Source: https://patentlyo.com/patent/2017/05/supreme-court-reins-patent.html
Timestamp: 2019-04-26 00:18:53+00:00

Document:
In TC Heartland LLC v. Kraft Foods Group Brands LLC, the Supreme Court has significantly shifted the balance away from the geographically fringe Eastern District of Texas – holding that the residence requirement of 28 U.S.C. § 1400(b) refers only to a defendant’s State of Incorporation for patent infringement venue purposes.
The short (10-page) unanimous opinion authored by Justice Thomas reaffirms the court’s prior decision in Fourco Glass Co. v. Transmirra Products Corp., 353 U. S. 222, 226 (1957) — holding again that “for purposes of §1400(b) a domestic corporation ‘resides’ only in its State of incorporation” and rejecting the notion that a much broader definition of venue (found in §1391) applies.
Although the Supreme Court law appears continuous. The Federal Circuit created a major blip in its 1990 decision of VE Holding Corp. v. Johnson Gas Appliance Co., 917 F. 2d 1574 (1990). In that case, the appellate court held that patent infringement venue is proper in any court having personal jurisdiction over the defendant. That expansive change allowed for the rise of patent-focused venues such as the Eastern District of Texas where the majority of infringement lawsuits have been filed over the two decades (heat map below).
What next: Section 1400(b) limits patent cases to the judicial district (1) “where the defendant resides,” or (2) “where the defendant has committed acts of infringement and has a regular and established place of business.” This means a likely large boost of lawsuits in Delaware. National retailers will still be amenable to suit essentially everywhere, but many would-be defendants will be able to avoid E.D.Texas at least. There will also be new litigation on the implications for foreign companies with no established place of business in the US. The decision here expressly refuses to address that question other than noting that it did previously decide that foreign corps can be an exception to 1400(b). Although possible, it is unlikely the court will adapt the “established place of business” to include the internet, although that portion of 1400(b) has not been explored since the e-tailing explosion. With less concentrated venue, I we can also expect a rise in multi-district litigation. For more, consider Prof Janicke’s article on the Imminent Outpouring from the Eastern District of Texas.
Or a tail of how Google and Mark Lemley got their way again.
See post 16.2 below, discussing the link that Malcolm himself provided.
May I predict that there is going to be a lot of activity in the Eastern District of Texas starting now with motions for transfer being filed alleging that the venue in the Eastern District of Texas is improper. Waiver is going to be argued. But I also predict, and in appropriate cases, that patent owners will argue that doing a large amount of sustained business in the district, through e-commerce and the like, will count as a a regular and established business in the state. Brick-and-mortar may not be required.
Ned, I think you will find from old cases on what is a “regular and established place of business” for this venue statute that mere interstate mail order catalog purchase of a product by someone remote ordering it from the subject district by mail was insufficient. Such cases could be relevant to much e-commerce.
Paul, there may be a bit of difference between one purchase using a catalog and a regular and established internet business that draws tens of millions in revenue from products sold in a district.
One clear difference tha tI can see Ned is that you have mixed apples and oranges with Paul’s comparison.
By that, I mean that you take Paul’s object of remote ordering by mail in the singular, but then you try to compare that to something else.
Instead of comparing (in an apples to apples manner) the remote ordering by mail with a remote ordering by Web, you switch the emphasis to the oranges of the aggregated non-personal end of the remote ordering (you switch from the consumer side to the business side).
Other than mode, which is an obvious difference, what is the (apples to apples) difference that you are seeing?
But remember, folks: “anon” isn’t a defender of patent tr0lling.
Your ad hominem here has zero tie to the discussion.
I think, anon, in e-commerce, it is the location of the server is irrelevant. The location of the computer of the contracting party is what counts. Thus one has to pay state sales taxes depending on where the transaction is made.
Thus, legally, when one establishes an e-commerce business within the 50 states and territories, one establishes a business that is active within each state.
I think the courts will have to dance a weird tune to avoid holding that an e-business conducted within a particular state, were local taxes are paid, is not a regular and established business within that state.
I actually think that there was no sales tax on mail-order’s.
Anon, not back in the day.
As the article indicates, the inability to collect (as a problem) means that collection requirement was there – but enforcement of that requirement was a problem.
Nevertheless, the wording of the relevant clause of 1400(b) “where the defendant has committed acts of infringement and has a regular and established place of business”.
This is not the same as saying that the alleged infringer conducts business within the state. There must be a place within the state. If that place is the computer of the purchaser, then is the regular and established place the location of that one computer, or the locations of computers of all purchasers within the state? If the computers of all purchasers, how can that be considered to be a place? A place is surely a specific location within the state. Or if just the computer of a single purchaser, whilst the transaction is taking place, how can that “place” be regular and established?
Yes – consumer-side-centric or business-side-centric; either way, for apples to apples, mail order and web order would need to have the same orientation.
Since every judicial district in the U.S. has folks electronically remote ordering a huge variety of products from their computers, Ned’s reading of the statute would render this statutorily intended venue LIMITATION [just re-blessed unanimously by the Supremes] completely ineffective and meaningless.
Well, distant, how could they not have a place of business if they are transacting business in the state so as to have to pay sales the sales taxes of their customers?
Is it really the case that a business in California cannot set up a website and allow internet users in (say) Alabama purchase items, to conveyed over the Internet if digital, or else through couriers or the U.S. postal service, and remit any necessary taxes to the State of Alabama, without setting up an office employing a couple of people in (say) Montgomery, Alabama in order to meet legal requirements for making sales in the state of Alabama?
Are the laws on interstate commerce in the US so rigid as to prevent businesses located in one state making sales (e.g., by mail order) in other states unless they set up subsidiaries or offices in those other states?
The other question is, what if there are no sales? What if the business is making freely available open source software that is alleged to infringe a patent?
Distant, one has to ask themselves what is the intent of congress initially in requiring that the defendant have a regular and established place of business in the jurisdiction before they could be sued that there?
