Supreme Court Limits Preferred Venue for Patent Litigation

May 2017

The possibility of being sued for patent infringement has been a concern largely because of the risk of having to litigate out of town from the defendant's headquarters and places of business, and often in remote districts like Marshall, Texas. That risk of increased expense and inconvenience was significantly lessened by the U.S. Supreme Court's ruling today, May 22, 2017, in TC Heartland LLC v. Kraft Food Brands Group LLC. In an 8-0 decision (in which Justice Neil Gorsuch did not participate), the Court ruled that patent owners must file infringement lawsuits where the defendant “resides,” which essentially is limited to the defendant’s state of incorporation. This ruling upends nearly 30 years of practice following the 1990 Federal Circuit ruling of VE Holding Corp. v. Johnson Gas Appliance Co., and it reinstates the more-restrictive standard from the 1957 decision in Fourco Glass Co. v. Transmirra Products Corp.

This ruling will likely curb the concentration of patent infringement litigation in a handful of perceived plaintiff-friendly federal courts. The patent venue statute, 28 U.S.C. § 1400(b), provides that “[a]ny civil action for patent infringement may be brought in the judicial district where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business.” As held in the opinion authored by Justice Clarence Thomas, “…a domestic corporation ‘resides’ only in its state of incorporation for purposes of the patent venue statute…” The Supreme Court had ruled in Fourco Glass Co. that § 1400(b) is the exclusive authority for venue in patent infringement actions, and was not to be supplemented by § 1391(c).

Lewis Rice covered this case in March of 2017, shortly before oral argument. Our prior alert noted that the Eastern District of Texas has been described as the “patent litigation capital of America” because over 40% of all U.S. patent cases are filed there despite few defendants' being located there.

The ruling is expected to result in patent infringement cases' shifting back to Delaware, which is the former hub of patent litigation prior to VE Holding Corp. and the place of incorporation of over a million businesses, over 50 percent of publicly traded U.S. companies and 60 percent of Fortune 500 companies. The implications of this matter for limited liability companies, foreign companies, and pending lawsuits are to be determined. Moreover, the final word might still come from Congress.

The attorneys at Lewis Rice have extensive experience in developing and protecting intellectual property rights, as well as in defending against claims of infringement. If you require assistance with your intellectual property portfolio or with limiting your risk of infringement, please call one of our intellectual property attorneys.