Supreme Court Limits Where Patent Lawsuits May Be Filed
On May 22, 2017 the United States Supreme Court in TC Heartland LLC v. Kraft Foods Group Brands LLC held that a domestic corporation resides only in its state of incorporation for purposes of the patent venue statute, i.e., 28 U.S.C. § 1400(b). This decision may have a significant negative impact on “forum shopping” and the actions of “patent trolls” – individuals or entities that acquire patents solely for the purpose of initiating lawsuits and demanding damages, not to practice the disclosed invention. Patent holders will no longer be able to bring suit in distant jurisdictions, perceived to be favorable to them, against businesses that operate nationwide in an effort to extract monetary settlements or favorable results.
Kraft Foods Group Brands LLC sued Heartland LLC for patent infringement in the District of Delaware. Although Heartland had shipped some of the accused products to Delaware, it is incorporated in Indiana. Heartland argued that Delaware was an improper venue for the case citing the Supreme Court’s decision in Fourco Glass Co. v. Transmirra Products Corp., 353 U.S. 222 (1957). In Fourco, “resides” under 28 U.S.C. § 1400(b) was limited to the state of incorporation. The District Court denied Heartland’s motion to dismiss. The Federal Circuit affirmed.
The Supreme Court reversed and remanded for further proceedings holding that § 1400(b) refers only to the state of incorporation. Significantly, the Court noted that in Fourco it had rejected the argument that the definition of “residency” in 28 U.S.C. § 1391(c), the general venue statute, was controlling over the term “resides” in § 1400(b), the patent venue statute. The Court further rejected Federal Circuit’s holdings that amendments to § 1391(c) redefined the meaning of “resides” in § 1400(b).