This week, we are pleased to have a guest post from James Nault, a patent attorney and member of Robinson & Cole LLP’s intellectual property litigation group.

The United States Supreme Court just limited where corporations can be sued for patent infringement in a case called TC Heartland LLC v. Kraft Foods Group Brands LLC, No. 16-341 (U.S. May 22, 2017).  Manufacturers sued for patent infringement are now more likely to fight those fights in their home venues.

Case Background

Kraft sued TC Heartland, an Indiana-based and incorporated manufacturer of flavored drink mixes, for infringement of one of Kraft’s patents in the federal district court in Delaware.  TC Heartland moved the court to either dismiss the case or to transfer it to a federal district court in Indiana, which the Delaware court could have done.  But the court refused to do so, citing a case from the U.S. Court of Appeals for the Federal Circuit, which hears all patent appeals, which held 30 years ago that a corporation can be sued for patent infringement wherever it is subject to personal jurisdiction.

A complete discussion of all of the rules regarding personal jurisdiction is beyond the scope of this post, but basically because TC Heartland regularly shipped it products into Delaware, the court ruled that they could be sued there, which comported with the Federal Circuit’s rule.  TC Heartland appealed to the Federal Circuit, asking them to order the district court to transfer the case to Indiana, but the Federal Circuit refused.  So TC Heartland petitioned the Supreme Court to take the case, which they did.

The Supreme Court’s Opinion

The Supreme Court, in a unanimous opinion authored by Justice Clarence Thomas, reversed the Federal Circuit and held that the rule the Federal Circuit had announced 30 years ago, which greatly broadened where a corporation could be sued, is wrong.  Justice Thomas cited a 60-year-old U.S. Supreme Court case called Fourco Glass Co. v. Transmirra Products Corp., 353 U.S. 222 (1957), which had definitively interpreted the special federal statute governing venue in patent infringement actions to mean what it says, which is that “[a]ny civil action for patent infringement may be brought in the judicial district where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business” [note:  a corporate defendant can also be sued in a venue if it consents to being sued there].

The Federal Circuit had held, using a separate statutory section governing venue generally, that where a corporation resides is wherever it is subject to personal jurisdiction, basing that holding on amendment to the general venue section.  But the Supreme Court has now rejected that idea, holding that where a corporation resides is only where it is incorporated.

That rejection was foreshadowed by Chief Justice Roberts at oral argument when his first question to Kraft’s counsel of record was “Is Fourco still good law?”  In other words, if Fourco is still good, then the Federal Circuit’s contrary rule could not be right.  TC Heartland’s Counsel of Record Jim Dabney had argued that Fourco is indeed still good law, and that an amendment to the general venue section could not alter the more specific patent venue section, and the Supreme Court has now agreed.

Why it Matters for Manufacturers

This case is important for manufacturers because the Federal Circuit’s expansive broadening of where a corporation could be sued for patent infringement meant that corporations were often sued far away from their headquarters state or where they were incorporated.  It also made possible the rise of the Eastern District of Texas, now the most popular venue for patent infringement actions in the country [a place where our firm has defended clients on several occasions], which has plaintiff-friendly special patent rules which make out-of-state defendants particularly vulnerable.  TC Heartland should return much patent litigation back to where a manufacturer is incorporated or where it has its major manufacturing center, i.e. on its home turf.

[View source.]