On May 22, 2017, the Supreme Court issued its opinion in TC Heartland v. Kraft FoodsTC Heartland overturned the Federal Circuit’s 1990 decision in VE Holding v. Johnson GasVE Holding stated that the 1990 amendments to 28 U.S.C. § 1391 indicated Congress’ intent to apply the general venue statute (§ 1391) to patent litigation.  This marked a departure from prior Supreme Court jurisprudence, which held that the patent venue statute (28 U.S.C. § 1400(b)) was the sole and exclusive provision controlling venue in patent actions.  TC Heartland re-affirmed the prior Supreme Court jurisprudence, and established 28 U.S.C. § 1400(b) as the sole venue provision for patent actions.  28 U.S.C. § 1400(b) states that patent actions can only be brought in: (1) the defendant’s state of residence, or (2) where the defendant committed acts of infringement and has a regularly established place of business.  Courts have held that the defendant’s state of residence is its state of incorporation.  The second prong of the patent venue statute has been the subject of motions to transfer venue, or dismiss for improper venue, in the wake of TC Heartland.

The impact of this decision is expected to be especially pronounced in two districts: the Eastern District of Texas and the District of Delaware.  The Eastern District of Texas has the nation’s largest patent docket.  However, due to the more restrictive nature of the patent venue statute, TC Heartland is expected to significantly reduce the Eastern District of Texas’ patent docket.  Since over half of publicly traded companies are incorporated in Delaware, the District of Delaware is expected to see a significant increase in its patent docket.  In the three months since the TC Heartland decision was issued, the Eastern District’s patent docket has decreased 21 percent.

After the TC Heartland decision, significant questions about what constitutes a regular and established place of business have been raised.  Judge Rodney Gilstrap of the Eastern District of Texas issued a four-factor test for analyzing what http://www.jetlaw.org/wp-admin/post.php?post=27279&action=editconstitutes a regular and established place of business.  The four factors are: (1) the defendant’s physical presence in the district, (2) defendant’s representation’s of its presence in a district, (3) extent to which the defendant derives benefits from the district, and (4) the defendant’s targeted interactions with a district.  Rep. Darrell Issa, Chairman of the House Subcommittee on Courts, Intellectual Property, and the Internet, criticized Judge Gilstrap’s decision as an end-run around the TC Heartland decision.  Issa’s criticism notwithstanding, legal commentators have praised Judge Gilstrap’s order as “both well-thought out and well-supported.” Technology companies like Ericsson and Nokia have voiced support for Judge Gilstrap’s order as well.  On September 21st, 2017, the Federal Circuit issued their decision on Judge Gilstrap’s test in In re Cray.  The Federal Circuit listed three requirements needed to satisfy the “regular and established place of business” prong of the patent venue statute:”(1) there must be a physical place in the district; (2) it must be a regular and established place of business; and (3) it must be the place of the defendant.”  The Federal Circuit based their decision on the statutory language of the patent venue statute, and noted certain errors in the District Court’s order.  The Federal Circuit limited the place of business requirement to “a physical, geographical location in the district from which the business of the defendant is carried out.”  Further, the place of business must be stable and established within the district, and must be a place of the defendant themselves, and not their employees.  With these new requirements promulgated by the Federal Circuit, future venue inquiries in patent cases will likely be very fact intensive.

–Vivek Biswas

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