It really is a matter of fairness is not?
If one intentionally engages in business in a jurisdiction, completes numerous sales transactions, pays sales taxes, delivers products, all in that jurisdiction, can it series be denied that they have a regular establish place of business even if the personnel that operate the equipment for the defendant that make all that possible are not located there?
Can a company headquartered in California deny that they are conducting e-business in California simply because it servers are not located there, and the people conducting the transactions a located in places such as India?
Again the issue is fairness. Would it be unfair for company gaining tens of millions of dollars of revenues from a particular jurisdiction and paying sales taxes because it is deemed that the transactions are actually occurring in that jurisdiction to actually be able to stand trial in that jurisdiction for the infringements that occur there?
Assume for example, a foreign corporation, for which the residency requirements can never be met, is conducting e-business only in Alaska and nowhere else, and paying taxes there. There is no other jurisdiction in the United States where such foreign corporation can be sued under the patent venue statute which Supreme Court has now is exclusive of the general venue statute. I we to say that that foreign corporation cannot be sued there?
And what difference does it make if it can be sued in other states?
And if it is fair to sue a foreign corporation in Alaska because it is doing business there, why not a U. S. corporation?
Ned, unless SCOTUS set an odd precedent back in the day when courts respected Fourco, the plain words of the statute surely control, irrespective of any “fairness” issues. Surely “place” refers to some specific geographical location within the state, and the qualification “regular and established” does surely imply reasonable permanancy, substance and immoveability.
Rather than focus on what some former Congress might possibly have intended, it might make sense to look at what members of the current Congress might do.
Consider for example the “VENUE Act”, that had been referred to the Senate Judiciary Committee in the 114th congress.
The text is almost identical with the corresponding provisions of the Innovation Act (H.R. 8). A provision concerning “retailers not eligible for customer stay” is missing from S.2733.
Presumably anyone who objects could get to work lobbying their senators and representatives. But I would presume that, if adopted by them, the House and Senate Judiciary Committees could get legislation as limited as these venue provisions through Congress.
I haven’t committed on the substance much but it might raise interesting scenarios for those attempting to transfer. Insofar as the transferee venue has to be proper it could be that a defendant who is incorporated in a state, that has its headquarters in another state, yet has its plant that manufactures and sells the infringing goods in another state cannot have the case transferred to the state of its headquarters.
That is most unhelpful for defenders of the eligibility of logic patents. Ouch!
Is that more of the same dissembling on “logic” patents…?
And the Scalia quote does not support your own whine (Mann has nothing on you).
It does not fit your script.
I will typically not give Mann too much due, as his grasp of IP law is not the best.
But he is much sharper on general civil procedure, and the linked article rests on his better knowledge there.
Wake up Congress – try to remember this other power that the Constitution provides you in regards to courts and matters not of ANY court’s original jurisdiction.
It would be hard for anyone to deny several things that you are correct about anon, but you miss the punchline, as usual.
– The CAFC is far more patentee friendly than some district courts and the Supreme Court.
– That this case was clearly orchestrated from start to finish by the Supreme Court to be a timely intervention to ward off political interference, or to solve a policy problem where the political branches were not getting it done, or both.
-They sailed close to the wind of not having an actual controversy, so this opinion is indeed quasi-advisory.
– The unanimous decision and bulletproof presence of the saving clause introducing ambiguity into the statue means that no serious resistance to the opinion will be forthcoming until the new regime shakes itself out.
The punchline is that as always, the three branches overlap. Each does some degree of legislating, enforcing, and interpreting. Rather than despising and decrying that fuzzy overlap, which must always exist, people should focus their policy perspectives to balancing the interests of all 9 branches and making sure none become disproportionate.
This court did what it had to do. It did it cleverly and unassailably. Will it do the same when somebody finally gets cert on subject matter again?
If they see rumblings about really changing 101, I would not be surprised to see a case appear on a cert list- and the facts of that case may render it too semi-advisory.
And you anon will predict that outcome badly too. It’s what you do.
PS, fuzzy or not, the court will never, ever, never never ever put up with any notion of jurisdiction stripping WRT patents. The ultimate judicial power of the United States will remain with the Supreme Court. This opinion should be a stark reminder of that fact.
The punchline – as you put it – is not at issue here, and while YOU may reflect that I am correct in what I am saying, it is clear that those with whom I am having the dialogue with have not yet reached that point.
Further, your own “punchline” remits a joke of its own as “policy” is not an open ended invitation to the Court (or courts) to address.
You are heavily intox1cated on the mead of Ends justify the Means.
That “overlap” you want is beyond the limits of what our Constitution provides.
Clearly, it is you that has failed to grasp the punchline in the larger context of dicussions about the Supreme Court, the other branches of the government and the proper balances under the Constitution.
As far as “putting up with,” you need to first understand what jurisdiction stripping is, why the point of original jurisdiction is important, and what power the Constitution provides to Congress in this manner.
Clearly – you are not there yet.
Just so very thankful to not be going to EDTX as much in the future. Former Judge Ward and others and those courts can go back to being a small docket, thankfully.
in the likes of distant perspective….
Let me see if I’ve got this right: patent infringement suits from trolls, especially in EDTx, were the scourge of big companies post-State Street Bank. This eventually led to the passage of the AIA, with its patent death squads, loss of grace period and general introduction of uncertainty into the patent landscape.
Gee, thanks SCOTUS. If you guys had gotten your s–t together back then we might have been spared the AIA.
The part about the SCOTUS fabricating facts to fit their judgment is true. The part about the trolls is fiction.
Reality: far fewer patent applications per $1 billion of GDP generated by high-tech companies are being filed today than 30 years ago.
Reality: if you add all the monetary judgments together for software, the total is less than one year of profits banked by Google.
If you have a problem with Google’s profits, you’re certainly not alone. To suggest that the answer if “more patents, easier to enforce” is absolutely absurd. That’s not what the patent system is for.
