TC Heartland v. Kraft Foods Group Brands LLC

Issues 

Does the general venue statute, 28 U.S.C. § 1391, define “where the defendant resides” for purposes of the patent venue statute, 28 U.S.C. § 1400(b)?

Oral argument: 
March 27, 2017

In 1957, the Supreme Court held in Fourco Glass Co. v. Transmirra Products Corp. that the patent venue statute, 28 U.S.C. § 1400(b), was the “sole and exclusive” venue provision in patent infringement actions. After Congress amended the general venue statute, 28 U.S.C. § 1391, in 1988, the Federal Circuit in VE Holding Corp. v. Johnson Gas Appliance Co. held that the statutory amendments supplanted Fourco and § 1391(c)’s definition of a defendant’s “residence” applied to § 1400(b). In 2011, Congress amended the general venue statute again.

TC Heartland and its many amici argue that the 2011 amendments supersede VE Holding and reinstate Fourco, thereby restricting a corporate defendant’s “residence” to its state of incorporation. In contrast, Kraft maintains that the 2011 amendments bolster VE Holding’s conclusion that a corporate defendant “resides” wherever it is subject to personal jurisdiction. The Court’s decision about which venue definition is proper in patent infringement actions could significantly limit where defendants are eligible to be sued, thereby reducing forum shopping in patent infringement actions.

Questions as Framed for the Court by the Parties 

Whether 28 U.S.C. § 1400(b) is the sole and exclusive provision governing venue in patent infringement actions and is not to be supplemented by 28 U.S.C. § 1391(c).

Facts 

TC Heartland is an Indiana limited liability company, headquartered in Indianapolis, which manufactures and sells liquid beverage enhancer products. See Brief for Petitioner, TC Heartland, LLC D/B/A Heartland Food Products Group at 16–17. In 2014, Kraft Foods Brands Group (“Kraft”), a Delaware company headquartered in Indiana, sued TC Heartland for patent infringement in the District Court for the District of Delaware. See In re TC Heartland LLC, 821 F.3d 1338, 1340 (Fed. Cir. 2016). TC Heartland moved to dismiss or transfer, arguing both that it was not subject to personal jurisdiction in Delaware, and that venue was improper under the patent venue statute, 28 U.S.C. § 1400(b) because it is not a Delaware company. See id. The district court found specific personal jurisdiction based on TC Heartland’s shipment of the allegedly infringing products to the state, and dismissed the venue challenge by relying on the Federal Circuit’s 1990 decision VE Holding Corp. v. Johnson Gas Appliance Co.. See id. at 1340–41.

VE Holding explains the interaction between the patent venue statute, 28 U.S.C. § 1400(b), and the general venue statute, 28 U.S.C. § 1391. See In re TC Heartland LLC, 821 F.3d at 1342. The patent venue statute, originally enacted in 1897, remains unchanged since its recodification in 1948 as § 1400(b). See Fourco Glass Co. v. Transmirra Products Corp., 353 U.S. 222, 223, 225 (1957). The statute provides that patent infringement suits may be brought in the district “where the defendant resides” or “where the defendant has committed acts of infringement and has a regular and established place of business.” See id. at 223. The residency provision of the general venue state, § 1391(c), was recodified in 1948 and was subsequently amended by Congress in both 1988 and 2011. See In re TC Heartland LLC, 821 F.3d at 1342. Originally in 1948, § 1391(c) provided that a corporation “resides,” “for venue purposes,” in any district it does business in or is licensed to do business in. See Fourco Glass, 353 U.S. at 223. This prompted a dispute regarding whether § 1391(c)’s definition of corporate residency should be read into § 1400(b)’s phrase “where the defendant resides.” See id. at 223–24. The Supreme Court addressed this question in Fourco Glass Co. v. Transmirra Products Corp., where it held that § 1391(c) was not applicable and that § 1400(b) alone governed venue for patent infringement. See id. at 229. The Court held that “residency” under § 1400(b) is synonymous with “domicile,” which for corporate defendants means the state of incorporation. See id. at 226.

