Supreme Court to Review Forum Shopping in Patent Infringement Litigation

Tuesday, December 20, 2016

In a development that may signal a major change in patent litigation practice, the U.S. Supreme Court has granted certiorari to hear a challenge to the rules governing where patent owners can file infringement actions against corporate defendants. TC Heartland LLC v. Kraft Foods Group Brands LLC, No. 16-341 (cert. granted Dec. 14, 2016).

The petitioner in TC Heartland challenges the Federal Circuit’s interpretation of the patent venue statute, 28 U.S.C. § 1400(b), which states that infringement actions “may be brought in the judicial district where the defendant resides[.]” The petitioners argue that shortly after Congress enacted § 1400(b), the Supreme Court interpreted it as permitting an infringement suit to be filed against a corporate defendant only in its state of incorporation. Fourco Glass Co. v. Transmirra Prods. Corp., 353 U.S. 222 (1957). In a later case, relying on an amendment to a different provision defining where a corporate litigant “resides,” 28 U.S.C. § 1391, the Federal Circuit held that § 1400(b) allows a patent owner to sue a corporate accused infringer in “any district where there would be personal jurisdiction over the corporate defendant.” VE Holding Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574 (Fed. Cir. 1990). That interpretation in effect allows infringement actions to be filed against corporations selling or distributing allegedly infringing products through nationwide channels of commerce in practically any judicial district.

As a consequence of the current venue rule, patent owners have opted to file infringement cases in favorable districts, with over half of all patent infringement actions in 2015 being filed in just two courts: the U.S. District Court of for the Eastern District of Texas and the U.S. District Court of for the District of Delaware. Critics have criticized this practice as “forum shopping,” noting that subjecting defendants to litigation in inconvenient courts (particularly the ED Texas) is unfair. Other critics have argued that the concentration of patent litigation in a handful of districts gives the limited number of federal judges in those districts a disproportionate influence over the interpretation of the Patent Act and development of patent law.

The respondent is likely to argue that the Federal Circuit’s VE Holding decision is a defensible interpretation of the interplay between sections 1400(b) and 1391. In addition, although Congress has had many opportunities to revise the venue statute during the over 25 years since VE Holding, most notably in the 2011 Leahy-Smith America Invents Act, it has left § 1400(b) undisturbed, even as it amended other jurisdictional provisions affecting patent cases.

If the Supreme Court rules to restrict venue in patent infringement matters to districts where a corporate defendant is incorporated or maintains a place of business, it is likely that far fewer cases will be filed in ED Texas, and more will be filed in jurisdictions where corporations are based or have significant operations. Such a result could have potentially far-reaching effects on patent litigation tactics.