If I thought for one second that you actually cared about excessive corporate profits, I might join you in formulating ways to cure that ill. But I know that you could care less about that, just like all you’re li’l maximalist friends.
MM, obviously the comment goes to the narrative that the supposed “patent trolls” are destroying all the companies. Obviously, the scale is not there for the narrative to be true.
NW – Reality: far fewer patent applications per $1 billion of GDP generated by high-tech companies are being filed today than 30 years ago.
So? Should we expect it to remain constant? If by high-tech you mean computer and software industries, they were in their infancy 30 years ago. The low hanging fruit has already been picked. Innovations are harder to come by these days. I would expect patent apps to be down vs the early days, independent of other factors at play.
NW – Reality: if you add all the monetary judgments together for software, the total is less than one year of profits banked by Google.
Assuming that’s true – so what? Google is a huge company with huge revenues (profits can vary wildly due to accounting vagaries. not a good measure). Should the software industry expect to pay this much in judgments every year? What about all the other costs: litigation, settlements, etc? Surely that is substantially larger than the figure just for judgments.
Judgements-to-profits is an irrelevant comparison. The real questions are: are those patents sound? Do they advance the art? Are software companies using those innovations? Are the licensing / royalty payments in line with the value added by the patents?
If the answer to all those is yes, then the system is working fine. Many suggest the answers are not all yes though. In which case, your “realities” have no bearing on the issue.
>> I would expect patent apps to be down vs the early days, independent of other factors at play.
First the patent applications being down shows that the narrative that patent applications are way out of hand and being filed frivolously is not true.
As commented below, this is not an accurate statement. Denial of cert does not – and cannot – impute the meaning that you want to impute.
That being said, there IS a separate notion that Congress acting on legislation is aware of the state of law as developed by the courts, and that if it changes a law – and does not change what the courts have done in that particular area of law being changed immediately in front of and by Congress – then Congress is (here is your) implicitly accepting what the courts have done.
Except in those situations in which the Supreme Court does not want to listen to what Congress may (or may not) have done and instead wants its own policies in place.
Contrast this with the Kimble case, where the Supreme Court did not want to “disturb” the law, even after acknowledging that its old law was wrong. The only apparent concern is the Ends that the Court wants.
You’re going to blame SCOTUS for the patent troll problem by not granting certiorari in VE Holdings in 1990!? That’s silly. No one back then foresaw the mischief and abuse that decision would create. In fact, it took more than a decade (in the early 2000s) to get the EDTex patent troll train rolling.
I’ve been around long enough to know how this happened, and to put it bluntly, the reason it took more than a decade for the rampant abuse to crop up after VE Holdings was that other federal districts simply had too much integrity to become “patent litigation hot spots.” In the 1990s, the Eastern District of Virginia was a brief hotbed because of its very fast docket speeds. Plaintiffs thought that the ultra-fast dockets would create significant settlement pressure. It did for some, but the problem was that the judges in Virginia were not interested in catering to forum shopping, so if you didn’t have a good reason for being in that forum, they transferred your case out (usually to the defendant’s preferred venue, which coincided with the plaintiff’s least favored venue). And if you managed to stay in Virginia, the judges there would grant summary judgment against the garbage cases. Then came the Western District of Wisconsin, with its lightening fast seven month filing-to-trial schedule. But if you didn’t belong there, you got transferred, or if your case managed to stay there but stunk on the merits, it got thrown out. Lots of other districts briefly got trendy but dried up for similar reasons. Central District of California. Middle District of Florida. Western District of Arkansas. Eastern District of Michigan. Northern District of Illinois. The list goes on and on, and the pattern was the same — plaintiffs initially flocked there, with venue being technically “proper” under the expansive view of VE Holdings, but the judges granted discretionary transfer motions against cases that didn’t belong there, and for those few cases that remained, the judges acted impartially by throwing out the junk patent cases. You could win, or lose, it depending on the strength of your case, but you weren’t guaranteed a trial simply because you filed a complaint. There were certainly plenty of patent cases filed back in those days, but the reasonableness of those districts acted as a backstop against the filing of the kinds of garbage we later saw littering the EDTex docket.
Plaintiff’s lawyers by 2004, after experimenting with all of these other districts, figured out the whole E.D. Tex. thing. And like 9/11, it changed everything. People quickly realized that Judge Ward and Judge Davis would play ball with patent trolls, go out of their way to deny transfer motions and keep cases there (like sitting on transfer motions for a year and then denying them on questionable grounds shortly before trial), and most importantly, they let even the most meritless cases reach trial.
All of a sudden, junk patent suits that would get tossed just about anywhere else on account of the patent not being infringed, or invalid, became extremely valuable assets in E.D.Tex. that yielded millions on pretrial settlements. Because the E.D.Tex. judges almost never granted summary judgment, and never transferred, and almost never stayed cases pending post-grant reviews like reexamination, defendants there were basically screwed. If a defendant got tagged for a specious patent suit in EDTex, that suit became a $2 million defense cost proposition, with the best outcome simply being winning the case after spending all of that money. Because even if you won the case, everyone knew you’d almost never get your fees back from those judges under 35 USC 285, no matter how specious the case was.
Defendants figured out the lose-lose economics of defending suits in EDTex and settled out the vast majority of cases, for widely varying amounts. There were certainly a few exceptions and holdouts who wanted to act tough and send a message by trying cases, but overall, most defendants figured out that the economics of fighting just made no sense. Fear of the district grew such that, by simply filing a three page complaint in EDTex, you could all but guarantee a significant settlement from just about anyone.
And things got even worse when you saw how EDTex judges responded to the legal reforms in patent law, in the area of damages, pleadings, 101, and IPRs. They bucked the trend of the rest of the country by denying 101/Alice challenges, denying most Daubert motions against inflated damages reports, denying motions to dismiss based on insufficient pleadings, and refusing to stay most cases pending IPR or CBM reviews. The clear pro-plaintiff bias on these issues became so stark that even more cases got filed there until, by 2016, basically 45% of all patent cases in the entire country were filed there.
