Federal Circuit Continues Broad Venue Allowance in Patent Cases

by Dennis Crouch

In its petition for writ of mandamus, TC Heartland raised a set of interesting venue and personal jurisdiction claims – basically arguing that both the statute and Supreme Court precedent strongly limit where patent claims can be brought.

In its new decision, however, the Federal Circuit panel has rejected the petition – finding that “Heartland’s arguments are foreclosed by our longstanding precedent.”  This result was expected – likely even by Heartland’s counsel Prof John Duffy and Jim Dabney – and the long game has seemingly always been focused on en banc review and a potential supreme court review.  An eventual win by Heartland would result in a major shake-up of patent litigation by greatly reducing the concentration of patent cases – especially those in the Eastern District of Texas.

The basic setup:

Heartland 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. But Heartland admitted it ships orders of the accused products into Delaware pursuant to contracts with two national accounts.

Based upon this setup, Heartland argues (1) that it does not “reside” in Delaware for venue purposes according to 28 U.S.C. § 1400(b); and (2) that Delaware district court lacks specific personal jurisdiction over it for this civil action.

Unfortunately for Heartland, these same arguments were raised and resolved by VE Holding Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574 (Fed. Cir. 1990).  Although Heartland presented an argument that an amendment to the statute overruled VE Holdings, that argument was flimsy and rightly rejected by the appellate panel.  Rather, the real argument – now to be presented en banc – is that VE Holdings was wrongly decided and represents a misinterpretation of both the statute and Supreme Court precedent.

I previously explained the primary argument as follows:

In the dispute, Heartland has asked the court to reconsider its interpretation of the patent venue statute 28 U.S.C. § 1400(b) and order that the limiting elements of the provision be given effect.  Under the proposed interpretation, a patent infringement case could only be filed in districts either (1) the defendant resides or (2) the defendant has both committed acts of infringement and has a regular and established place of business. This proposal stems directly from the language of 28 U.S.C. § 1400(b) which requires either (1) residency or (2)  a combination of infringing acts plus a regular-place-of-business as a prerequisite to proper patent venue. For the past several decades the limits of § 1400(b) have been given essentially no weight after being undermined by 28 U.S.C. § 1391(c). This broadened provision undermines § 1400(b) by providing a very broad definition of the term “resides” — indicating that that “except as otherwise provided by law,” a defendant will be deemed to “reside” in any venue where the defendant is subject to that court’s personal jurisdiction in the action at hand. When § 1400(b) and § 1391(c) are read together, it appears that patent cases can be filed in any venue with personal jurisdiction over the defendant.  The point of the TC Heartland mandamus action is that those two provisions should not be read together, but instead, the more traditional and limited definition of “residency” should apply when interpreting 1400(b).

On TC Heartland’s side is Fourco Glass Co. v. Transmirra Products Corp., 353 U.S. 222 (1957).  In that case, the Supreme Court ruled 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).”  This statement was reiterated by the Supreme Court in Brunette Mach. Works Ltd. v. Kockum Indus., Inc., 406 U.S. 706 (1972) (“Congress placed patent infringement cases in a class by them-selves, outside the scope of general venue legislation.”).  Congress then amended the statute which led the Federal Circuit to hold that Fourco no longer held sway.

 

 

 

9 thoughts on “Federal Circuit Continues Broad Venue Allowance in Patent Cases

  1. “An eventual win by Heartland would result in a major shake-up of patent litigation by greatly reducing the concentration of patent cases – especially those in the Eastern District of Texas.”

    If the patent venue statute is restored, suits can still be filed where a company is incorporated vs. is principle place of business. Thus, suits will concentrated in Delaware, where most big US companies are incorporated, as patentees will continue to want to avoid the infringer’s home town.

    1. Exactly, if corps want to play games with the laws of their state of incorporation, then prepared to be sued in that state.

      1. Iit,

        How is that any different then from the supposed games on jurisdiction shopping for patents?

        You seem comfortable accepting the game for corporations law, but not for patent law… (or am I misunderstanding your post?)

        1. You may be misunderstanding. I’m for broad venue. While I personally find it appalling and uncreative that patent cases are filed in a few very concentrated venues in obscure regions of the country, I do believe this should be the right of the patentee as a plaintiff – the same as any other Federal plaintiff. Personally, I would bring suit in my home town, even if that venue is not textbook in my corner as a plaintiff.

          1. Thanks for the clarification.

            In today’s internet enabled ubiquitous presence of a world, with patents being a Federal item, it seems difficult to deny forum (although I am more than certain that plaintiffs can exclude themselves from forums if they try really hard).

            That being said – the underlying “rest of the story” (in the late Paul Harvey tones), would be to understand exactly why particular forums are sought out.

            Some claim that this is because of “too friendly” local rules. I don’t know about that. Local rules cannot be so egregious as to offend state or federal concerns, and any such untoward “too friendly” would have been appropriately challenged by now – or at least that would be the rational conclusion.

  2. I guess I don’t see why patent cases should be in a class by themselves when it comes to venue. Judges can always grant transfers after weighing factors.

    1. The question is valid, but the short answer is that Congress enacted a special venue statute for patent cases, and it is still on the books, with no expressed intent for it to be overruled, but emasculated by a Fed. Cir. decision. However, this attempt to get that Fed. Cir. decision overruled by a mandamus action is a real long shot. As noted, it would take an en banc appeal of this mandamus denial, which I assume is even more unusual?

      1. Paul, perhaps one of the more overlooked aspects of MCM Portfolio LLC v. Hewlett-Packard was the court’s ruling that only an en banc court could overrule a prior decision of the Federal Circuit. We had argued that Patlex was inconsistent with subsequent controlling authority and that it had been overruled. We actually had a significant amount of discussion at oral argument on this issue.

        One would think that the Federal Circuit may have been satisfied with simply saying that Patlex controlled outcome of the present case on the issue of public rights. But they went into a full legal analysis of the constitutionality of IPRs. Even though I disagree with the Federal Circuit, I still appreciate their efforts to lay out the best case for sustaining the constitutionality of IPRs because it makes it a lot easier for us to get Supreme Court’s attention.

    2. Because Congress enacted a special patent venue statute in 1897, and the Supreme Court twice held that the general venue statute does not apply to patent cases. VE Holding goes against the holdings in Stonite and Fourco.

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