Supreme Court Preview -- TC Heartland LLC v. Kraft Foods Group Brands LLC

By Andrew Williams --

Next week, on Monday March 27, the Supreme Court will hear oral arguments in the TC Heartland LLC v. Kraft Foods Group Brands LLC case.  This case involves the interpretation of the current patent venue statute.  And while interpreting statutory language may seem dry, the outcome of this case could have a significant impact on the so-called Patent Troll problem.  Unfortunately, it could also negatively affect all patent owners seeking to legitimately assert their patent right against infringers, regardless of how blatant the infringement is.  As a result, it is not surprising that this case has generated a significant amount of amicus interest from patent owners, trade organizations, academics, and the operating companies that are generally targets for these so-called patent trolls.

In particular, sixteen amicus briefs were filed in support of petitioner TC Heartland, the party seeking a narrow interpretation of the statute determining which venues a patent infringement case can be brought.  These parties range from 48 internet companies, retailers, and associations (in a single brief); a brief from 61 professors of law and economics (also in a single brief); the states of Texas, Arizona, Colorado, Connecticut, Hawaii, Illinois, Iowa, Maine, Maryland, Michigan, Nebraska, North Carolina, Ohio, South Carolina, Vermont, Virginia, and Wisconsin (again, in a single brief); the ABA; and not surprisingly, the Electronic Frontier Foundation.  Of particular interest for the life sciences community, the Generic Pharmaceutical Association also filed an amicus brief in support of petitioner, in which they argued in part that the Federal Circuit's interpretation of the statute, in conjunction with its jurisdictional decision in Acorda Therapeutics Inc. v. Mylan Pharms, has worked to delay the public's access to low cost generic drugs.

On the other hand, eleven amicus briefs were filed in support of respondent, Kraft Foods.  These parties range from 33 practicing-entity patent owners (in a single brief); eighteen individuals and organizations representing inventors and patent owners; 22 law, economics, and business professors (in a single brief); professors of patent law and civil procedure (in a separate brief); the Biotechnology Innovation Organization (BIO) and the Association of University Technology Managers (AUTM) (together in a brief); the Pharmaceutical Research and Manufacturers of America (Phrma); and Genentech, Inc.  BIO and AUTM acknowledged that their members have been the victims of so-called patent trolls, but nevertheless, a narrow interpretation of the statute would serve to unfairly disadvantage patent owners relative to accused infringers.  Genentech, for its part, pointed out the unique situations for ANDA and BPCIA litigations, including the fact that the precipitating acts of infringement are within the defendant's control.  Finally, there were also three amicus briefs in support of neither party: the American Intellectual Property Law Association (AIPLA); the General Electric Company; and the Intellectual Property Law Association of Chicago.

This case has an interesting procedural posture.  It stems from a denial of a writ of mandamus by the Federal Circuit that arose from a denial of a motion to dismiss a case on, among other things, venue grounds.  The litigation was brought by Kraft Foods against TC Heartland in the U.S. District Court for the District of Delaware, where it is currently pending before Chief Judge Stark.  TC Heartland is incorporated in Indiana, and has its headquarters in Carmel, Indiana.  However, other than approximately 2% of its alleged infringing product ending up in Delaware, TC Heartland has alleged that it has had no other contacts with that state.

The posture of the case is also interesting because the issue had essentially already been decided by the Federal Circuit in VE Holding Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574 (Fed. Cir. 1990) case.  As such, TC Heartland's chance of success at the Federal Circuit was minimal.  However, the last time the Supreme Court considered the specific patent venue statute, in the Fourco Glass Co. v. Transmirra Products Corp., 353 U.S. 222 (1957) case, it held that the general venue statute did not override the specific patent statute.  This is essentially the result that TC Heartland is seeking in this case -- that a corporation can essentially only be sued in the state in which it is incorporated.  In TC Heartland's favor, the specific patent venue statute has not changed since that time.  However, the general venue statute has changed a couple of times in the interim, which is why the Federal Circuit deviated from the Supreme Court precedent.

The specific venue statute for patent litigation was (and is) 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).  At the time of the last Supreme Court case, the general venue statute specified that:

(c) A corporation may be sued in any judicial district in which it is incorporated or licensed to do business or is doing business, and such judicial district shall be regarded as the residence of such corporation for venue purposes.

28 U.S.C. § 1391(c) (1952).  However, this was amended in 1988 to be more definitional:

(c) For purposes of venue under this chapter, a defendant that is a corporation shall be deemed to reside in any judicial district in which it is subject to personal jurisdiction at the time the action is commenced.

28 U.S.C. § 1391(c) (1988).  There was another subsequent change in the Federal Courts Jurisdiction and Venue Clarification Act of 2011, which made two changes, including expanding the applicability of the new definition to:  "all venue purposes."  It was the addition of the phrase "[f]or purposes of venue under this chapter" that convinced the Federal Circuit to veer from Supreme Court holding in VE Holding Corp., thereby making virtually every forum available to patent holders in bringing infringement actions, provided of course that the district court had personal jurisdiction over the defendant.  Of course, critics of the opinion point out that almost the exact opposite has resulted -- even though any forum can be used, it is the Eastern District of Texas and the District Court of Delaware that have seen over half of the patent litigation cases.  For example, TC Heartland included a pie chart from data obtained from Lex Machina of the impact of forum shopping in 2015, which showed that more than 43% of patent infringement cases were filed in the Texas court:

If the Supreme Court sides with TC Heartland, Patent Trolls will be curtailed from using the Eastern District of Texas as a tool for extorting settlements from accursed infringers.  Interestingly, Congress has also attempted to solve the so-called patent troll problem by, among other things, recently introducing the VENUE Act.  However, it is unlikely that any further action will be taken by that body until other more pressing matters are addressed.  It is therefore almost certain that the TC Heartland LLC v. Kraft Foods Group Brands LLC will be resolved before that happens.

Comments

[EG]

Hey Andrew,

Very nice and balanced write up on this case, unlike that other patent blog that calls itself "America's leading patent law source" and provides a completely one-sided version of this case that gives only the TC Heartland's side of the story and not Kraft Foods' side.

[skeptical]

EG,

So you noticed that as well, eh?

Color me shocked - shocked I say.

(well, not really)

[EG]

Hey Skeptical,

LOL, I have! No "fair and balanced" on that patent blog.

[skeptical]

As far as I can tell, EG, that "other blog" has just blocked outright any and all comments from yours truly.

Nothing like censorship when the posts are too close to the truth for comfort (someone's comfort, someone who does not like or want people to actually employ some critical thinking).

Then again, perhaps it is just some wrinkles that they are ironing out with the new "report" functionality...

;-)