Supreme Court Restricts Forum Shopping in Patent Infringement Case

On Monday (May 22, 2017), the U.S. Supreme Court dealt a significant win to companies accused of patent infringement. The decision in TC Heartland LLC v. Kraft Foods Group Brands LLC, No. 16-341 (S. Ct. May 22, 2017) (8-0) reversed a longstanding rule that effectively permitted a patent owner to sue in any jurisdiction where the accused products were made or sold. Under the new rule, a patent owner may only sue in a state where the alleged infringer is incorporated or maintains a regular and established place of business.

The Supreme Court’s Decision

Federal law provides specific instructions for patent litigation venue. The statute permits a patent owner to sue “where the defendant resides . . . or has committed acts of infringement and has a regular and established place of business.” 28 U.S.C. § 1400(b). In 1990, the U.S. Court of Appeals for the Federal Circuit held that Congress changed the meaning of “resides” in 1988, by defining “resides” in a different statute (28 U.S.C. § 1391) to include any state where the defendant is subject to personal jurisdiction. As a general matter, the law of personal jurisdiction provides that a court has personal jurisdiction over a company accused of infringement in any state where an act of infringement (such as making, using, importing, or selling the accused product or method) has occurred.

In reversing this rule, the Supreme Court found that the meaning of “resides” was not changed by Congress in 1988. Rather, it retained its meaning of “state of incorporation” (as to U.S. corporations), as held by the Supreme Court in Fourco Glass Co. v. Transmirra Products Corp., 353 U.S. 222 (1957). As a result, mere personal jurisdiction over a domestic defendant is no longer adequate to comply with the patent venue statute. The patent owner must sue the defendant where it resides (state of incorporation) or where it maintains a regular and established place of business.

Key Implications

This decision severely constricts forum shopping by patent owners. As a consequence, the filing of patent cases in jurisdictions long-favored by patent owners is likely to drop off significantly as defendants challenge venue under the TC Heartland decision. Such districts include the Eastern District of Texas (a popular choice due to its high win rate for patent owners), and the Eastern District of Virginia and the Western District of Wisconsin (both known for fast-paced dockets, reaching trial in 12 to 13 months on average). See 2016 study by PWC, page 15. The District of Delaware, on the other hand, will likely see a sharp increase in patent cases due to the high proportion of companies incorporated in that state.

TC Heartland will force patent assertion entities to litigate in many and more diverse venues, increasing their costs. It will also reduce the risk of out-of-state litigation for alleged infringers, especially those that incorporate and have an established place of business in one state. Finally, it will increase the burden on certain district courts, for instance Delaware, the Western District of Washington, and the Northern District of California, where popular infringement targets are incorporated and doing business.