Source: https://www.andrewskurth.com/insights-1508.html
Timestamp: 2018-04-20 03:06:47
Document Index: 385045727

Matched Legal Cases: ['§ 1400', '§ 1400', '§ 1391', '§ 1400', '§ 1400', '§ 1391', '§ 1406', '§ 1406', '§ 1400', '§ 1391', '§ 1400']

Supreme Court Reinstates Venue Limitations in Patent Cases: Hunton Andrews Kurth LLP
Jeff C. Dodd, Tonya Gray, John R. Hutchins, Rose Cordero Prey and Mark A. Chapman
The patent venue statute, 28 U.S.C. § 1400(b), has two independent prongs for determining proper venue: "Any civil action for patent infringement may be brought in 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." TC Heartland addresses the "residence" prong. For 27 years the Federal Circuit applied the rule in VE Holding Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574 (Fed. Cir. 1990), which read the general venue statute’s residency definition into the patent venue statute in § 1400(b). The current version of the general venue statute, 28 U.S.C. § 1391(c)(2), states that "an entity . . . shall be deemed to reside, if a defendant, in any judicial district in which such defendant is subject to the court’s personal jurisdiction with respect to the civil action in question." Thus, reading the general venue provision's residency test into the patent venue provision meant that a corporation "resided," and so could be sued, anywhere it was subject to personal jurisdiction. The Federal Circuit followed this precedent in TC Heartland.
The Supreme Court reversed in the latest in a growing string of cases overturning Federal Circuit patent decisions. Relying on the text and history of § 1400, Justice Thomas, writing for a unanimous Court, rejected the Federal Circuit's holding and—implicitly—twenty-seven years of Federal Circuit precedent. In reversing, the Supreme Court reiterated its 1957 holding in Fourco Glass Co. v. Transmirra Products Corp., 353 U. S. 222 (1957) that "28 U.S.C. § 1400(b) is the sole and exclusive provision controlling venue in patent infringement actions, and that it is not to be supplemented by the provisions of 28 U.S.C. § 1391(c)." Fourco, 395 U.S. at 229. Accordingly, the Court held "that a domestic corporation 'resides' only in its State of incorporation for purposes of the patent venue statute." TC Heartland, slip op. 2.
The immediate impact of the Court’s decision will likely be a flurry of motions to transfer cases out of venues unpopular with defendants. Section 1406(a) states that "[t]he district court of a district in which is filed a case laying venue in the wrong division or district shall dismiss, or if it be in the interest of justice, transfer such case to any district or division in which it could have been brought." Section 1406(b) is explicit that it does not impair a court's jurisdiction where a defendant "does not interpose timely and sufficient objection to the venue," but it is an open question whether a § 1406 motion brought now in an ongoing case—where a defendant's answer might have included a perfunctory venue objection—will be considered timely if the defendant had not previously moved because of the "settled" law. We expect to see litigation related to this issue and to the question of timing of transfer after a court grants a § 1406(a) motion. Professor Janicke of the University of Houston Law Center examined the immediate effect of such motions in the Eastern District of Texas, which has been a popular venue for plaintiffs in patent cases, and estimated that:
Going forward, plaintiffs will look for new venues in which to sue large groups of defendants. We expect that the District of Delaware—already a popular venue for patent cases—will see an increase in filings due to the large number of entities that are organized in Delaware, the history of patent litigation there, and the resulting expertise of the Delaware bench. However, plaintiffs will take into account that Delaware has only four full-time judgeships, and this may dissuade plaintiffs from filing there because docket jams may slow the pace of proceeding to resolution, by settlement or otherwise. We may also see an increase in filings, and rapid development of patent dockets, in other popular organization states such as Nevada and New York. Venues such as the California districts, where many technology companies have a presence, may see some impact, but have not historically been viewed as plaintiff-friendly. Other jurisdictions with patent pilot programs, such as the Northern District of Texas, may also draw cases.
Finally, we should note that TC Heartland’s holding applies only to U.S. corporations. The Court expressly states that it takes no position on its prior holding in Brunette Machine Works, Ltd. v. Kockum Industries, Inc., 406 U.S. 706 (1972), which held—based on a long-standing rule that venue restrictions do not apply to foreign defendants—that a foreign corporation may be sued for patent infringement in any judicial district. In Brunette, the Supreme Court wrestled with distinguishing Fourco, noting that "in [Fourco], the Court asserted that '28 U.S.C. § 1400(b) is the sole and exclusive provision controlling venue in patent infringement actions,' emphasizing its character as 'a special venue statute applicable, specifically, to all defendants in a particular type of actions,'" and that "Fourco held that venue in patent cases is not affected by § 1391(c), which expands for general venue purposes the definition of the residence of a corporation." Brunette Machine Works, 406 U.S. at 711 (citation omitted). Brunette ultimately distinguished Fourco and reached back down to Section 1391(d), which the Court held was not "derived from the general venue statutes that § 1400(b) was intended to replace," but rather reflected "the longstanding rule that suits against alien defendants are outside those statutes." Id. at 713. Given the dramatic increase in international trade and development of intricate webs of distribution, and the Court’s firm embrace of Fourco in TC Heartland, future litigation on patent‑venue involving foreign companies is possible.