A much-anticipated decision from the U.S. Supreme Court has scaled back the ability of patent plaintiffs to choose the forum in which they file suit. By limiting a practice that many defendants consider to be forum shopping by patent plaintiffs, the Court’s decision may shift the geography of patent infringement lawsuits from the East Texas heartland to the coasts.
In TC Heartland LLC v. Kraft Foods Group Brands LLC, the Court considered the patent venue statute, 28 U.S.C. § 1400(b), which states: “Any 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.” The Court held that a patent infringement defendant “resides” only in its state of incorporation, and that “residence” does not include states where the defendant merely conducts business.
In the case, the defendant was organized under Indiana law and headquartered in Indiana. The plaintiff filed suit in Delaware, into which the defendant shipped product but otherwise had no physical or legal presence. The defendant argued that venue in Delaware was improper under the patent venue statute.
The Court agreed with the defendant. Focusing on the meaning of the phrase “where the defendant resides,” the Court held that the term “residence” means only an entity’s state of incorporation, and the term does not include states where an entity merely does business.
The case may deal a blow to the Eastern District of Texas, which has served as the epicenter of patent patent infringement litigation in recent years. However, the Court did not negate the second half of the patent venue clause, which also supports venue “where the defendant has committed acts of infringement and has a regular and established place of business.” Texas ranks second in a list of states where the most Fortune 500 companies are headquartered. Thus, at least some new cases that previously would have gone to the Eastern District of Texas may now shift to other Texas district courts such as the Northern District of Texas (in which Dallas is located) or the Western District of Texas (in which Austin is located).
It is even more likely that new patent filings will spread out to other venues such as the District of Delaware (where more than 2/3 of the Fortune 500, and more than 1 million companies in total, are incorporated) ; the Northern District of California (home to the tech giants of Silicon Valley); or the Southern District of New York (where more Fortune 500 companies are headquartered than in any other state).
The new decision also will make it harder for patent plaintiffs to sue multiple defendants in a single case. If the accused infringers are organized in different states and have different corporate office locations, the patent holder may need to file multiple suits in multiple states.
[Image credit: Bram Janssens]