So if you want to blame anyone for the patent troll problem, and the arguable legislative overreaction, it is silly to blame SCOTUS. You’d have to place that blame on the EDTex judges and the troll lawyers who profited from that district, as well as the CAFC failing for more than a decade to reign in forum shopping.
Excellent summary of the history for those who are just stepping into the scene.
A lot of truly rotten people made a lot of money thanks to the shenanigans in the Banana Republic of Junk Patents. It’ll be interesting to see how the EDTX adjusts.
I wonder what’s happening at Big G’s blog? Nonstop headless chicken dance as usual?
The problem with trolls are not the big cases, but the small ones. The abusive behavior is when plaintiffs ask for licenses on dubious patents that are far lower than the cost of defense, banking on the fact that companies will make the rational choice. Procedural issues in EDTex drive up the cost of litigation, and make the economics even better for trolls.
The AIA lowered the cost of defense dramatically due to IPRs. That alone stopped much of the worst behavior. Alice and now TC Heartland are probably both unnecessary and will likely have negative unintentional long term effects.
There appears to be some bitter after taste to that Kool-aid, LR.
No, sorry, this patent suit venue issue was not a driving factor for the AIA legislation, and would not have affected the widely bi-partisan support for IPRs. It was even thought then [erroneously, as it turned out] that the non-joinder provision of the AIA would get most patent suits moved out of E.D.TX on the existing forum inconveniens basis established by that Circuit [not the Fed. Cir.] in the Volkswagen case.
If you guys had gotten your s–t together back then we might have been spared the AIA.
Doubtful. In addition to eliminating interference proceedings (anybody miss those yet? I didn’t think so) one of the main goals of the AIA was to provide a systematic means for eliminating the huge pile of junk created in the wake of State Street.
If you want to criticize the Supremes, criticize them for not destroying the State Street Bank decision immediately. And prior to that, you can criticize them for writing Diehr in, shall we say, a less-than-careful manner.
Are the facts getting in the way of your rants again?
The opinion is shoddy at best. The Congress knew in 2011 all about how venue was being handled.
I would characterize this case as: Google lobbies for a change in the patent venue. The usual suspects rally and generate lots of papers and other propaganda about patent venue. The SCOTUS decides to legislate. And, the hack job is given to Thomas again.
I would appreciate a comment on the intra-mural implications of this case, i.e., the decades long smacking down of the CAFC by the Supreme Court. In this case, the CAFC had relied on its more recent case law (VE Holdings – 1990). Smackdown! The Supreme Court invoked their earlier three decisions and reversed. Much like the Supreme Court constantly invokes Benson to smackdown any CAFC 101 caselaw. So the question I have is, when the issue of patents being private (Supreme Court) or public (CAFC) rights gets to the Supreme Court, and it will eventually, will the Supreme Court smackdown Newman’s more recent (flip-flopping) CAFC case law and and invoke their earlier decisions …. once again …. and rule that patents are private rights, with the added bonus of a smackdown on Congress for its making the AIA inseparable? This is not an abstract question because I wrote it down on a piece of paper, so that it doesn’t “exist solely in my human mind”, a phrase that deserves a complete semantic smackdown.
Greg A will the Supreme Court smackdown Newman’s more recent (flip-flopping) CAFC case law and and invoke their earlier decisions …. once again …. and rule that patents are private rights, with the added bonus of a smackdown on Congress for its making the AIA inseparable?
This has been another edition of easy answers to simple questions.
Unfortunately it is hard to convince some folks of the enormous difference between such routine Sup. Ct. “smackdowns” [reversals] of its own lower circuit courts and the very rare declaring of Federal Acts of Congress to be unconstitutional, even though the Supreme Court itself has repeatedly articulated and demonstrated that important distinction.
…another snipe from the sidelines from someone who refuses to engage in any actual dialogue on the merits….
I had set that torch aside after dialogue with Greg here on these boards and my inability to find the actual amendment that would have introduced separability into the AIA being rejected.
Do you have a link or other information about the rejection of separability?
What did you do with the real “anon”????
Well I guess Marshal will lose its skating rink.
A well reasoned decision by Justice Thomas, but it does have a glaring flaw, and it is this: prior to VE holdings, the Supreme Court took up the issue of the patent venue statute three times, the last being Brunette Machine Works in 1972. The latter case dealt with foreign corporations; and the Court held there held that the residency requirements of the patent venue statute did not apply to foreign corporations for the obvious reason that they were not incorporated in United States. But in 1990, the Federal Circuit held that the language of the general venue statute was unambiguous and its definition of residency for corporations applied rather than that of that of the prior Supreme Court decisions that had limited residency to the State of incorporation only consistent with the statute in 1892.
Today’s decision then moves on as if there is nothing else that happened, stating, “Following VE Holding, no new developments occurred until Congress adopted the current version of §1391 in 2011.” But something else did happen. VE Holdings was petitioned to the Supreme Court and the Supreme Court denied certiorari. The clear implication of this is that the members of the Supreme Court at that time agreed with the Federal Circuit. It was with this background that Congress amended venue statute in 2011 believing that VE Holdings stated the law.
Question: your competitor hires an employee from its widget manufacturing plant in Minnesota, and moves the employee to Chicago where the employee discloses trade secrets. The competitor then begins manufacturing the widget in its Tennessee plant for sale abroad only. Your competitor is incorporated in Delaware. The widget infringes one of your patents.
Where is venue proper for both the trade secret case and the patent case?
Does Minnesota, Illinois or Tennessee law apply to the trade secret case?
The Sup. Ct. decision expressly indicates that Congress did NOT ever indicate any agreement with the Fed. Cir. VE Holdings decision.
