TC Heartland Changes Venue Rules for Patent Litigation

Introduction

Venue for patent litigation had been an agreed concept for close to three decades before the United States Supreme Court came down with its TC Heartland decision. Now with this decision in the books, patent litigation has changed drastically, causing significant impact in certain areas of the country, especially Texas.

The Past

Prior to TC Heartland, the United States Court of Appeals for the Federal Circuit (“Federal Circuit”) had ruled that venue for patent litigation was proper in any district court where the personal jurisdiction of a corporate defendant was appropriate.[1]   This broad interpretation opened big corporate defendants to patent litigation almost anywhere in the United States. One of the hotspots for patent litigation was the Eastern of Texas. At one point, the Eastern District of Texas had almost 40% of the total patent infringement cases filed in the United States. No one knows exactly why this specific district became a plaintiff’s choice for patent litigation, but outcomes in that district heavily weighed against the corporate defendants. As a result, some companies went as far as to heavily contribute to the community to try to appease a future jury.

Heartland’s Implications

The Supreme Court rejected the Federal Circuits previous interpretation and held that not only is 28 U.S.C. § 1400(b) controlling for patent litigation, but also that under 28 U.S.C. § 1400(b), a corporate defendant may only be sued (1) in its state of incorporation, or (2) where it has committed acts of infringement and has a regular and established place of business. The first alternative under TC Heartland is fairly straightforward. The second prong has created subsequent litigation to get an exact scope of its meaning. In re Cray Inc., is a recent Federal Circuit decision which gives guidance to satisfying this prong since the Supreme Court did not define its parameters.[2] In re Cray sets forth a three-part test, requiring that (1) there must be a physical place in the district; (2) this place must be a regular and established place of business; and (3) the physical place must be the place of the defendant[3] .

This stricter test has already had implications across the United States. Specifically, 120 days after TC Heartland, the Eastern District of Texas only has 15% of the patent litigation matters in the United States, compared to the almost 40% mentioned earlier. The District of Delaware on the other hand now has approximately 28% of the patent litigation matters in the United States (compared to 12% in 2015). This surge in patent litigation in the state of Delaware is likely attributed to the fact that many large companies are incorporated in the state thanks to the generous tax incentives offered.

Conclusion

Overall, the TC Heartland decision has offered some relief to corporate defendants from the Eastern District of Texas and its plaintiff friendly juries. This decision has also established some sort of predictability when it comes to venue of patent litigation. However, it remains to be seen if the generosities the companies gave to the previous patent litigation hotspots will be continued or not. 

At Rao DeBoer Osterrieder, our goal is to help you understand complex aspects of IP as they apply to your business. As intellectual property strategies vary greatly between industries or even businesses, it is our aim to learn your business goals and function as an in-house IP attorney would for you. There are a number of strategies even after a patent is allowed that can help increase your bottom line.

Contact us so we can tailor a plan to your individual business goals and needs.  Make your Intellectual Property effectively work for you.

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© 2018 Jorge Zamora

The views expressed in this article are those of the author and do not reflect the views of Rao DeBoer Osterrieder, PLLC, or any of its clients. All rights reserved.

[1] VE Holding Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574, 1584 (Fed. Cir. 1990), abrogated by TC Heartland LLC v. Kraft Foods Grp. Brands LLC, 137 S. Ct. 1514 (2017)

[2] 871 F.3d 1355 (Fed. Cir. 2017)

[3] The Federal Circuit specifically rejected the idea that “virtual space[s]” or “electronic communications from one person to another” could satisfy the “place” requirement of the statutory phrase “regular and established place of business” as used in § 1400(b).  See Id. at 1360