TC Heartland LLC v. Kraft Foods Oral Arguments.

Last week’s oral arguments in TC Heartland LLC v. Kraft Foods (SCT 16-341) went well for the petitioner. [TRANSCRIPT: 16-341_8njq]  In the case, the accused infringer TC Heartland argues that Delaware is an improper venue for its patent case since 28 U.S.C. 1400(b) limits patent venue to “judicial district where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business.”  TC Heartland is an Indiana LLC that is also HQed in Indiana and has no regular place of business in Delaware – seemingly excusing it from defending a patent case in Delaware.  The big catch, however, is that 28 U.S.C. 1391(c) provides a broad definition of “reside” –

Except as otherwise provided by law . . . For all venue purposes . . .  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.

28 U.S.C. 1391(c).  This provision appears to greatly extend the reach of proper venue for all federal cases to the limits of personal jurisdiction as well. Operating from a blank slate, I expect that the best reading of the statute is that 1391(c) controls and broad venue is available.  The problem though, is that the Supreme Court previously held the other way in Fourco Glass (1957).  And, although the statute has been somewhat amended, there is no suggestion in the record that Congress intended to overrule Fourco.

Arguing for TC Heartland, James Dabney begins:

MR. DABNEY: The Court in this case is presented with an historic choice. That choice is between upholding or destroying venue protections that Congress provided in 28 U.S.C. 1400(b), and that this Court interpreting that statute declared to exist in its Fourco Glass decision. And the correct choice, we submit, is to adhere to this Court’s existing, long-established interpretation of Section 1400(b) and to reject the new call for a new revisionist interpretation that would render Section 1400(b) nugatory in this case and in all but the most unusual cases. . . .

In the Fourco Glass case, the Court considered statutory language that was not materially different in this respect from current 1391 and held that 1400(b) when it says the judicial district where the defendant resides, that means domicile.

Justice Kagen appeared to agree that Fourco controls – and that the Federal Circuit has been going the wrong way for some time:

JUSTICE KAGAN: One oddity of this case is usually, when we say something, when we issue a decision, we can be pretty confident that Congress is acting against the backdrop of that — that decision. But I think that that would be an odd thing to say in this case, given that for 30 years the Federal Circuit has been ignoring our decision and the law has effectively been otherwise. And then It seems actually that if I were a congressman, I’d think that the practical backdrop against which I’m legislating is not Fourco; it is instead the Federal Circuit’s decision in VE Holding, which is the decision that the practice has conformed to.  . . . When 30 years of practice goes against you, what happens?

MR. DABNEY: I heard Justice Souter say something like that in the KSR case, you know, the teaching-suggestion-motivation test had been around so long that, at some point, the mistake becomes the law. And this Court has again and again and again stood up for its authority to declare what the law is.

On issues of patent law, there’s actually a precedent, Andrews v. Hovey that says no issue of patent law is settled until we have settled it.

Chief Justice Roberts, who tends to focus on precedent, seems to also agree that congressional action since then had no intent to overrule the patent venue cases:

CHIEF JUSTICE ROBERTS: No — [the recent amendment to 1391] wasn’t intended to overrule VE Holding, but I suspect it wasn’t intended to overrule Fourco at all either. And Fourco is a decision of this Court.

For his part, William Jay, arguing on behalf of Kraft focused on the statutory language.

MR. JAY: [The post-Fourco amendment] it isn’t here a change from “for venue purposes” just to “for all venue purposes.” [there are several other amendments to the statute] . . . [Although] the principles by which Fourco interpret the statutes are still good law — the definition that Fourco applied is no longer the controlling definition of “residence.”

So Fourco is based on two things. Number one, the fact that 1400 was recodified in the 1948 revision of the Judicial Code. [That is interpreted differently than ordinary amendments, which presume an intent to change and overrule.]