The decision also indicates why VE Holdings was contrary to proper statutory interpretation to begin with [as I noted at the time]: Congress left the more specific patent venue Section 1400(b) on the books, with no indication of any intent to amend it, much less to render it effectively moot [since almost all patent suit defendants are corporations], when Congress amended the more general venue statute.
Paul, patent venue statute did come up in discussions leading up to the 2011 venue amendments. If I recall correctly, the American Law Institute recommending the amendments to the general venue statute also recommended that the patent venue statute be repealed as being now unnecessary. Congress did not adopt that suggestion. But it was the clear understanding of the people in the American Law Institute that VE Holdings was the law, and that there amendments in 2011 would apply to patent venue.
The folks over at the American Law Institute behind the 2011 amendments should and probably will be shocked by this decision. To the extent that any in Congress thought that VE Holdings was not law, I would like them to step forth and say something because I would find it hard to believe because everybody involved seemed to understand that VE Holdings was the law.
All in all, this was a very political decision by the Supreme Court.
Ned, you are beating a legally dead horse with wet noodles. The debate is over. They don’t get any deader than from unanimous Supreme Court decisions.
1. LLC are not included in this decision. There are a lot of closely held companies that are LLCs.
2. The ALI might have a say in Congress. I expect Congress to act. There is no excuse for corporations to have such narrow venue when LLCs and foreign companies can be sued everywhere.
3. Pharma is up in arms.
Why would Pharma be up in arms?
Good question. I don’t recall seeing a lot of pharma patent suits being brought in E.D.TX?
Interestingly, there was a CAFC opinion published just yesterday re a pharma case that was filed in E.D.TX (Mylan. v. Aurabindo.
Why did Pharma companies file amicus briefs in support of Kraft? Because they wanted the ruling we have now?? Obviously Pharma didn’t want this, and it has nothing to do with EDTEX. Probably didn’t want all the Pharma cases to end up in D. Del.
anony, when a number of generics file ANDA’s, patent owners like to sue them all in one forum for obvious reasons. The current decision in TC Heartland is going to make that it all but impossible.
If [?] an LLC is not treated as a corporation [?] under this statute, how does this decision make its patent suit venue narrower than it already was before?
Are there really that many LLCs getting sued for patent infringement?
Paul, while it may not be many LLCs getting sued for patent infringement, but the survey a lot of foreign corporations. I predict they will continue to be sued in the Eastern District of Texas.
From the pleadings and from the case caption on the published opinion, both of the entities involved are LLCs. So, please explain how the parties could have cajoled the SC into issuing an opinion that only applies to a d/b/a, and not the actual legal entity involved????
…and as noted below, some though do not want to understand what the term “advisory opinion” means.
Federal courts cannot issue advisory opinions because of the Constitution’s case-or-controversy requirement.
Both parties being LLC’s removes the “controversy” that the Court decided upon. The Court’s own reasoning makes this a purely advisory opinion, as neither party qualifies to make the section of law decided upon germane to their case.
Have we not discussed previously that denial of cert is NOT to be taken as a decision on the merits as you are attempting to do, Ned?
Well, I have just done some web searching. I have just come across a document on the House Judiciary Committee website which seems to indicate the light in which members of the House Judiciary Committee regarded the Federal Circuit decision in VE Holdings.
Hearing before the Subcommittee on Intellectual Property, Competition and the Internet of the Committe of the Judiciary, House of Representatives.
By allowing corporations only be sued where they are incorporated is guaranteed in many instances that the litigation we filed in litigated in the form that is inconvenient to both parties. For example, if the design engineers of the infringing products are located in a state different from that where is the infringer incorporated, which might also be different from where it has a principal place of business, it might not be possible to actually litigate the case there if there is no infringing activity.
I think you’re ignoring the second half the statute. There is no “*principal* place of business” requirement, but instead a broader “*regular and established* place of business.” The “regular and established” language is over a century old and there are many cases defining the term. Most recently, pre-VE holdings, the Fed. Cir. in In Re Cordis (1985) held that a couple salesmen working out of home offices qualified (read case for additional facts). I’m not sure I agree with that holding (and it seems to conflict with older supreme court cases), but I’m just pointing out that it’s not as strict as you imply. Venue against and company with retail stores in all 50 states will proper anywhere.
Another document found on the House Judiciary Committee website.
(2) in the judicial district where the defendant has committed acts of infringement and has a regular and established place of business.
(c) Notwithstanding section 1391(c) of this title, for purposes of venue under subsection (b), a corporation shall be deemed to reside in the judicial district in which the corporation has its principal place of business or in the State in which the corporation is incorporated..
Does the failure of your example bill to be transformed into law actually prove the opposite of your suggested “ light in which members of the House Judiciary Committee regarded the Federal Circuit decision in VE Holdings.” …?
Would the indication then be that the larger body of Congress disagreed with the House Judiciary Committee…?
Same with the 2007 quote….
Distant, I think it is more interesting as to why Congress refused to repeal the patent venue statute in 2011 at the recommendation of the American Law Institute, whose recommendation was based upon the idea that the VE Holdings Federal Circuit case from 1990 had harmonized the patent venue statute with the general venue statute. I think it is quite clear, as others have said here, that Congress passed the legislation it did in 2011 fully understanding that everyone assumed that VE Holdings stated the law, particularly because the Supreme Court denied certiorari in that case.
Once again, Ned – this is legal error and has no place in the dialogue.
I think the short answer is that the matter was not before Congress in 2011, or in the two preceding years when the legislation was developed.
It is explained therein that the bill was not processed through the House Judiciary Committee in the normal fashion, with amendments put forward at Committee, but the final bill was approved by voice vote without amendment.
The discussion at committee is on pages 32 to 36. Basically just a statement from the Chairman and another from the Ranking Member, followed by a voice vote.
