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.