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)?
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).
TC Heartland is an Indiana limited liability company, headquartered in Indianapolis, which manufactures and sells liquid beverage enhancer products. 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. 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. 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..
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. The patent venue statute, originally enacted in 1897, remains unchanged since its recodification in 1948 as § 1400(b). 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.” 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. 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. 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.” 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. The Court held that “residency” under § 1400(b) is synonymous with “domicile,” which for corporate defendants means the state of incorporation.
After a 1988 amendment, Congress, in 2011, passed the Federal Courts Jurisdiction and Venue Clarification Act, which significantly amended § 1391. Section 1391(a) and (a)(1) now provide that § 1391 governs venue for all civil actions “except as otherwise provided by law.” The act also amended § 1391(c), striking “[f]or purposes of venue under this chapter” and replacing it with “for all venue purposes.”
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. 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.
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).
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. 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.” TC Heartland argues that, at the time of enactment, corporate inhabitancy was synonymous with domicile or residency—meaning the state of incorporation. 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.
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. 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. 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. Kraft notes there are multiple references in the legislative history to the fact § 1391(c) would apply “[u]niversally” to all other venue statutes.
CANONS OF STATUTORY CONSTRUCTION
TC Heartland claims that the Federal Circuit’s interpretation of the patent venue statute violates three canons of statutory construction. 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. 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). 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. 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.” 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. 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. 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.
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. 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.” 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. 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. 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.
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. TC Heartland maintains that the new § 1391 governs venue in all civil actions “except as otherwise provided by law.” 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). 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). 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. In addition, TC Heartland maintains that VE Holding undermines the structure of the patent venue statute. 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.
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. The new § 1391(c) specifies that the provision applies “[f]or all venue purposes,” which includes patent venue purposes. 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. 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.” Kraft also disputes TC Heartland’s argument that the Federal Circuit’s interpretation renders the second half of § 1400(b) irrelevant. 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. 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.
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. 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. 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.
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. Kraft claims that such an approach would force patent infringement litigation into districts unrelated to the dispute. 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. 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.
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. 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. The internet companies point to statistics showing that in 2001, 44% of patent infringement actions were brought in ten districts. By 2016, this number had risen significantly, with a full two-thirds of patent infringement actions brought in only five districts. 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. 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. 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”). 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.
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. 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. 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. 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. 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.
- Gene Quinn, Supreme Court Agrees to Hear Patent Venue Case Filled with Patent Reform Implications, IP Watchdog (Dec. 14, 2016).
- Danny R. Barber, Supreme Court to Address Patent Venue in TC Heartland v. Kraft Foods, Maschoff Brennan (Dec. 20, 2016).
- Richard S.J. Hung, et al., Seven IP Cases to Watch in Early 2017, Morrison Foerster (Dec. 22, 2016).