Given the press of other agenda items in 2010, the Judiciary Committee could not devote ‘‘formal’’ process to the evaluation of H.R. 4113 during the 111th Congress. In other words, while the bill was considered important, the Committee did not have time to conduct a hearing on H.R. 4113, followed by a markup. Instead, the Administrative Office of the US Courts (‘‘AO’’) functioned as a clearinghouse to vet the bill and newly-developed revisions to it with the Judicial Conference’s Federal-State Jurisdiction Committee, academics, and interested stakeholders. The main stakeholder groups include the American Bar Association (‘‘ABA’’), Lawyers for Civil Justice (‘‘LCJ’’), the Federal Bar Association (‘‘FBA’’), the American Association for Justice (‘‘AAJ’’), and the U.S. Chamber of Commerce.
As you can see, no mention whatsover of the American Law Institute and the list of credits! Indeed it is referenced in a single footnote (footnote 11), and there are various references to the ALI Project, particularly with regard to rules for aliens.
And, searching this House report, the word patent does not occur anywhere within the document.
So it is difficult to understand why some ALI Prospectus published 12 years before the passing of the act should determine the interpretation of an act that came into being through the work of Rep. Lamar Smith. If he chose, for any reason, not to introduce anything related to 1400(b) within the Act, or discuss it with the Committee, or in the Report, why should the reported understanding of someone associated with the ALI have relevance for the legislative history of the act?
See Committee on Federal-State Jurisdiction, Amendments to the Venue Statutes on page 17.
The Conference approved, in principle, amendments to the venue statutes in Title 28, to add a new section 1390, revise 1391 and repeal 1392.
The intent of the revision was specified, not any specific proposed wording.
The proposed revisions to the venue provisions were enacted by Congress in 2011.
The revisions approved in principle by the Judicial Conference make no mention of patents or 1400(b).
Presiding at the Judicial Conference was the Chief Justice, John G. Roberts, Jr.
I believe it has been pointed out numerous times that denial of cert does not equal affirmance. Roberts reiterated that very recently. The only thing clearly implied by denial of cert is that scotus is silent.
I would characterize this case as: Google lobbies for a change in the patent venue. The usual suspects rally and generate lots of papers and other propaganda about patent venue. The SCOTUS decides to legislate. And, the hack job is given to Thomas again. Maybe he should be a moniker. Something like the butcher of the CAFC.
Could not predict any of this coming.
Because this case comes to us at the pleading stage and has been litigated on the understanding that petitioner is a corporation, we confine our analysis to the proper venue for corporations. We leave further consideration of the issue of petitioner’s legal status to the courts below on remand.
A nice win for justice made a bit sweeter by anon’s tears.
I predict reversal. I don’t know if 8-0 or 5-3 will do it, but “except as otherwise provided by law” is the court’s ticket to ride, and I think, caeteris paribus that they will take a golden opportunity to remind the CAFC, the USPTO, and the patent bar exactly whose decisions carry the force of law. Dabney was an impressive strategist IMO to lead and lean on that notion.
That’s telling, as not one of his positions emerged unscathed.
If he wins, your comment is meaningless. If he loses, he may still have brought it closer to the goal line. If he loses and they call him out for a specific point, I was wrong.
And cut and paste I did. Spin that anon. Dabney did a great job (you know, unanimous opinions tend to suggest that…) I could easily see it, and you could not, and you were exactly, precisely wrong.
May I suggest logging some Holiday Inn time?
You just aren’t very good at this.
He’s already spinning. Based on the Supreme Court’s oh-so-unfair decisions, he and his bff are convinced that the “rule of law” no longer exists in the US. So there! You lose, Martin.
The important thing is that “anon” cast a “protest vote” for Bernie Sanders. That’s how you know he’s a very serious person with real deep understanding of the system.
Maybe try something (anything) with a substantive point, Malcolm.
Sorry Mr. Snyder, but this Cort decision does not back up the adulation that you wish to pay yourself on the back with.
There is simply no cause or correlation based on what the Court presents here and your earlier reason for projected success. You simply err by leaning on that “tend to suggest” bit.
You still have no put a shirt on.
They should let it thaw and call it The Magical Pool of Albritton’s Tears. And then put up a historical marker explaining the significance. Gosh, I might even be compelled to visit Marshall if they do that.
How large can those post office boxes be…?
Are you kidding? NPE patent litigation had to be the most lucrative business in Marshall TX. Not even counting the motel and barbecue business booms.
…since when does “Local Counsel Offices” include such ancillary items Paul?
Maybe you wanted to make a different wisecrack at 6.2…?
And so another sad chapter in the Patent Maximalist Playbook crumbles into dust and blows away. Nobody could have predicted any of this!
I’m sure “the pendulum” will start swinging back as soon as the IPO/AIPLA’s ridiculous “revision” to 101 gets passed. It’ll be just like the good old days! First Amendment, schmerst amendment.
Forgive me for asking the obvious, but since 1391 does not apply to 1400, and 1400 refers only to “the defendant” in the singular, is there no proper venue for a suit a against multiple defendants that are incorporated or HQ’d in different states now? What about the scenario where a Plaintiff sues a manufacturer and its distributor for the same infringing product, but the two are incorporated and HQ’d in different states? Need two suits?
since 1391 does not apply to 1400, and 1400 refers only to “the defendant” in the singular, is there no proper venue for a suit a against multiple defendants that are incorporated or HQ’d in different states now?
Read the case again. There’s a big clue in there about how to resolve statutory interpretation questions like the one you proposed. It’s important.
By all means Malcolm please indicate the proper statutory construction of the singular/plural.
Try not to be duplicitous about it.
Because obsessing over singular versus plural worked so well for you in Promega v. Lifetech.
Thomas just pulled the rug out from under the maximalists again. Tough luck.
That won’t cut it – add one to the “against you actually providing anything of cogent and substantive legal worth” column.
I don’t think you’ve helped answer his question. If you know, please share to enrich us all.
There’s nothing in the statute that prohibits joinder of parties in a proper venue, provided the other applicable venue requirements are met. And there’s also nothing in the Congressional history that suggests a contrary intent.
Was this supposed to be difficult?
Wrong answer – see post by Paul.
