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May 2016

  

Federal Circuit Rejects Attempt to Limit Venue in Patent Cases

  

 
 

  

     

  

 
 

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Keith J. Grady

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With venue for patent cases being a subject of great debate across the nation, the Federal Circuit was asked to reconsider its position on the matter but ruled on April 29, 2016, to maintain the status quo.

The current standard, enunciated by the Federal Circuit in VE Holding Corp. v. Johnson Gas Appliance Co., is very broad and has led to concerns about forum shopping and over-reliance on a few jurisdictions. For example, last year alone more than 45 percent of patent cases in the United States were filed in the Eastern District of Texas, according to statistics compiled by Law360. Repeated attempts to limit venue for patent cases have failed in Congress.

In an attempt to address the issue through the judiciary, the matter was brought to the Federal Circuit, which rejected the new argument to limit venue for patent cases, maintaining its original holding.

In the matter, Kraft Foods Group Brands LLC sued TC Heartland LLC ("Heartland") for patent infringement in the U.S. District Court in Delaware – Heartland is an Indiana LLC with its headquarters in Indiana and Kraft is a Delaware entity with its principal place of business in Illinois. It was undisputed that Heartland sold allegedly infringing products in Delaware with Delaware sales accounting for about 2 percent of Heartland's total sales of the accused products for 2013.

The general venue statute that applies to all civil actions, 28 U.S.C. 1391, provides for venue in any judicial district in which a defendant resides. Section 1391(c) defines "residency" for "an entity with the capacity to sue and be sued," such as an LLC or corporation as any "judicial district in which such defendant is subject to the court's personal jurisdiction." The specific patent venue statute, 28 U.S.C. 1400(b), allows for a defendant to be sued for patent infringement "where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business." In VE Holding, the Federal Circuit held that the definition of corporate residence from section 1391(c) applied to the patent venue statute, section 1400(b).

In 2011, Congress made minor amendments to general venue statute. Based on the 2011 amendments, which did not change the definition of corporate residence, Heartland argued VE Holding no longer applied. Accordingly, Heartland maintained that venue for patent cases is governed by section 1400(b) and was not appropriate in Delaware. 

The Federal Circuit rejected Heartland's argument. The Court determined that the 2011 amendments were not intended to overrule the VE Holding decision. Therefore, venue is appropriate in Delaware for Kraft's infringement action because Heartland is subject to personal jurisdiction there based on sales of its allegedly infringing products. The decision is now expected to leave any changes in the short term to the Congress.

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Polsinelli attorneys will be able to navigate these complex privity issues for you to determine the real parties-in-interest. For questions in this area or any other business needs you may have, please contact the author or your Polsinelli attorney.

 
 

  

     

  

 
         

 

 

 

  

     

  

 
 

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