Supreme Court Curbs Forum Shopping in Infringement Suits

Last month, in its decision in TC Heartland LLC v. Kraft Foods Group Brands LLC, 581 U.S. __ (May 22, 2017), the U.S. Supreme Court considered the issue of where proper venue lies for purposes of patent infringement actions brought against domestic parties. Section 1400(b) provides that “[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.” Moreover, the Supreme Court has previously held in Fourco Glass Co. v. Transmirra Products Corp., 353 U.S. 222, 226 (1957), that, under § 1400(b), a domestic corporation is only considered to be a resident of the state in which it is incorporated. Since the Fourco decision, 28 U.S.C. § 1391(c) has been twice amended and now provides that a domestic corporation is deemed to reside in any judicial district in which personal jurisdiction may be exercised against it.

Background

Section § 1400(b) was recodified in 1948 to recite “where the defendant resides” (instead of referring to where the defendant “inhabits”). At the same time, the general venue provision of § 1391 was amended to further define “residence” of federal defendants. Thus, the question arose of whether § 1400(b) incorporated § 1391(c) by virtue of its amendment, which was answered definitively by the Fourco decision: no.

However, § 1391 has been amended further – once in 1988 and again in 2011 – to permit domestic corporate defendants to be hailed into any district in which personal jurisdiction may be exercised over them. The 2011 amendment, however, provided that § 1391 would govern all civil actions brought in federal district court “except as otherwise provided by law.” The Court of Appeals for the Federal Circuit held that the 2011 amendment did not affect the applicability of § 1391 to patent infringement suits. The Supreme Court reversed.

Holding

In an 8-0 decision, the Supreme Court unanimously held that § 1400(b) is the only statutory provision applicable to issues of venue in patent cases and thus does not incorporate § 1391. The Court reasoned that, although Congress has amended § 1391 multiple times since the Fourco decision, it has not amended § 1400(b) since its recodification in 1948. The current iteration of § 1391 does not indicate a legislative intent to alter the established meaning of §1400(b) and the Court reasoned that one should not be inferred where there has been a decisive judicial interpretation to the contrary. The Supreme Court thus relied on its well-established and now 60-year-old precedent in Fourco.

Consequences

With the Federal Circuit’s 27-year-old precedent reversed, domestic corporations may take comfort in the fact that they may not be unexpectedly haled into a district court in simply any district in which their inventions are sold. The very lenient standard of personal jurisdiction requires only “minimal contacts” with the judicial district. The Supreme Court’s clarification on this issue should result in significantly less forum shopping by plaintiffs.

(For more information about the history of this case, see our earlier post here.)