The other thing is the specific and the general canon. This Court said that 1391(c), as it then existed, was clearly a general corporation venue statute, and so it was. It provided where a corporation could be sued. It doesn’t do that anymore. 1391(c) is now a purely definitional provision, and it was adopted specifically to clear up a number of the nagging problems that the members of the Court have been asking my friend about, including where do you sue an artificial entity that is not a corporation? Where does it reside.

An important statutory interpretation question is whether the Supreme Court’s Fourco interpretation of 1400(b) should be included within the “except as otherwise provided by law” limitation of 1391(c).  Interesting question about what Congress intended when it said “provided by law.”

Only a small portion of the discussion involved policy questions of the focus of patent cases in E.D. of Texas and the pending congressional legislation. This, I think brought out a good point by Mr. Jay.

MR. JAY: I think that the issue is not the definition of residence. The [real] issue is how do we come up with a different patent venue statute altogether? And that is something that Congress has been working on, trying to come up with something more calibrated, so that, for example, a research university would be able to bring suit in its home district, because that’s where it did the invention; it’s where the inventor’s lab is and so forth, you know, where they would want to be able to sue a defendant in its own principal place of business, even if it doesn’t commit the relevant act of infringement there.

Big picture here – the statutory interpretation is messy enough that there is not a clean pathway to an answer for the Supreme Court.  If we have a reversal – we’ll see more big changes to patent litigation.

31 thoughts on “TC Heartland LLC v. Kraft Foods Oral Arguments.

  1. To some extent pushing off-topic but still I think relevant, as it concerns how SCOTUS operates with regard to prior precedents, the agenda of some of the Justices with regard to patent law and economics, and the lens through which Justice Kagan in particular would view the apparent conflict between Fourco and VE Holding.

    I have just been looking through a lengthy preprint draft of a paper on SSRN concerned with situations in which “textualist” judges advocate overruling prior precedents.

    The preprint draft is by Prof. Anita S. Krishnakumar (St. John’s University), is entitled Textualism and Statutory Precedents, and is intended to appear in Virginia Law Review in 2018. There is a caveat:

    “Draft. Please do not circulate or cite without permission”.

    I am construing this to mean that the author does not want the draft discussed in academic publications as if it were a published paper, and that she does not want drafts circulating around: those wishing to consult a current draft should go to SSRN. But the fact that the draft is available on SSRN presumably indicates that the author is not averse to the draft been read or noticed.

    The URL is here:

    link to papers.ssrn.com

    The paper stems from the observation that, whilst one would expect “textualist” judges to adhere closely to the principle of stare decisis, nevertheless there are surprisingly many instances where “textualist” justices in their opinions, concurrences and dissents advocate overruling prior precedents. The author has an appendix which seeks to identify and list, based on text searches, all cases in the Rehnquist and Roberts courts where justices have advocated overruling precedents otherwise protected by statutory stare decisis.

    There is one patent case, Kimble v. Marvel Entertainment LLC (2015). The URL to justia.com is here:

    link to supreme.justia.com

    Basically the question before the court was whether they should overrule Brulotte. The majority seemed to agree that there wasn’t much to support the principle of Brulotte, but declined to overrule it on account of the principle of statutory stare decisis. Justice Kagan delivered the opinion of the Court. Part III discusses stare decisis. Kagan describes statutory stare decisis as a “superpowered form of stare decisis” where reversal would require “superspecial justification”.

    Kagan wrote for the liberal Justices, plus Kennedy and Scalia.

    Alito wrote a dissent, joined by Roberts and Thomas. Their “superspecial justification” was along the lines that Brulotte was judge-made law not well-grounded in the words of the statute, motivated by discredited economic theories. Accordingly Brulotte should not interfere with the liberty of the parties to enter into a contract to their mutual advantage, which may involve continuing to pay royalties after the expiration of the patent.

