Supreme Court ruling could have patent reform implications. 

By recently deciding to hear a patent venue case— TC Heartland LLC v. Kraft Food Brands Group LLC— the Supreme Court has agreed to decide whether U.S. Code Title 28, Section 1400(b) is the exclusive provision governing venue in patent infringement actions. Resolving this question could have very large ramifications on where patent infringement cases can be brought by patent owners.

Ultimately, the question that petitioner TC Heartland really wants the Supreme Court to address is whether the Eastern District of Texas, home to 20 percent to 25 percent of all patent litigations, is a proper venue for patent owners to choose. If the Supreme Court issues a ruling that strikes down current patent venue rules, there would be no need for patent venue reform efforts to continue in Congress. On the other hand, if the high court affirms the U.S. Appeals Court for the Federal Circuit in this case, calls for legislative venue reform would likely become deafening.

The statutes in question will be the aforementioned Title 28, Section 1400(b), as well as Section 1391(c). In 1400(b), a “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.” In 1391(c), a corporation is deemed to be a resident of “any judicial district in which such defendant is subject to the court’s personal jurisdiction…”

In Fourco Glass Co. v. Transmirra Products Corp. (1957), the Supreme Court held that Section 1400(b) is not to be supplemented by Section 1391(c) and that “Section 1400(b) is the sole and exclusive provision controlling venue in patent infringement actions…” Though that might seem to end the inquiry on its face, the federal circuit has for 25 years ignored the Supreme Court ruling in Fourco Glass based on the understanding that 1988 amendments by Congress “rendered the statutory definition of corporate residence found in (Section) 1391 applicable to patent cases.” So the federal circuit believes that Congress overruled the Supreme Court’s ruling in Fourco Glass, which Congress obviously has the authority to do.

Federal Circuit Decision

Although this decision will be about whether venue in the Eastern District of Texas is proper, this case originated in the District of Delaware. TC Heartland LLC petitioned for a writ of mandamus to the federal circuit for an order directing the United States District Court for the District of Delaware to either dismiss or transfer the patent infringement suit filed against it by Kraft Foods Group Brands LLC. The panel decision of the federal circuit denied the petition. Kraft filed suit against Heartland in Delaware, alleging that Heartland’s liquid water enhancer products infringe on three of Kraft’s patents. Heartland moved to dismiss the complaint for lack of personal jurisdiction. It also moved to either dismiss the action or transfer venue to the Southern District of Indiana under U.S. Code 28, Sections 1404 and 1406.

Heartland, a limited liability company organized and existing under Indiana law and headquartered in Indiana, alleged that it is not registered to do business in Delaware, has no local presence in Delaware, has not entered into any supply contracts in Delaware or called on any accounts there to solicit sales. Heartland did, however, admit that it ships orders of the accused products into Delaware, consistent with contracts with two national accounts.

Heartland argued that it is entitled to a writ of mandamus based on two legal theories. First, it argues that it does not “reside” in Delaware for venue purposes according to Code 28, Section 1400(b). Second, it argued that the Delaware district court lacks specific personal jurisdiction over it for this civil action. The federal circuit, in a decision written by Judge Kimberly Ann Moore and joined by Judges Richard Linn and Evan Wallach, concluded that a writ of mandamus was not warranted.

Heartland attempted to make a novel but rather frivolous argument that certain minor amendments to Section 1391 in 2011 somehow re-established the supremacy of the congressionally-overruled Supreme Court decision in Fourco Glass. More specifically, the 2011 amendments stated in Section 1391(a) that the section was applicable “except as otherwise provided by law.” Heartland argued that because of Fourco Glass, it was “otherwise provided” that Section 1391(c) did not apply to patent cases.

Judge Moore explained the fallacy of Heartland’s argument: “Heartland asks us to presume that in the 2011 amendments Congress codified the Supreme Court’s decision in Fourco Glass Co. v. Transmirra Products Corp. … regarding the patent venue statute that was in effect prior to the 1988 amendments. We find this argument to be utterly without merit or logic. The venue statute was amended in 1988 and in VE Holding, this court held that those amendments rendered the statutory definition of corporate residence found in (Section) 1391 applicable to patent cases. With respect to personal jurisdiction, Heartland did not dispute that Kraft’s patent infringement claims arose out of their shipments into Delaware. The federal circuit easily found those contacts sufficient to satisfy the minimum contacts requirement for personal jurisdiction to attach. Whether there is or is not personal jurisdiction over Heartland is not before the Supreme Court.

A ‘Poor Vehicle’

In Kraft’s opposition to the petition for certiorari—a writ in which a higher court reviews a lower court’s decision—counsel for Kraft pointed out that this case is a poor vehicle for the Supreme Court to decide the issued complained about by Heartland relating to forum shopping.

Kraft is correct. Obviously, this case has nothing to do with forum shopping. TC Heartland shipped allegedly infringing products into Delaware and was sued in Delaware. How it can be surprising that it was sued in Delaware is a mystery.

This case is being used by those with an agenda to attempt to make a statement about what is happening in the Eastern District of Texas, in a patent owner-friendly district court. It is unconscionable that the Supreme Court would take this case and force Kraft to play an unwilling and unjustifiable role in a macabre judicial protest with heavy political overtones.

Conclusion

I have little doubt that the Supreme Court will make the wrong decision, as it almost always does in patent cases. But if logic and sanity prevail, the federal circuit will be affirmed. Unfortunately, it will cost Kraft unnecessary legal fees and push back resolution of this infringement matter.