The Federal Circuit Resolves Uncertainties of Venue Selection in Patent Cases

Sung-Hoon Kim | May 6, 2016

In Re: TC Heartland LLC

April 29, 2016

Before: Moore, Linn, and Wallach.  Opinion by Moore.

Summary:

The Federal Circuit denied a petition for a writ of mandamus by TC Heartland LLC (“Heartland”) after the U.S. District Court for the District of Delaware denied its motions to dismiss the complaint for lack of personal jurisdiction and transfer venue.  The Federal Circuit held that Congress’ 2011 amendments to 28 U.S.C. §1391 did not overruled the VE Holding Corp. and actually broadened the applicability of the definition of corporate residence.  Therefore, at least for now, the status quo remains in place with regard to venue in patent cases.

본 사건은 Heartland사가 연방항소법원에 Kraft사를 상대로 직무집행영장소송 (Writ of Mandamus)을 제기한 건으로, 연방항소법원은 기존의 특허 소송 재판지 (venue) 관련 판례를 뒤집지 않고 Heartland의 청원을 기각한다.  당분간 특허 소송 재판지에 관한 논란은 줄어들 것으로 예상된다.  하지만 특허소송 재판지는 특허 소송에 큰 영향을 미치므로 앞으로 의회 및 대법원의 대응을 주목할 필요가 있다.

Details:

Statutes and Case Law re: Patent Venue

28 U.S.C. §1400(b): a patent infringement action “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.”

28 U.S.C. §1391(c): “For purposes of venue under this chapter, a defendant that is a corporation shall be deemed to reside in any judicial district in which it is subject to personal jurisdiction.” (Congressional amendment in 1988)

The VE Holding Corp. case: the Federal Circuit held that the new definition of corporate residence in §1391(c) applies to all venue statutes, including §1400(b) (patent case may be brought in any venue where the court has personal jurisdiction over a defendant, not limited to the specific venue set forth in §1400(b)).

Background

Heartland is a company in Indiana, and Kraft is a company in Illinois.  Kraft sued Heartland in the U.S. District Court for the District of Delaware for infringing Kraft’s three patents.  Heartland moved to dismiss the complaint under FRCP 12(b)(2) for lack of personal jurisdiction and dismiss the action or transfer venue to the Southern District of Indiana.

Heartland argued that it is “not registered to do business in DE, has no local presence in DE, has not entered into any supply contracts in DE or called on any accounts there to solicit sales.”  However, Heartland admitted that it ships orders of the accused products into DE.

District Court

The District Court denied Heartland’s motions.  The District Court held that it had specific personal jurisdiction over Heartland for claims involving the accused products by citing the Beverly Hills case (Beverly Hills Fan Co. v. Royal Sovereign Corp., 21 F.3d 1558, 1571 (Fed. Cir. 1994)), and rejected Heartland’s arguments by holding that Congress’ 2011 amendments to 28 U.S.C. §1391 did not change the holding in the VE Holding Corp. case (VE Holding Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574 (Fed. Cir. 1990)).

Federal Circuit

Heartland petitioned for a writ of mandamus in the Federal Circuit.

The Cheney test: the below conditions should be satisfied before issuing the writ

  • The petitioner must have no other adequate means to attain the relief he desires;
  • The petitioner has the burden to show his right to mandamus is “clear and indisputable”; and
  • The issuing court must be satisfied that the writ is appropriate under the circumstances.

(Cheney v. U.S. Dist. Court for the Dist. Of Columbia, 542 U.S. 367, 380 (2004))

Only the second part in the Cheney test was discussed in this case.  Heartland argued that it does not reside in DE for venue purposes according to 28 U.S.C. §1400(b), and that the DE district court lacks specific personal jurisdiction over it.

First, the Federal Circuit emphasized that the arguments regarding venue have been resolved in the VE Holding Corp. case for over 25 years, and that the arguments regarding personal jurisdiction have been resolved in the Beverly Hills case over 20 years.

Second, the Federal Circuit did not agree with Heartland’s arguments that Congress’ 2011 amendments to 28 U.S.C. §1391 overruled the VE Holding Corp. case because the 2011 amendments[1] to §1391 was minor, and the amendments actually broadened the applicability of the definition of corporate residence.

Third, the Federal Circuit did not agree (“utterly without merit or logic”) with Heartland’s arguments that §1400(b) and §1391(c) should not be read together by citing the U.S. Supreme Court’s decision in Fourco Glass Co. v. Transmirra Products Corp. (353 U.S. 222 (1957))[2] because the Federal Circuit held in the VE Holding Corp. case that Congress’ 1988 amendments made the Fourco case no longer the law.

Finally, the Federal Circuit did not agree with Heartland’s argument regarding personal jurisdiction.  The Federal Circuit cited the Beverly Hills case to hold that since Heartland shipped orders of the accused products directly to DE, this shipment satisfied the minimum contact required for a due process requirement in the Beverly Hills case.

Takeaway:

  • This case resolves the uncertainties of venue selection in patent cases at least for now.
  • The ED of TX and ND of CA will continue to be popular venues for patent cases.
  • However, it is likely that Heartland might pursue en banc review and a Supreme Court review in the future.
  • In addition, Congress might act to modify venue rules for patent cases.

[1] Changed from “From the purposes of venue under this chapter…” to “For all venue purposes….”

[2] The U.S. Supreme Court held that “28 U.S.C. §1400(b) is the sole and exclusive provision controlling venue in patent infringement actions that it is not to be supplemented by the provisions of 28 U.S.C. §1391(c).”

Full Opinion

 

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