After a 1988 amendment, Congress, in 2011, passed the Federal Courts Jurisdiction and Venue Clarification Act, which significantly amended § 1391. See In re TC Heartland LLC, 821 F.3d at 1341. Section 1391(a) and (a)(1) now provide that § 1391 governs venue for all civil actions “except as otherwise provided by law.” See id. The act also amended § 1391(c), striking “[f]or purposes of venue under this chapter” and replacing it with “for all venue purposes.” See id.

In this case, after the district court determined that jurisdiction and venue were proper, TC Heartland petitioned the Federal Circuit for a writ of mandamus, arguing that VE Holding had been effectively overruled by the 2011 amendments to § 1391. See In re TC Heartland LLC, 821 F.3d at 1341. The Federal Circuit rejected TC Heartland’s arguments and held that VE Holding continues to dictate that § 1391(c)’s definition of “resides” applies to § 1400(b), and therefore TC Heartland can be sued for patent infringement wherever it is subject to personal jurisdiction. See id. at 1342–43.

TC Heartland appealed, and the Supreme Court granted certiorari to determine whether § 1400(b) is the sole and exclusive provision governing venue in patent infringement actions and is not to be supplemented by § 1391(c). See Brief for Petitioner at i, 19.

Analysis 

ORIGINAL MEANING OF THE PATENT VENUE STATUTE

TC Heartland argues that the patent venue statute was originally enacted to restrict venue in patent infringement suits, specifically to protect defendants from being sued wherever they could be served. See Brief for Petitioner, TC Heartland, LLC D/B/A Heartland Food Products Group at 21–22. It notes that, as originally enacted, the statute contained two methods of establishing venue: the district “where the defendant is an inhabitant” or the district “where the defendant has committed acts of infringement and has a regular and established place of business.” See id. at 22. TC Heartland argues that, at the time of enactment, corporate inhabitancy was synonymous with domicile or residency—meaning the state of incorporation. See id. This meaning is supported, TC Heartland elaborates, by the statute’s use of the singular article “the,” which implies that at any given time a corporation can only “inhabit” a single district. See id. at 23.

Kraft, on the other hand, claims that TC Heartland’s extensive focus on the previous versions of the patent venue statute is misplaced because what matters today is only the meaning of the 2011 amendments and not any of the preceding statutes. See Brief for Respondent, Kraft Foods Group Brands LLC at 15. Kraft maintains that the meaning of the 2011 amendments is clear from the text and structure, and that meaning is supported by the legislative history. See id. at 18. Kraft argues the 2011 amendments – the Federal Courts Jurisdiction and Venue Clarification Act – were intended to unify the federal venue provisions and resolve several ambiguities. See id. at 19. Kraft notes there are multiple references in the legislative history to the fact § 1391(c) would apply “[u]niversally” to all other venue statutes. See id.

CANONS OF STATUTORY CONSTRUCTION

TC Heartland claims that the Federal Circuit’s interpretation of the patent venue statute violates three canons of statutory construction. See Brief for Petitioner at 26. First, TC Heartland argues, VE Holding violates the principle that subsequently enacted general provisions do not override conflicting specific provisions absent a clear Congressional intention to displace that specific provision. See id. TC Heartland contends that the Federal Circuit violated this principle by interpreting the general venue provision, § 1391(c), to override the meaning of “residence” that the Court in Fourco attributed to the specific provision, § 1400(b). See id. at 27–28. Second, TC Heartland argues, VE Holding violates the principle that that judicially-settled interpretations of statutes are not overruled or called into question every time that statute is subsequently revised by Congress. See id. at 28–29. TC Heartland maintains that the Federal Circuit violated this principle by effectively overruling multiple Supreme Court decisions, including Fourco, based solely upon the change in § 1391(c)’s text from “for venue purposes” to “[f]or purposes of venue under this chapter.” See id. at 29. TC Heartland maintains that such a significant departure from Supreme Court case law is unjustified based on the relatively minor change in statutory language and the lack of any corroborating evidence in the legislative history. See id. at 29–30. Third and finally, TC Heartland argues that VE Holding violates the principle that Congress “does not hide elephants in mouseholes,” or in other words, Congress does not use vague or miscellaneous provisions to make fundamental changes to the meaning of statutes. See id. at 31. TC Heartland notes that the Federal Circuit’s decision relies upon concluding that Congress hid a significant expansion in the scope of the patent venue statute in an amendment to a different statute despite the lack of legislative history to support this conclusion. See id.

