On May 22, 2017, the U.S. Supreme Court, through Justice Clarence Thomas, handed down its unanimous ruling (Justice Gorsuch did not participate) requiring patent owners to sue infringers in a district court in the state where the infringer is incorporated. In TC Heartland LLC v. Kraft Foods Group Brands LLC, 581 U.S. ___ (2017) the Supreme Court narrowed the definition of “resides” in the patent venue statute by holding that a domestic corporation only “resides” in the state of its incorporation, not everywhere it may be subject to personal jurisdiction due to its business operations. The effect of this decision is to eliminate “forum shopping” by plaintiffs who, prior to this decision, had the option of suing a potential infringer in any state where the infringing company had sufficient minimum contacts to establish personal jurisdiction.
Prior to TC Heartland, the generally accepted rule for the past three decades was that the term “resides” as used in the patent statute (28 U.S.C. §1400(b)) meant the same thing as “resides” as used in 28 U.S.C. §1391(c)(2), i.e., “any judicial district in which such defendant is subject to the court’s personal jurisdiction with respect to the civil action in question.” This meant a plaintiff alleging patent infringement was allowed to sue the defendant in any state where the defendant had sufficient minimum contacts to subject itself to personal jurisdiction – such as making sales into State A even though the company was incorporated in State B.
The old rule gave plaintiffs the advantage of “shopping” to sue an alleged infringer in a judicial district that was inconvenient for the defendant as long as the defendant had minimum contacts with the state in which it was sued. That is no longer allowed – now, a plaintiff must sue the alleged infringer in its state of incorporation which presumably levels the playing field a bit and interjects more predictability than what existed before in terms of “where” a patent litigation case may be filed against a domestic corporation.
Caution: The TC Heartland decision leaves unanswered some important questions: (1) whether it applies only to “domestic” corporations — it is silent as to foreign corporations; (2) whether lower courts will extend the new rule to business entities other than domestic corporations such as limited liability companies, partnerships, etc.; and (3) if and how this new rule will be applied in pending cases.
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