    I suggest that, in addition to Kagan’s concerns with longstanding conflicting SCOTUS and CAFC precedents, the case also demonstrates that Alito, Roberts and Thomas feel very strongly about issues related to patent law that they feel justifies them in overriding “superpowered” statutory stare decisis. I suggest further that they may put great weight on the liberty of parties to contract terms freely with one another that they disfavor interference from patent law impeding freedom to contract. I suggest that, on such principles, it would not be surprising if they considered that patent law should just get out of the way on a first sale so that contract law controls entirely thereafter (i.e., patent exhaustion). Roberts’s remarks at the Lexmark oral argument are surely consistent with this, as is unanimity in Quanta, authored by Justice Thomas.

    1. You seek too much order where a simpler (Occam’s razor) mindset applies:

      Visit the history archives for the quote: “The only valid patent is one that has not yet appeared before us.”

    2. there are surprisingly many instances where “textualist” justices in their opinions, concurrences and dissents advocate overruling prior precedents

      I’m shocked, truly, that judges would have political ideologies that they tend to promote above and beyond their putative judicial philosophies.

      Astounding.

      1. Would you be astounded if you understood exactly where it was proper to use the tool of common law development and where that tool was inappropriate?

        Your sardonic comment belies your own lack of appreciation of the legal system.

        That’s not a great way to go through life, son.

    3. [T]here are surprisingly many instances where “textualist” justices in their opinions, concurrences and dissents advocate overruling prior precedents.

      I’m not sure why you’d be surprised. Statutory stare decisis is especially prone to revision because it is grounded in textual interpretation. A textualist would have no issue advocating a revision of what is to them an absurdity. The flip-side is Kagan’s “superspecial justification” to revise. The whole reason it would be considered “superspecial” is because it needs such protection because it is so easy to revise.

      Maybe you’re thinking about it backwards – that it deserves “superspecial” protection because it is rigorously reached in the first place. No, the argument is that it deserves “superspecial” protection because it is prone to revision and the Court wants to avoid fecklessness caused by shilly-shally interpretations.

      Well, this is my understanding, anyway.

      Also, I think some dissents stand on a principle in part because they are in the minority. They can afford to advocate a different interpretation in a dissent because their comments do not actually change the statutory interpretation all that often.

      1. Thanks for the reply. The “surprise” (maybe not with that exact word) I was taking from the author of the paper, not expressing my own surprise. To precis the first paragraph of the abstract (with my italics).

        “This Article seeks to shed light on a little-noticed trend. The Court’s textualist Justices … have proved remarkably willing to abandon stare decisis … This is especially curious given that statutory precedents are supposed to be sacrosanct…. What then accounts for the textualist Justices’ brazen willingness to overrule statutory precedents in recent years? And how can this practice be reconciled with textualism’s core aims of promoting clarity and stability in the law?”

        (The above quoting from the abstract.)

        There is a lot of detailed discussion and analysis of individual cases in what is a fairly long paper, looking for patterns. The article suggests possible reasons to explain the phenomenon and “both supports and critiques” textualist Justices’ approach to statutory precedents.

  2. Trying to put together some thoughts on this, having read the transcript several times and listened to the oral argument.

    Before the oral argument, I was thinking to myself that it would be interesting to see how SCOTUS handles this case. Their responsibility is to rule on what they deem to be the correct interpretation of current law. That interpretation cannot depend on how many cases find their way to E.D. Texas, and whether or not a change in the interpretation of the law would transfer a lot of E.D. cases to Delaware. At most such issues would go to whether a particular interpretation would result in “mischief”, and so this might have some relevance to assessments of the policy implications of alternative interpretations. But if such questions dominated, this would indicate that SCOTUS had departed from their responsibilities to clarifying the reading of the status through deciding cases and controversies that come before them. So the apparent lack of interest (real or feigned) in the E.D. Texas phenomenon would seem to indicate that SCOTUS did indeed see their task as one of statutory interpretation.

