On March 27, 2017, the Supreme Court of the United States heard oral argument in TC Heartland LLC v. Kraft Food Brands Group LLC. This case concerns whether part of the general venue statute, 28 U.S.C. 1391 (“§ 1391”), which allows a corporation to be sued in multiple districts, applies to the patent venue statute, 28 U.S.C § 1400(b) (“§ 1400”). If the Supreme Court rules in TC Heartland’s favor, venue in patent cases potentially could be limited to those districts where the defendant is incorporated or has a regular and established place of business.
Background
§ 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 § 1400(b) is limited to the defendant’s state of incorporation. But in 1990, the Federal Circuit in VE Holding held that “resides,” as defined by § 1391(c), means any district where the defendant is amenable to jurisdiction.
Petitioner Heartland is an unincorporated entity headquartered in Indiana and organized under the laws of Indiana. Respondent Kraft has a principal place of business in Illinois and is organized 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 Heartland is not registered to do business in Delaware, has no local presence in Delaware, and does not solicit business in Delaware. 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 § 1391 codified the Supreme Court’s Fourco precedent and limited the “resides” language in § 1400(b) to the state in which the defendant is incorporated. The Federal Circuit rejected that argument, holding that Congress’s amendments to § 1391 following Fourco superseded—rather than codified—the Fourco precedent.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.
The Oral Argument
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 Mr. Dabney about the precedential value of the Fourco decision, and sought clarity on how Fourco was affected by the Court’s subsequent rulings on the broad applicability of the general venue statute and by Congress’ 1988 and 2011 amendments to § 1391. Mr. Dabney argued that the Court’s subsequent decisions were consistent with the Fourco decision, and maintained that Congress’s 2011 amendment to § 1391 simply codified. Justice Kagan seemed unconvinced by Mr. 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.”
Justice Ginsburg questioned Mr. 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 suits did not appear to be so limited. Mr. Dabney noted that § 1400(b) is not limited to where an entity is incorporated, but also where the entity has committed acts of infringement and has a regular and established place of business. However, Mr. Dabney maintained that § 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 is 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 doesn’t apply to an unincorporated entity like Heartland.
In Kraft’s portion of the oral argument, Chief Justice Roberts and Justice Breyer sought clarity from Mr. Jay on why the Fourco decision was not controlling law, noting that the current version of the general venue statute, § 1391, begins with the preamble “[e]xcept as otherwise provided by law.” Mr. Jay argued Fourco interpreted an older version of § 1400(b) and was no longer applicable in view of the intervening changes to § 1391. As for the “except” language in § 1391, Mr. Jay noted that similar language had appeared in prior venue statutes, and that the current “except” language was not intended to overrule VE Holding. Justice Roberts pushed back, asserting “I suspect it wasn’t intended to overrule Fourco either.” And Justice Breyer indicated his belief that the “except” language should apply to all sections of § 1391—including § 1391(c).
Justices Sotomayor, Ginsburg and Breyer also questioned Mr. Jay on whether Kraft’s interpretation of § 1391 rendered superfluous the venue limitations of § 1400(b). Mr. Jay argued that, under Kraft’s interpretation, § 1391(c) did the work of defining where a corporation or business entity “resides” under § 1400, but that the remainder of § 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. The language in Section 1400(b) fills a gap for individual defendants that have a foreign residence, but otherwise commit acts of infringement in the judicial district it regularly conducts business. Mr. Jay argued that Kraft’s interpretation would harmonize the venue inquiry for patent infringement cases with the venue inquiry for declaratory judgment patent actions, and also simplify the venue inquiry in cases where there are multiple diverse defendants, such as pharmaceutical patent cases.
In their questions to Mr. Jay, Justice Breyer and Chief Justice Roberts returned to the matter of whether the issue was properly before the Court, again noting that Heartland is an unincorporated entity and “Fourco doesn’t apply really to unincorporated associations.” At first, Mr. Jay seemed to suggest that Kraft would be comfortable if the Court disposed of the case on those grounds, but later asked the Court for a definitive ruling on whether § 1391(c) applied to § 1400(b).
The Justices questioned both parties briefly about the forum-shopping concerns discussed by the amici. Mr. Dabney noted that the current venue law had led to a concentration and overcrowding of patent cases in a few courts. Mr. 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.”
Conclusion
Although it is difficult to predict how the Court will decide this case, it is possible that the Court’s decision may not even address the merits, as Justices Roberts and Breyer questioned whether the issue was properly before the Court. If the case is decided on the merits, however, the decision could have far-reaching effects on where patent infringement suits are filed.