Kraft counters that none of the canons that TC Heartland invokes support a return to Fourco, and also claims that TC Heartland’s interpretation violates the most important canon of construction – that the plain and unambiguous language of a statute controls its meaning. See Brief for Respondent at 31. First, Kraft argues the principle that general provisions do not override specific provisions is not violated because § 1391(c) does not “override” § 1400(b), but rather provides a definition to the statutorily undefined term “resides.” See id. at 33. Second, the Federal Circuit was justified in disregarding Fourco, Kraft argues, because the Supreme Court’s reasoning in that case was dependent upon the unique legislative history of the 1948 recodification of the Judicial Code. See id. at 39–40. Kraft maintains that the 1988 and 2011 amendments made substantive textual changes to § 1391(c), and the legislative history to the 2011 amendments demonstrates a congressional intention to expand § 1391(c)’s definition of “residency” to apply to all venue provisions. See id. at 40–41. Third, the Federal Circuit did not “find an elephant in a mousehole,” Kraft argues, because regardless of the 1988 amendments, the 2011 amendments clearly purported to, and did, substantively reshape the statutory venue provisions of Title 28. See id. at 47.

TEXT AND STRUCTURE OF THE 2011 AMENDMENTS

TC Heartland argues that even if VE Holding was a permissible interpretation of the 1988 amendments to § 1391(c), that interpretation is foreclosed by the text and structure of the 2011 amendments. See Brief for Petitioner at 39. TC Heartland maintains that the new § 1391 governs venue in all civil actions “except as otherwise provided by law.” See id. TC Heartland maintains that the Supreme Court’s holding in Fourco, that § 1400(b) is the “sole and exclusive” venue provision in patent infringement actions, is case law interpreting a statute, and is therefore a type of “law” referred to in § 1391(a). See id. at 40. As a result, TC Heartland contends that § 1391(a)’s carve-out is triggered, and § 1391(c)’s definition of “resides” does not extend to § 1400(b). See id. TC Heartland further argues that Fourco, and not VE Holding, is the controlling case law on the subject of § 1400(b) because a lower court cannot “judicially settle” statutory questions in patent cases. See id. at 41. In addition, TC Heartland maintains that VE Holding undermines the structure of the patent venue statute. See id. at 31. TC Heartland argues that the Federal Circuit’s interpretation renders the second half of § 1400(b) irrelevant because “where the defendant has committed acts of infringement and has a regular and established place of business” will, by definition, always be a district where the defendant is subject to personal jurisdiction. See id. at 31–32.

Kraft takes the inverse position, arguing that even if VE Holding was an impermissible interpretation of the 1988 amendments to § 1391(c), that interpretation is now required by the text and structure of the 2011 amendments. See Brief for Respondent at 15–16. The new § 1391(c) specifies that the provision applies “[f]or all venue purposes,” which includes patent venue purposes. See id. at 16. This interpretation, Kraft argues, is supported by § 1390(a), which defines “venue” to mean the geographically proper court for litigating a civil action, excluding grants or restrictions of subject-matter jurisdiction. See id. at 17–18. Section § 1400(b), Kraft continues, provides for civil actions and does not grant or restrict subject-matter jurisdiction, and therefore under § 1390(a) it has a “venue purpose” and is subject to § 1391(c)’s definition of “resides.” See id. at 18. Kraft also disputes TC Heartland’s argument that the Federal Circuit’s interpretation renders the second half of § 1400(b) irrelevant. See id. at 33. Kraft counters that the provision retains some residual purpose because the personal-jurisdiction-based residency definition found in § 1391(c)(2) only applies to business organizations. See id. at 34. Residency for natural individuals continues to be defined as domicile under § 1391(c)(1), and therefore the second half of § 1400(b) still applies with full force to non-corporate patent infringement defendants. See id.

