Guest Post by Professor Tun-Jen Chiang of George Mason University.
Patent litigators are all familiar with the Eastern District of Texas. The reason that this otherwise-unexceptional district is able to dominate patent litigation comes down to a little known case, VE Holding Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574 (Fed. Cir. 1990), which created nationwide venue for virtually every patent case.
Some background is in order. 28 U.S.C. § 1400(b) allows a patent infringement action to be brought, inter alia, where the defendant "resides." Intuitively, one would think that residence refers to the state of incorporation or principal place of business, and under that version few defendants reside in East Texas.
28 U.S.C. § 1391(c) adds a wrinkle. It states: "For purposes of venue under this chapter, a defendant that is a corporation shall be deemed to reside in any judicial district in which it is subject to personal jurisdiction." By the plain language of the statute, a corporation that makes any sales in East Texas is then deemed to reside there. This is the basic analysis of VE Holdings.
But the Supreme Court decision in Fourco Glass Co. v. Transmirra Products Corp., 353 U.S. 222 (1957) is very much to the contrary. Fourco dealt with the prior version of § 1391(c), which stated: "A corporation may be sued in any judicial district in which it . . . is doing business, and such judicial district shall be regarded as the residence of such corporation for venue purposes." The respondent in Fourco specifically argued that old § 1391(c) was clear and deemed a corporation to "reside" wherever it did business. The Supreme Court nonetheless held it did not apply to § 1400(b):
We think it is clear that § 1391 (c) is a general corporation venue statute, whereas § 1400(b) is a special venue statute applicable, specifically, to all defendants in a particular type of actions, i.e., patent infringement actions. In these circumstances the law is settled that [h]owever inclusive may be the general language of a statute, it will not be held to apply to a matter specifically dealt with in another part of the same enactment. . . .
We hold 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).
The Federal Circuit in VE Holdings distinguished Fourco because the statutory language had changed. See 917 F.2d at 1579. But the change in language was immaterial to the underlying rationale of Fourco: the new § 1391(c) was and is still a "general corporation venue statute," and § 1400(b) was and is still a "special venue statute applicable, specifically, to . . . patent infringement actions."
What we have is the familiar situation where the Federal Circuit tosses aside a Supreme Court decision by invoking a slim excuse. See KSR Int'l Co. v. Teleflex Inc., 550 U.S. 398 (2007). Until very recently the Supreme Court indulged this. But the Court seems to have changed, and this would be a good time to revisit VE Holdings.
I should add one thing, which is that one can very much question whether Fourco itself is correctly decided. But this is, of course, not a question the Federal Circuit should arrogate upon itself to decide.