An 8-0 Decision by the U.S. Supreme Court in TC Heartland v. Kraft Foods Limits Venue Shopping in Patent Suits

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Today, May 22, 2017, in the TC Heartland v. Kraft Foods opinion written by Justice Clarence Thomas, the U.S. Supreme Court held that the proper venue for a patent infringement lawsuit is (1) the state of incorporation for the defendant, or (2) a district where the defendant has committed acts of infringement and has a regular and established place of business. The Court held that for purposes of the patent venue statute, 28 U.S.C. §1400(b), a domestic corporation “resides” only in its State of incorporation, rejecting the argument that §1400(b) incorporates the broader definition of corporate “residence” contained in the general venue statute, 28 U.S.C. §1391(c).

The TC Heartland ruling will limit the ability of patent owners to venue shop and bring cases in what are perceived as patent-friendly jurisdictions like the Eastern District of Texas. For example, the May 2016 PricewaterhouseCoopers Patent Litigation Study, indicates that plaintiffs had a higher percentage of success in the Eastern District of Texas (54%) compared to other venues (e.g., District of Delaware – 40%). These perceptions helped drive patent infringement lawsuit filings: in 2016 more than 1,600 new patent cases were filed in the Eastern District of Texas. The next busiest district, the District of Delaware, had less than 500 new patent cases filed.

After TC Heartland, several districts should see an uptick in new patent infringement suits: (1) the District of Delaware because many technology companies, including those related to social media and the internet, incorporate in Delaware; and (2) other districts where technology companies have an established place of business, e.g., the Northern, Central and Southern districts of California, and the Northern and Western districts of Texas. And for cases pending in the Eastern District of Texas, expect to see a flood of motions to dismiss or transfer brought under 28 U.S.C. § 1406 in the weeks ahead. (A more detailed exploration of this topic is available here by Professor Paul M. Janicke of the University of Houston Law Center.)