Patent Venue Battle Continues – Steps Leading Up to TC Heartland

June 2017 | Posted in Forensic Litigation & Valuation
Forensic Litigation & Valuation
Patent Venue Battle Continues – Steps Leading Up to TC Heartland

Under the patent venue statute which was codified by Congress in 1948, 28 U.S.C. §1400(b), “[a]ny civil action for patent infringement may be brought in [1] the judicial district where the defendant resides, or [2] where the defendant has committed acts of infringement and has a regular and established place of business.”

For nearly 70 years, courts have attempted to define the term “resides”, which was not specifically defined under §1400(b).  However, in the 1948 codification of 28 U.S.C. §1391(c) corporate “residence” was defined as “any judicial district in which it is incorporated or licensed to do business or is doing business.”  In 1957 the Supreme Court held in Fourco Glass Co. v. Transmirra Products Corp. that the definition of corporate residence in §1391(c) did not apply to §1400(b) and clarified that a corporation is deemed to “reside” only in its state of incorporation.   The Supreme Court’s ruling in Fourco controlled patent venue from 1957 to 1988, when Congress amended the text of §1391(c).

In Fourco, the Supreme Court did not find any indication that the corporate residence definition in §1391(c) should apply to §1400(b).  However, in 1988 Congress amended the definition of corporate residence in §1391(c) adding “for purposes of venue under this chapter”.  The reference to “this chapter” is to chapter 87, which includes both §§ 1391 and 1400 and leads to an interpretation that the definition of corporate residence under § 1391(c) was to apply to §1400(b).  The  Federal Circuit adopted this interpretation in 1990 when it held in VE Holding Corp v. Johnson Gas Appliance Co. that the definition of corporate residence in §1391(c), as amended, applied to the patent venue statute.  As a result, for the past 17 years, patent venue has been decided based on the 1988 amended text of §1391(c), which reads:  “…a defendant that is a corporation shall be deemed to reside in any judicial district in which it is subject to personal jurisdiction at the time the action is commenced.”  This meant that patent infringement lawsuits could be brought in any judicial district where a defendant’s products were sold.

So what caused the Supreme Court’s most recent review of patent venue in TC Heartland?  In 2011, Congress again amended §1391 through the Federal Courts Jurisdiction and Venue Clarification Act of 2011 removing “for purposes of venue under this chapter” and providing an “except as otherwise provided by law” clause.  This amendment opened the door for arguments on a previously settled issue: Whether the definition of “corporate residence” in §1391(c) applies to §1400(b).

On May 22, 2017, the Supreme Court decided in TC Heartland that the definition of corporate residence in §1391(c) does not apply to §1400(b), citing its holding in Fourco that a corporation is deemed to reside in its state of incorporation.  However, as noted above, §1400(b) provides two options for patent venue: (1) defendant’s state of corporation or (2) where defendant has infringed and has a regular and established place of business.

While the Supreme Court’s decision in TC Heartland limits patent venue to the defendant’s state of incorporation, plaintiffs will likely consider establishing venue through the second option available under §1400(b), which will undoubtedly give rise to the next issue:  What constitutes a “regular and established place of business”.

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