By Andrew Williams --
"You Can Arrange the Menu, the Venue, the Seating"
The above slightly-modified quote is from a lyric sung by Thomas Jefferson in the Tony-award nominated musical "Hamilton" (with apologies to Lin Manual Miranda) -- the song being one that highlights the behind-closed-doors political horse-trading that helped establish the young nation. Of course, as the first Secretary of State, Thomas Jefferson was essentially the first Commissioner of Patents, but unfortunately Mr. Miranda did not include a song describing the awarding of the first patent on July 31, 1790. Fast forward more than 225 years, and the subject of venue for patent infringement lawsuits is still being questioned. (OK, we will admit that the relationship of this case to the Hamilton musical is a stretch, but come on -- 16 Tony nominations!). In a recent case, In re TC Heartland, the Federal Circuit concluded that Congress did not restrict what could be considered a proper venue when it passed the Federal Courts Jurisdiction and Venue Clarification Act of 2011. Perhaps not completely coincidentally, Congress is currently considering doing just that -- restricting venue for patent suits -- with S. 2733, the "Venue Equity and Non-Uniformity Elimination Act of 2016," in an effort to restrict so-called "patent trolls" from using favorable districts that are otherwise only tangentially related to the cause of action. We have previously highlighted that bill and its potential implications (see "The VENUE Act -- A Last-Ditch Attempt at Patent Reform?").
The In re TC Heartland case stemmed from a lawsuit brought by Kraft Foods Group Brands LLC against TC Heartland, LLC and Heartland Packaging Corp. in the U.S. District Court for the District of Delaware. TC Heartland is incorporated in Indiana, and has its headquarters in Carmel, Indiana. In fact, other than approximately 2% of its alleged infringing product ending up in Delaware, TC Heartland argued that it had no other contacts with that state. As a result, it moved to either dismiss the complaint for lack of personal jurisdiction, or to dismiss the action on venue grounds or transfer venue to the Southern District of Indiana. On August 13, 2015, Magistrate Judge Burke had recommended denying the motion, and Chief Judge Stark subsequently adopted the report in all respects. TC Heartland followed that up with a petition to the Federal Circuit for a writ of mandamus to either dismiss or transfer the case.
In order to understand TC Heartland's arguments related to venue, it is important to review the venue statute and its history. Venue for patent litigation is controlled by 28 U.S.C. § 1400(b):
Any 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.
28 U.S.C. § 1400(b). Also at issue was the general venue statute, Section 1391, specifically:
(2) an entity with the capacity to sue and be sued in its common name under applicable law, whether or not incorporated, shall be deemed to reside, if a defendant, in any judicial district in which such defendant is subject to the court's personal jurisdiction with respect to the civil action in question and, if a plaintiff, only in the judicial district in which it maintains its principal place of business.
28 U.S.C. § 1391(c). Initially, in Fourco Glass Co. v. Transmirra Products Corp., 353 U.S. 222 (1957), the Supreme Court held that the general statute does not override the specific statute, and therefore the residence of an accused infringing corporation was its place of incorporation. In 1988, Congress amended 28 U.S.C. § 1391 to add "[f]or the purposes of venue under this chapter" before the beginning of the above-quoted language. As such, the Federal Circuit held in VE Holding Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574 (Fed. Cir. 1990), that § 1391(c) now governs the definition of "resides" in 1400(b). This made any forum available for a patent infringement action, provided the district court had personal jurisdiction over the defendant. Finally, as previously mentioned, Congress subsequently passed the Federal Courts Jurisdiction and Venue Clarification Act of 2011, making two changes relevant to the present case. First, the newly added language was changed to read "[f]or all venue purposes," and second, § 1391(a) was amended to include the language: "Applicability of section. -- Except as otherwise provided by law."
First, TC Heartland argued that by removing the language "[f]or purposes of venue under this chapter," Congress meant to overturn the VE Holding decision. After all, the argument went, the Federal Circuit in that case had relied heavily on that language in its opinion in that case. Of course, the Federal Circuit pointed out that the new language ("[f]or all venue purposes") was broadening, and not narrowing. As such, the Court found that Congress did not make any change to the definition of corporate residence as provided for in § 1400.
Second, TC Heartland argued that by including the "applicability" section above, Congress meant to include federal common law within the "otherwise provided by law" exception. Without deciding whether this was correct, the Federal Circuit pointed out that TC Heartland's position relied on an alleged intent of Congress to codify the Supreme Court's Fourco Glass decision. The flaw in this logic, the Federal Circuit pointed out, was that Fourco Glass was no longer the law because of the intervening 1988 amendment and the Federal Circuit's VE Holding case. In other words, "the common law definition of corporate residence for patent cases was superseded by a Congressional one." There was, therefore, no longer any federal common law that could be codified by the new language. The Federal Circuit also noted that TC Heartland provided no evidence that Congress meant to codify Fourco Glass.
Finally, TC Heartland alleged that the Supreme Court redefined what the venue statute meant in Atlantic Marine Const. Co. v. U.S. Dist. Court for W. Dist. Of Texas, 134 S. Ct. 568 (2013). The relevant language was quoted in its entirety by the Federal Circuit in the present case: "Section 1391 governs 'venue generally,' that is, in cases where a more specific venue provision does not apply. Cf., e.g., § 1400 (identifying proper venue provision for copyright and patent suits)." This language was from a footnote, and was characterized by the Federal Circuit as dicta. More importantly, the Federal Circuit pointed out that the general statute of § 1391(c) was not replacing by § 1400, because it could not do so, but rather this section only operates to define where a corporation resides, when that term is found within § 1400.
TC Heartland also alleged that the case should have been dismissed because of a lack of personal jurisdiction. Barring that, TC Heartland argued, the Delaware Court should only have specific personal jurisdiction over 2% of the case based on TC Heartland's sales that ended up in the state. The Federal Circuit pointed out that the Beverly Hills Fan case was controlling, and that it was bound to follow it. Nevertheless, the Court did point out that, if TC Heartland was correct, then "to resolve nationwide the same issues as in this Delaware infringement suit, Kraft would have to bring separate suits in all other states in which Heartland's allegedly infringing products are found." It is not surprising that the Court did not adopt such a rule of personal jurisdiction.
As mentioned above, and as we previously reported, certain members of Congress are seeking to make changes to the venue statute along lines similar to those argued by TC Heartland. In fact, most likely a function of coincidence, Judge Moore during oral argument commented that the changes TC Heartland was seeking might be more appropriately made by Congress. Within days of that comment, the VENUE bill was introduced. Interestingly, Judge Moore, who wrote the opinion, cited the introduction of the VENUE bill as evidence that Congress did not intend to codify Fourco in the 2011 amendments. This argument would appear circular at best, and a case of the tail wagging the dog at worst. Still, even though the provision appears to have support from both parties, with the election year in full swing it is unlikely that any headway will be made on the VENUE bill until at least 2017.
In re TC Heartland (Fed. Cir. 2016)
Panel: Circuit Judges Moore, Linn, and Wallach
Order by Circuit Judge Moore