Discussion 

VENUE LAW AND FAIRNESS CONCERNS

The Electronic Frontier Foundation and Public Knowledge (“EFF”), supporting TC Heartland, argue that the motivating principle of venue law is fairness and convenience to both parties of a suit. See Brief of Amici Curiae The Electronic Frontier Foundation and Public Knowledge (“EFF”), in Support of Petitioner at 5, 9. The EFF asserts that the Federal Circuit failed to consider this important principle in both VE Holding and in the opinion below in this case. See id. at 9. The EFF further argues that, under VE Holding’s personal-jurisdiction-based venue regime, patent infringement defendants are subject to extensive unfairness in the forms of pervasive forum shopping, plaintiff-friendly local rules, and increased costs and difficulties caused by the requirement to litigate in remote forums. See id. at 10.

Kraft acknowledges the fairness principle of venue law but counters that a return to Fourco’s state-of-incorporation-based venue would result in inconvenience and unfairness to patent holders. See Brief for Respondent, Kraft Foods Group Brands LLC at 51. Kraft claims that such an approach would force patent infringement litigation into districts unrelated to the dispute. See id. at 50. Kraft argues that if, for example, Oracle sued Google for patent infringement, the Northern District of California—the district where both companies are headquartered—would not be a proper venue unless the alleged infringement also occurred in that district; otherwise, Oracle would be forced to sue in Delaware. See id. at 50. Kraft also maintains that the Fourco approach would needlessly complicate multi-defendant patent infringement cases by forcing plaintiffs to bring separate actions against each defendant in different districts, which would waste resources and expose plaintiffs to the danger of non-mutual issue preclusion. See id. at 51–52.

FORUM SHOPPING

In support of TC Heartland, Forty-Eight Internet Companies, Retailers, and Associations (“the internet companies”) argue that the Federal Circuit’s decision in VE Holding has produced a patent infringement regime plagued by rampant forum shopping. See Brief of Amici Curiae 48 Internet Companies, Retailers, and Associations (“the internet companies”), in Support of Petitioner at 5. The internet companies, which include companies such as Kickstarter, FedEx, and Walmart, argue that plaintiffs in patent infringement suits are increasingly choosing to sue in a small handful of plaintiff-friendly districts. See id. The internet companies point to statistics showing that in 2001, 44% of patent infringement actions were brought in ten districts. See id. at 14. By 2016, this number had risen significantly, with a full two-thirds of patent infringement actions brought in only five districts. See id. at 15. Plaintiffs chose to bring over half of all patent infringement actions in two districts in particular: the Eastern District of Texas and the District of Delaware. See id. at 16. Moreover, the internet companies argue, a single judge in the Eastern District of Texas, Judge Rodney Gilstrap, has handled nearly 25% of all of the patent infringement actions brought nationwide since 2014. See id. at 16–17. The internet companies further argue that these statistics actually understate the problem caused by one notorious type of patent infringement actions: those brought by so-called patent trolls, also known as non-practicing entities (“NPEs”). See id. at 15. Of the patent infringement suits brought in the Eastern District of Texas, which comprised 44% of the nationwide total in 2015, 96.2% were brought by NPEs. See id. at 15–16.

The American Intellectual Property Law Association (“AIPLA”), supporting neither party but arguing in favor of affirming the Federal Circuit, contends that while forum shopping should be minimized, TC Heartland’s proposed solution—a return to Fourco’s definition of residency as the state of incorporation—would produce collateral complications. See Brief of Amicus Curiae American Intellectual Property Law Association (“AIPLA”), in Support of Neither Party at 17. First, AIPLA argues, defining residency as the state of incorporation would exacerbate, not alleviate, the trend towards consolidation of patent infringement suits in a small number of districts and would unduly restrict the available venues for plaintiffs. See id. at 17–18. AIPLA maintains that under Fourco the bulk of patent litigation would merely relocate to the districts in which patent defendants are incorporated, such as Delaware, or physically congregated, such as New Jersey for pharmaceutical companies or the Northern District of California for technology companies. See id. at 18. As a result of these complications, AIPLA argues that to the extent the current patent venue regime requires modifications, Congress is more capable of making those modifications than the courts. See id. at 18–19. Additionally, General Electric Company, supporting neither party, agrees that forum shopping should be minimized in patent infringement actions, but notes that the Federal Circuit’s interpretation of § 1400(b) is not the only cause: another significant culprit is the Federal Circuit’s far-reaching personal jurisdiction doctrine; implying that may be a more appropriate vehicle for constraining forum shopping. See Brief of Amicus Curiae General Electric Company, in Support of Neither Party at 5.

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