    Why did SCOTUS grant certiorari. They would be aware that venue for patent cases is an issue that Congress is considering. Indeed I remember watching a video of a panel discussion a few weeks ago which opened with a presentation from Michelle Lee and closed with some remarks by Rep. Darrell Issa of the House Judiciary Committee. And Rep. Issa told the meeting, amongst other things, that he gets to meet the Justices every now and again, and that Chief Justice Roberts had told him (from my memory of the video) that if Congress considered venue to be a problem, then it was something they needed to sort out themselves – it wasn’t a matter for the courts to solve.

    So one reason that SCOTUS might have granted certiorari would be in order to try to clear the undergrowth and try to gain ideally clarity, or at least closures, as to what is deemed the correct interpretation of the relationship between 1391 and 1400(b), so that Congress knows where they stand, and where they should amend the code, if and when they decide to legislate with regard to patent venue.

    Finally I would suggest that SCOTUS may be hunting as a pack on this question, teasing out from the lawyers as much as they can about the background, the implications of the legislative history, such as it is, and whether making 1400(b) the venue statute for patent infringement cases would cause problems, e.g., for L.L.C.s, aliens etc.

    1. Continuing, what about the legislative history? Of course not all Justices consider legislative history relevant. It seems that, with regard to 1391, Congress outsourced the revision of this part of the US code to the American Law Institute. What can be gleaned from the Kraft’s section of the oral argument? Supporting Kraft is the fact that ALI intended the venue provisions in 1391 in the 2011 revision to be “cross-cutting”, making unnecessary special venue provisions. But some Justices noted that ALI recommended that 1400(b) be deleted, but Congress did not implement this deletion. So one might consider arguments form 2011 legislative history to cancel one another out.

      1. Distant, this point is crucial. I believe Jay made the point that even with the revisions to the definitions of “reside” made in 1391(c), that section 1400(b) still had work to do in the case of individuals who could be sued not only where they reside physically, but where they do business and commit acts of infringement. That simply is not covered clearly by the new venue statute.

        “MR. JAY: So the second half, I agree, does not have much work left to do, except in cases where the defendant’s an individual. So I think that that –that by itself means that the second half is not surplusage.

        JUSTICE
        SOTOMAYOR: But you would have specific jurisdiction if the person committed an act of infringement and has regular established place of business. Presumably, they’re doing business in that State by doing the act of infringement.

        MR. JAY: But the –for an individual defendant, Justice Sotomayor, the definition isn’t based on personal jurisdiction. It’s based on their domicile.

      2. Also, if the general venue statute does not apply, there remains the issue of what is the proper venue of LLCs — something the courts never decided. It is, however, addressed in the current venue statute’s definitions of residence.

        The convo above continued:

        MR. JAY: Well, but I can tell you, for example, that, you know, my friend Mr. Dabney says that this –the problems we’ve raised are hypothetical problems. This Court has six patent cases this term. Four of them have LLC defendants in them. And we think that understanding where an LLC resides is actually a very important point. LLCs were basically a business entity that came into existence in about 1979 and really have only taken off in the last 20 years. Applying the 1897 definition of “inhabitant” carried forward into 1400(b) without this definition doesn’t give you that
        answer. And we know that because -CHIEF
        JUSTICE ROBERTS: I thought –I thought you responded to Justice Breyer by saying that is an issue that could be dealt with on remand -MR.
        JAY: No, Your Honor. What -CHIEF
        JUSTICE ROBERTS: –the difficulty of determining where an LLC is located.
        MR. JAY: No, Your Honor. What I said both to Your Honor and to Justice Breyer is that it informs our statutory answer. In other words, this difficulty is the reason why you should adopt our reading of the statute and not the other side’s. As for if you adopt the other side’s -CHIEF
        JUSTICE ROBERTS: It’s a difficulty -again, it’s a difficulty you didn’t point out to us at the jurisdictional stage.
        MR. JAY: I think there are –the reasons to adopt our statutory interpretation are many: The text, the legislative history, and the structural considerations. And I think that they are all fair game here on the merits. We’re not –we’re not urging you to dismiss the case as improvidently granted, but I think that the practical difficulties with the other side’s statutory interpretation, we’re not required to raise all of those in a brief in opposition in order for you to consider why you should adopt our reading on the merits.

