David Donoghue and Steven Jedlinski are Partners and Anthony Fuga is an Associate in Holland & Knight's Chicago office
The patent venue statute, 28 U.S.C. 1400(b) (the statute), states that "[a]ny 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." In its ruling in TC Heartland LLC v. Kraft Foods Group Brands LLC, issued on May 22, 2017, the U.S. Supreme Court clarified that, in relation to the statute, "residence" refers only to the state of incorporation. This is in contrast to how district courts and the U.S. Court of Appeals for the Federal Circuit had interpreted the statute for the past 20-plus years, where venue was proper anywhere the district court could exercise personal jurisdiction over a defendant.
While the TC Heartland case did not originate in East Texas, the decision will have serious implications there because it is patent plaintiffs' favorite venue. For instance, in 2016, plaintiffs filed 1,679 patent complaints in the U.S. District Court for the Eastern District of Texas (E.D. Texas). The District of Delaware was second with 458 filings. The difference was even more stark in 2015: 2,549 patent cases filed in E.D. Texas and 544 patent cases filed in Delaware, which was again the second-busiest district.1 Although many defendants are incorporated in Delaware, many of the East Texas defendants had few ties to the district.
The number of filings in E.D. Texas will fall significantly. Defendants will, however, remain subject to litigation in E.D. Texas if they "committed acts of infringement" and if the defendant has "a regular and established place of business" in E.D. Texas. Certain reports have stated that patent cases can be filed only in the state of incorporation; however, that is an incorrect understanding of TC Heartland.
While plaintiffs who prefer to file in E.D. Texas appear to be the big losers in TC Heartland, it is likely that the winners are 1) the District of Delaware, where many companies are incorporated; 2) the Northern District of California, the home of many technology giants and startups; and 3) corporations without nationwide facilities or presence that will no longer be forced into patent litigation in far-flung states. Regardless, patent plaintiffs will need to address venue much differently in complaints going forward, with a focus on either the defendant's state of incorporation or the defendant's established place of business.
Footnote
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