The supreme court decided the issue 60 years ago in the Stonite Prods. case, which is referenced in today’s decision. Venue must be proper for *all* defendants under 1400.
? How were you handling that already since the AIA anti-joinder statute?
Should be fun as virtually every EDTX case and ANDA case grinds to a halt for the summer as thousands of motions to transfer get decided. ANDA cases are now officially a disaster.
ANDA cases are now officially a disaster.
Huh? This will affect some currently pending ANDA cases, but I expect that it will have hardly any effect going forward. Most ANDA plaintiffs are chartered in Delaware, and Delaware is already a very popular venue for ANDA cases, so no problem.
The CAFC recently decided that merely checking the paragraph IV box constitutes sufficient minimum contacts for a defendant to be subject to Delaware courts. If, as the Court held today, the plaintiff corporation’s venue is the state in which the corporation is incorporated, this simply means that most ANDA litigation (except for Eli Lilly) will be tried in Delaware. Given that a substantial portion of ANDA litigation is already brought in Delaware (the most of the rest is brought in next-door NJ), this strikes me as hardly any disruption at all.
The CAFC’s Acorda decision was predicated on the broad reach of Delaware’s long-arm statute. Does anyone here happen to know if Indiana’s long-arm reach is as extensive as Delaware’s? If not, I have to imagine that Eli Lilly will soon be lobbying the IN state government to revise the long-arm statute, so that Eli Lilly will not be deprived of a forum in which to bring ANDA suits.
I also saw that cert was granted on SAS v Lee, regarding the PTAB’s freedom to select a subset of petitioned claims for IPR.
I am not sure there is no greater recent embarrassment to patent jurisprudence than this case. In a footnote Justice Thomas notes that that TC Heartland is not a corporation at all. How a federal Magistrate, Federal District Court, the CAFC and all the fine attorneys arguing this case missed that singular significant issue is beyond comprehension. As an LLC, the law on is that it is a citizen of each state of its members. This opinion is an advisory opinion which under proper jurisdictional analysis should not have got here. Mandamus relief is traditionally served for exceptional issues. How can one with a straight face that argue that mandamus relief is warranted when the premise of the argument, i.e., that a corporation is arguing that the corporate and patent venue statutes have been misapplied, is flatly and demonstrably false.
In the footnote, Justice Thomas noted that TC heartland may be an unincorporated entity. However, he accepted the parties’ representations that it was a corporation.
A Court deciding to “confine [their] analysis” does not change an advisory opinion into a non-advisory opinion.
Is this not a purely factual predicate matter?
The status of TC Heartland as a corporation is a factual predicate matter that the Supreme Court did not resolve. Because TC Heartland was represented to be a corporation, it was forced to confine its analysis to that representation to avoid issuing an advisory opinion regarding other possibilities, such as an unincorporated entity. It is possible that this decision may not apply to TC Heartland, if it is determined not to be a corporation. However, an opinion does not become advisory depending on subsequent factual developments.
The factual status of what the party in question remains the same today (or tomorrow) as it was on the day the case started.
Try a quick thought experiment: the fact is established that the party never was a corporation.
This means that ALL aspects of the Supreme Court decision are based on something that never was – and that they should have never heard the case in the first place because….
…the Court’s writing in this case IS an advisory opinion.
Just because the Court may want to advise some future parties that may satisfy the point of law being put at issue does not mean that THAT point of law has been properly before the Court in the immediate instance.
This will not be some decision that “may not apply to TC Heartland,” but rather – as an advisory opinion which is beyond the power of even the Supreme Court, this decision applies to no one.
Is that not how the prohibition against advisory opinions work, after all?
this decision applies to no one.
If you stop assuming your conclusion for a second, you will understand that courts can only rule on the facts before them. As far as this case is concerned, it is a fact that TC Heartland is a corporation. Contrary to your premise, it was never established that TC Heartland is anything other than a corporation. As Justice Thomas noted, there is some suggestion that TC Heartland is an unincorporated entity, but SCOTUS is ruling on the law–not the facts. If the facts don’t match reality, that doesn’t make an opinion premised on those incorrect facts advisory. Reality doesn’t change, but the facts of the case might. To the extent that TC Heartland can change its legally-operative entity status at the district court (a fact), it may be able to avoid the applicability of this case.
The ACTUAL fact of whatever status that the party had cannot be “subsequently developed.” It is what it is and always will be what it is.
Now, that is different than the entity at some future time changing its entity status, but clearly that is not an item at point here.
Now the Court may have assumed that a fact was “x” when it was not. The point is that such an assumption does not change the fact into “x” just because the Court so assumed. Quite in fact, given the direction of the Court on remand, they themselves realize that THAT fact may change.
Further, you assume that I have as some “premise” that some status of entity was “established.” I have no idea where you got that or even why you think that such is even a premise. I never said such a thing, and what I did say has no requirement of such a thing as a premise.
The bottom line here is that the Court’s “ruling on the law” is a ruling on a case that may have had no legal basis for being in front of them. Any such case necessarily then becomes a mere advisory opinion.
The original complaint in this sub thread was a missed point (“and all the fine attorneys arguing this case missed that singular significant issue“), and the “miss” goes even further than FMS notes.
What the Court should have done – given the actual factual status of the party would be to dismiss without judgment on the law, precisely because the law at point could not reach the party involved, and instead withhold judgment until an actual case or controversy touching that law would be before them.
Or at the minimum, the Court should have remanded to have the particular fact ascertained PRIOR to their “confining” the analysis – as it may yet dawn on you that the “confined analysis” itself presupposes something that is not so.
It’s like building a castle on a foundation of air.
Rather than “assume a conclusion,” I invite you to understand what an advisory opinion means, and when such a thing may happen (like this instance).
You seem to have trouble distinguishing between “false” and “hypothetical”. TC Heartland’s status as a corporation was never hypothetical, although it was presumably always false. The complaint alleged that TC Heartland was a corporation, which was admitted in the answer. It is not an assumption to accept the facts of the case. You seem to be working under the false assumption that “ACTUAL facts” matter. They don’t.