      3. Aside: I did a websearch for opinions on justia.com containing the phrase “those who find legislative history useful”. It seems to be a stock phrase used in a number of Justice Breyer’s opinions. In addition to Kirtsaing, the search locates this phrase in Hoffman-La Roche v. Empagran and United States v. Tinklenberg. Of course, in writing for the Court, Breyer has taken account of the fact that not all his colleagues find legislative history “useful”.

    2. Regarding the video, I made a bookmark, and have now located it. Title: Trolls and Tech: How to fix Patents. Here is the URL:

      link to ces-innovation-policy.yourbrandlive.com

      Darrell Issa starts talking at around 45:45. There is a mention of TC Heartland v. Kraft around 47:26. His conversation with Chief Justice Roberts comes just after 52:30.

      1. Thanks. It was interesting to hear Issa on Trolls. Included IBM whose pile of patents was so large that they controlled technology, and could impose licenses by the shear size of the pile.

  3. “Last week’s oral arguments in TC Heartland LLC v. Kraft Foods (SCT 16-341) went well for the petitioner”

    Adamantly disagree. If anything, it went better for Respondent than Petitioner.

    The first thing is, the Judges seem to be obsessed with an issue that none of the parties or amici are overly concerned about: what to do with unincorporated associations.

    Ginsberg of all people seems concerned with the notion that, by statute, venue is proper only in the state of incorporation, and not PPB:

    “JUSTICE GINSBURG: Is there any other provision, venue provision in which a venue for a corporation is only the place of incorporation?

    JUSTICE GINSBURG: Well, don’t you suppose –even for diversity purposes, a corporation is –is diverse based on not simply its place of incorporation, but its principal place of business. Principal place of business counts. It doesn’t count under 1400.”

    You’ve got Breyer wondering why the parties and amici are so hyperfocused on EDTEX, and from him and other justices, it seems the public policy arguments fell flat.

    CJ Roberts did go on about precedent, but honestly, do we really think Kagan and Sotomayor are for affirmance and Roberts is for reversal? Unlikely. It’s more likely that the Justices most for a side, heavily questioned that side. CJ Roberts is exactly the type to start with statutory text and when the language is unambiguous, the inquiry ends there.

    “Our precedents make clear that the
    starting point for our analysis is the statutory text.”
    Desert Palace, Inc. v. Costa, 530 U.S. 90, 98 (2003)
    (citing Connecticut Nat’l Bank v. Germain, 503 U.S.
    249, 253-254 (1992)). “And where, as here, the
    words of statute are unambiguous, the ‘judicial
    inquiry is complete.’” Desert Palace, 530 U.S. at
    98 (quoting Rubin v. United States, 449 U.S. 424,
    430 (1981)).”

    If anything, I suspect you have Roberts, Alito, and Thomas on the side of affirmance based on statutory text of 1391(c) and 1400(b), Kagan, Sotomayor and Ginsberg for reversal, with Kennedy and Breyer being swing votes.

    This could easily go 4-4, 5-3 affirmance if Ginsberg is legitimately concerned about the notion that TC Heartland is advancing that under the first clause of 1400(b), you can only sue a defendant for patent infringement in the state of incorporation, and not where the PPB is.

  4. 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 in contrast to their (perhaps feigned) disinterest in the policy situation, although at one point Roberts referred to 25% of patent cases being in a single district, so he may be somewhat more alarmed if it’s pointed out in conference that a single judge has just about one-third of all US cases right now.

    That can’t be what Congress intended either.

    1. Martin, the problem with ED Tex is caused by an overly liberal and wrong Federal Circuit view on personal jurisdiction.

      As to generally liberalizing venue, yes, Congress intended that.

      And if TC H prevails, there will be no venue in the US for many aliens because they could then only be sued where they had a regular and established business. That is complete nonsense. Congress never intended that and could not have ever intended that the revision to the definition of “reside” would not have the universal effect it declared it had.

