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24 April 2017
On March 27 2017 the Supreme Court heard oral argument in TC Heartland LLC v Kraft Food Brands Group LLC. The case concerns whether part of the general venue statute 28 USC Section 1391, which allows a corporation to be sued in multiple districts, applies to the patent venue statute 28 USC Section 1400(b). If the Supreme Court rules in TC Heartland's favour, the venue in patent cases could potentially be limited to those districts where the defendant is incorporated or has a regular and established place of business.
Section 1400(b) states that civil actions 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". In 1957 the Supreme Court in Fourco held that 'resides' in Section 1400(b) is limited to the defendant's state of incorporation. However, in 1990 the Federal Circuit in VE Holding held that 'resides', as defined by Section 1391(c), means any district where the defendant is amenable to jurisdiction.
Petitioner TC Heartland was an unincorporated entity headquartered in Indiana and organised under the laws of Indiana. Respondent Kraft Food Brands Group had a principal place of business in Illinois and was organised under the laws of Delaware. Heartland shipped liquid water-enhancing products to Delaware. Kraft sued Heartland in the District of Delaware, alleging that these products infringed its patents.
Heartland moved to dismiss, arguing that:
The Delaware district court followed the Federal Circuit's VE Holding precedent to find that Heartland was subject to venue in Delaware.
Heartland appealed to the Federal Circuit for a writ of mandamus to either dismiss or transfer the suit filed by Kraft. Among other things, Heartland argued that Congress's 2011 amendments to Section 1391 codified the Supreme Court's Fourco precedent and limited the 'resides' language in Section 1400(b) to the state in which the defendant is incorporated. The Federal Circuit rejected that argument, holding that Congress's amendments to Section 1391 following Fourco superseded rather than codified the Fourco precedent. Heartland then appealed the Federal Circuit's decision to the Supreme Court.
On December 14 2016 the Supreme Court granted certiorari.
At the March 27 2017 oral argument, James B Dabney spoke for Heartland and William M Jay spoke for Kraft.
Justices Sotomayor and Ginsburg questioned Dabney about the precedential value of Fourco and sought clarity on how this decision was affected by the court's subsequent rulings on the broad applicability of the general venue statute and by Congress's 1988 and 2011 amendments to Section 1391. Dabney argued that the court's subsequent decisions were consistent with Fourco and maintained that Congress's 2011 amendment to Section 1391 simply codified Fourco. Justice Kagan seemed unconvinced by Dabney's second point, noting that "for 30 years, the Federal Circuit has been ignoring our [Fourco] decision and the law has effectively been otherwise".
Ginsburg questioned Dabney on whether Congress intended to limit venue in patent actions to a single location – the defendant's state of incorporation – when venue in other types of suit did not appear to be so limited. Dabney noted that Section 1400(b) is not limited to where an entity is incorporated, but also covers where the entity has committed acts of infringement and has a regular and established place of business. However, Dabney maintained that Section 1400(b), as interpreted in Fourco, limited venue in patent suits to a corporation's "domicile, and there can only be one of those".
During Heartland's portion of the oral argument, Justice Breyer made note of the fact that Heartland itself was not a corporation and suggested that the court could pursue a narrower path to disposing of the case than adopting either party's position: the court could simply rule that its Fourco precedent did not apply to an unincorporated entity like Heartland.
In Kraft's portion of the oral argument, Chief Justice Roberts and Breyer sought clarity from Jay on why Fourco was not controlling law, noting that the current version of the general venue statute – Section 1391 – begins with the preamble "[e]xcept as otherwise provided by law". Jay argued that Fourco interpreted an older version of Section 1400(b) and was no longer applicable in view of the intervening changes to Section 1391. As for the 'except' language in Section 1391, Jay noted that similar language had appeared in previous venue statutes and that the current 'except' language was not intended to overrule VE Holding. Roberts pushed back, asserting that he suspected "it wasn't intended to overrule Fourco either". Breyer indicated his belief that the 'except' language should apply to every part of Section 1391, including Section 1391(c).
Sotomayor, Ginsburg and Breyer also questioned Jay on whether Kraft's interpretation of Section 1391 rendered superfluous the venue limitations of Section 1400(b). Jay argued that, under Kraft's interpretation, Section 1391(c) defined where a corporation or business entity 'resides' under Section 1400, but that the remainder of Section 1400 ("or where the defendant has committed acts of infringement and has a regular and established place of business") did the work of identifying venue for an individual defendant. Jay argued that Kraft's interpretation would harmonise the venue inquiry for patent infringement cases with the venue inquiry for declaratory judgment patent actions and simplify the venue inquiry in cases where there are multiple diverse defendants, such as pharmaceutical patent cases.
In their questions to Jay, Breyer and Roberts returned to the matter of whether the issue was properly before the court, again noting that Heartland was an unincorporated entity and "Fourco doesn't apply really to unincorporated associations". At first, Jay seemed to suggest that Kraft would be comfortable if the court disposed of the case on those grounds, but later asked for a definitive ruling on whether Section 1391(c) applied to Section 1400(b).
The court questioned both parties briefly about the forum shopping concerns discussed by the amici. Dabney noted that the existing venue law had led to a concentration and overcrowding of patent cases in a few courts. Jay countered that forum shopping concerns are not unique to patent law. He also suggested that forum shopping concerns could be better addressed by a more nuanced solution from Congress, noting that "in this case... you only have two choices".
Although it is difficult to predict how the court will decide this case, the decision may not even address the merits as Roberts and Breyer questioned whether the issue was properly before the court. However, if the case is decided on the merits, the decision could have far-reaching effects on where patent infringement suits are filed.
For further information on this topic please contact Christopher Loh or Giancarlo L Scaccia at Fitzpatrick, Cella, Harper & Scinto by telephone (+1 212 218 2100) or email (firstname.lastname@example.org or email@example.com). The Fitzpatrick, Cella, Harper & Scinto website can be accessed at www.fitzpatrickcella.com.
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Giancarlo L Scaccia