Federal Circuit Further Clarifies Patent Venue in Three Decisions

Patent litigation can be very burdensome for companies big and small − and a major issue in these cases is where the case will be litigated.

Last year, in T.C. Heartland LLC v. Kraft Foods Group Brands LLC, 137 S.Ct. 1514 (2017), the Supreme Court overturned 20 years of Federal Circuit precedent, narrowing the legal construction of part of the patent-venue statute, 28 U.S.C. § 1400(b). But that decision left open a number of issues.

This past month, the Federal Circuit issued three opinions resolving open issues in determining venue: (1) the patent-venue statute does not apply to foreign corporations; they may be sued anywhere in the United States; (2) the burden of showing venue is proper is on the plaintiff; and (3) in a multi-district state, venue is proper in only one district, generally where the defendant has its headquarters.

Taken together, for domestic corporations, the available districts to be sued have been further narrowed. As we pointed out in a prior post concerning patent venue, this can shift the negotiating leverage towards parties accused of infringement (putative defendants), since would-be plaintiffs now have less options of where to sue.

An important part of litigation, especially patent litigation, is where the case is litigated. Apart from the inconveniences of defending suit in a distant forum, it is no secret that certain districts are more favorable to plaintiffs or defendants. Not surprisingly, “patent trolls” have tried to bring their cases in districts they consider favorable to them.

Where a patent case can be brought is governed by the patent-venue statute in 28 U.S.C. § 1400(b). Last month, the Federal Circuit issued three opinions interpreting that statute. These decisions are in the aftermath of the Supreme Court’s decision in TC Heartland, which left open a number of issues in determining venue. The Federal Circuit’s three decisions have now clarified these points.

The patent-venue statute allows infringement claims to be brought either “where the defendant resides” or “where the defendant has committed acts of infringement and has a regular and established place of business.” 28 U.S.C. § 1400(b). TC Heartland limited the first option to a corporation’s state of incorporation.

Patent owners then turned to the second prong of the patent-venue statute. In September 2017, the Federal Circuit construed that provision in In re Cray. According to Cray, the statute requires:

  • A physical location in the district – a physical, geographic location where the defendant conducts business in the district.

  • The presence must be regular and established – meaning there is some steady, permanent business presence in the district.

  • The place must be that of the defendant – not merely employee homes, or independent contractors (or as one later case held, wholly owned subsidiaries).

  • Patent infringement must have allegedly taken place there.

In re ZTE (USA) Inc. involved a patent claim where the patent owner relied on the second prong, “where the defendant has committed acts of infringement and has a regular and established place of business.” The issue was which party has the burden of proof to establish the requirements under that prone as interpreted by Cray. The Federal Circuit held that once a defendant challenges venue, the plaintiff bears the burden of showing that venue is proper. There is currently a Circuit split with regards to the general venue statute, 28 U.S.C. 1391, about who has the burden of persuasion on the issue of venue.

But, since there is a special patent-venue statute, the Federal Circuit determined that it was not required to apply regional circuit law. Instead, it construed that patent-venue statute to place the burden of persuasion on the plaintiff.

In re Big Commerce Inc. dealt with the first prong of the patent-venue statute, “where the defendant resides.” As noted, TC Heartland held that means, for a corporate defendant, the state of incorporation. But what happens if the state of incorporation has multiple districts, as do Texas, New York, and California, among others? Some courts (including the Eastern District of Texas, where that case was brought, and a favorite of patent trolls), that any district was proper. That meant that a Texas corporation could be sued anywhere in Texas.

The Federal Circuit rejected that construction. Rather, it held that venue is only proper under the “resides” part of the patent-venue statute only where the defendant corporation has its principal place of business, or if not, where its corporate agent is located. Thus, a Texas corporation having its headquarters in one Texas district could only be sued there, not in the other three Texas districts.

In re HTC Corp. determined that the patent-venue statute does not apply to foreign corporations. The traditional rule is that alien defendants may be sued anywhere in the United States, so long as they have sufficient contacts to sustain personal jurisdiction. The Federal Circuit held that this rule remains as to patent cases. It rejected arguments that Congress altered this rule when it amended the statute as part of the America Invents Act of 2011. Those amendments only related to aliens who are permanent residents of the United States, not to foreign aliens, including foreign corporations.

Taken together, for domestic corporations, the available districts to be sued have been further narrowed. As we pointed out in a prior post concerning patent venue, this can shift the negotiating leverage towards parties accused of infringement (putative defendants), since would-be plaintiffs now have less options of where to sue.