      1. Ned, I think aliens could be sued where the infringing acts occurred because clearly the statues alone or in combination could not mean that aliens can infringe with impunity.

        1. Martin, did you actually read the current statute appended to the reply brief of Kraft.

          Regardless, the only way aliens can now be sued for patent infringement in the US is if they have a regular and established place of business in the US and there infringe.

          That is nonsense.

    2. Dabney was an impressive strategist IMO

      That’s telling, as not one of his positions emerged unscathed.

      1. 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.

            1. It’s amusing that “anon” still bothers at this point. Nobody ever cared what he thought about anything and that was before the life tech beatdown.

  5. Saying “Last week’s oral arguments in TC Heartland LLC v. Kraft Foods (SCT 16-341) went well for the petitioner.” says more about the person saying it than it actually says about the transcript.

  6. For a differing reading of the oral argument tea leaves see:
    Ronald Mann, Argument analysis: Justices hear horror stories about venue for patent litigation, SCOTUSBLOG (Mar. 29, 2017, 7:48 AM), link to scotusblog.com
    [But even that observer seems to expect a delay in getting to an agreed decision here, and no observer seems to be projecting another obvious slam dunk unanimous reversal of the Fed. Cir.]

    1. Thanks – Mann seems more at home here (as compared to copyright) with what amounts to a civil procedure question.

    2. Agreed. The problem with the post is that the poster did not discuss Kraft’s very persuasive briefs. To a jury that has heard only one side of a story, the verdict seems foreordained.

      For example:

      “Jay: Now, my friends on the other side say, essentially, aliens can be sued in any district. And that’s what the prior statute said. But that’s not what
      Congress wanted the law to be anymore. Congress wanted the law to be that a defendant that does not reside in the United States may be sued in any district.

      How do you decide if a defendant resides in the United States? You apply (c)(1) and (c)(2). All those definitions tie together. And I think that if —
      if Congress had wanted to dispense with — dispense with Brunette for patent cases and creates, you know, an entirely different rule just for patent cases, I think there, it would have said so. But instead, it wanted to adopt a cross-cutting definition. ”

      This point is critical to understand, because the patent venue statute uses the term “reside” but does not define it. If Congress cannot define reside elsewhere, but only in amending 1400(b), then reside in 1400(b) means only “inhabitant,” and that mean only where a corporation is incorporated.

      The argument that Congress did define reside and resident globally is overwhelming.

      Jay estimated that if the Court would rule for TC Heartland that many if not most patent cases would have improper venue and would have to be transferred, e.g., to Delaware. Many foreign companies could not be sued at all for lack of venue, which flips the longstanding rule that they can be sued anywhere on its head. Pharma made the point that Hatch-Waxman cases would have to be filed hither and yon because of venue and could not be consolidated in one court.

      Congress simply could not have intended this.

      The patent venue statute originally expanded venue for patent cases beyond their places of incorporation. Congress, in expanding venue for corporations by defining residence for venue purposes and commanding that it be for all venue purposes, clearly intended to include 1400(b). This is how I think the court will come out in the end.

  7. venue protections that Congress provided in 28 U.S.C. 1400(b)

    The keyword here is protections. At the time of enactment of 1400(b), congress expanded patent venue.

    In a later case, the Supreme Court emphasized that the patent venue statute did not narrow broader venue. If you want, I will give you an exact quote.

    Thus, the statement by the attorney here is a boldface lie and not legitimate argument.

    1. “Venue in a federal-question case was at that time proper only where the defendant was an inhabitant, 24 Stat. 552 (1887), as corrected, 25 Stat. 434 (1888). Thus, the new statute gave patent claimants an advantage by authorizing as an additional venue alternative any district where the defendant maintained a regular place of business, and committed acts of infringement. ”

      Footnote 13 from Brunette Machine Works, Ltd. v. Kockum Industries, Inc., 406 US 706 – Supreme Court 1972

      link to scholar.google.com

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