The opinion would be advisory only if it were based on facts that were known by the Court to be false. As trivial as it may have been to correct the factual record, this decision was based on the fact that TC Heartland is a corporation. SCOTUS was under no obligation to remand the case to resolve a factual dispute raised for the first time on appeal. If it is so inclined, TC Heartland can seek leave to amend its answer at the district court, but, until then, TC Heartland is bound by this order as a corporation.
That is the second time on this topic that you have attempted to switch my argument into something that it is not.
Nowhere has my position depended on “hypothtical,” and facts ARE facts – regardless of how “constrained” the Court chooses to make ANY analysis.
I have no clue as to why you would attempt to portray my position as related to that word.
I have to ask (since you keep on posting around the topic): do you even know what an advisory opinion is? **(no snark intended).
Further, even if the parties Complain and Answer that they are “a corporation,” does NOT mean that they have the right to have a matter of corporate law decided if the fact of the matter is actually different.
As I sated: facts do NOT change, and an error does not a fact make.
Thus your own premise in reply of “this decision was based on the fact that TC Heartland is a corporation.” is wrong. Further, even the court remanded for the determination of that fact – this eviscerates your position.
** If you do understand what an advisory opinion means, then you would not be making the claims that you are making.
And it doesn’t matter a whit. Both parties argued the case as if TC Heartland were a corporation. If it turns out they aren’t, the arguments involved do not change one bit. They just apply to the next petitioner rather than TC.
The issue remains the same: how is corporate residency determined. The issue was fully argued, with both parties and numerous amici presenting comprehensive views.
The court ruled on the issue before them in the interest of judicial economy, as it is bound to come before them again. Why waste everyone’s time with a restart when it doesn’t affect the outcome? There is nothing to be gained by punting on a technicality.
It is not a matter of what the parties argued – it is a matter that the parties even had a right to be in court to make ANY arguments.
A non-corporation cannot invoke a corporate law matter in order to get into court to make arguments – regardless.
The “issue” is not reached because the party is not a proper party to TRY to reach the issue.
As to the plurality of people missing this point (parties, amici, even the courts and the Court), THAT is the point that FMS starts with.
“In the interest of judicial economy” does not – and cannot – overcome the Constitutional edict of no advisory opinions.
That is hardly a technicality.
Point well taken and maybe Trainman was superseded by that amendment. But I don’t know if the “residence” of an LLC under 1400(b) is the same as that of a corporation. It seems to me, maybe naively, to be a more complicated or at least different analysis…an analysis that is not addressed in this opinion.
I just don’t see how TC Heartland ever satisfied those three conditions once it was acknowledged that TC Heartland was not a corporation. Heck, in looking at TC Heartland’s petition for mandamus, I can’t see where they even attempted to argue 1400(b) as it relates to an LLC or or that Fourco’s discussion of corporation residence applies equally to LLC’s.
I disagree. The Court resolved the issue of “corporation” residency in patent cases. LLCs traditionally have not been considered to be corporations in the context of jurisdiction and venue. They are like partnerships, unincorporated associations. By way of example, every circuit has held that LLC are citizens of every state of their members for purpose of diversity jurisdiction.
Of course we are dealing with federal question jurisdiction here. SCOTUS addressed unincorporated association venue for federal questions in Denver & R. G. W. R. Co. v. Trainman, 387 US 556 (1967). There they held that venue was proper wherever the unincorporated association is doing business. Maybe for unincorporated defendants in patent cases Trainman doesn’t apply. If asked, maybe SCOTUS would have answered that. Notably, Trainman is not mentioned in the opinion.
So yes, maybe, the result will be the same. However, I believe we want our Court to analyze cases under the proper framework and have parties litigate matters they have a right to litigate. Call me naive, but I don’t believe a party that is an LLC has a right to ask a court to construe a statute that is about corporations.
Exactly – the “case or controversy” does not reach that law.
At a Federal level, the courts must not give advisory opinions. Any such opinion is NOT binding – to anyone.
Other comments (currently in the mod trap) explain this.
FMS, since Congress in 2011 is already addressed the issue of venue for LLCs, why would not any court follow what Congress as already specified as opposed to trying to figure it out by themselves – and based upon what criteria?
That too would have been an appropriate response from the Supreme Court (as opposed to the advisory opinion that they felt compelled to provide).
The fact of the matter that they DID feel compelled is a whole nother issue – legislating from the bench has run SO amuck, that the Court simply cannot help itself.
Congress, there is a single solid solution that will take care of the underlying problem (and it is not a redraft of 101).
From TC Heartland’s petition for cert.
Seems to me, that was a stretch…..
I don’t agree. If both parties or TC Heartland in their briefing stated that the fact of TC Heartland being a corporation is wrong then the Court does not have to assume that fact to be true. At that point then, in my opinion, this discrete issue becomes moot in this case.
I predict this case will stay in Delaware. Venue is waivable and since TC Heartland apparently has not argued the venue statute as it relates to its real status as an LLC, the CAFC on remand will summarily deny the petition.
Moreover, if I were the CAFC on remand, I would issue a show cause order to TC Heartland and sanction them. They made an argument and Supreme Court case asserting a statutory interpretation for a statute that they knew or could have easily figured out didn’t apply to them.
FMS, what if Kraft amends its pleading to allege that TC Heartland is an LLC?
Seems to me if they did that it would moot the petition for Mandamus. But it could start the whole process again for the courts to consider where an LLC “resides’ under 28 USC 1400 (b).
Isn’t there some prohibition against (even) the Supreme Court from rendering advisory opinions?
If indeed this is a mere advisory opinion, is this then without force of law?
SCOTUS: Once cert has been granted, the facts and the parties no longer matter – it is a vessel into which policy will be poured. – overheard at alcholoics anonymous.

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