiry. First, there must be a physical place in the district. This “place” need not be a formal office or store, but there must still be a physical, geographical location in the district from which the business of the defendant is carried out.” Therefore, mere virtual spaces or electronic communications do not meet the definition of “place.”

Second, the place must be a regular and established place of business. “Regular” means the business operates in a “steady, uniform, orderly, and methodical manner,” while “established” requires that the place in question must be “settled certainly, or fixed permanently.” Finally, the business must be “the place of the defendant.” In other words, “the defendant must establish or ratify the place of business.” Relevant considerations for this factor include whether the defendant owns or leases the place and whether the defendant conditioned employment on the employee’s continued residence in the place of business. In applying these venue requirements to the specifics of the case, the Federal Circuit found that the facts involving an employee’s home being located in the Eastern District of Texas “do not show that [the defendant] maintains a regular and established place of business in the Eastern District of Texas; they merely show that there exists within the district a physical location where an employee of the defendant carries on certain work for his employer.” Thus, the court ruled that case should have been transferred.

While the foregoing cases help to clarify how venue challenges in patent infringement cases may be evaluated, the question of proper venue is often a fact-specific inquiry. Nevertheless, as case law after TC Heartland grows, and as more and more §1400(b) challenges are litigated, the contours and confines of what the “regular and established place of business” prong requires will be clarified. But for now, TC Heartland and cases following it continue to adopt a more restrictive view on venue and the requirements for proper venue.

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