In May of 2017, the Supreme Court handed down another major patent law decision in TC Heartland LLC v. Kraft Foods Brand Group LLC1. The Court was tasked with determining whether the general venue statute’s subsection concerning corporate residency,2 in light of amendments, applies in the context of the patent-specific venue statute3 . The general statute provides a broad definition of corporate “residence,” while the Court’s previous construction of the patent venue statute in Fourco Glass v. Transmirra Products limited corporate residence “only to the State of incorporation.”4 Echoing its ruling in Fourco,5 the Court held that amendments to the general venue statute did not alter the scope of corporate residency under the patent venue statute, stating that “[a]s applied to domestic corporations, “reside[nce]” in § 1400(b) refers only to the State of incorporation.” Under TC Heartland, venue will now be proper “where the defendant has committed acts of infringement,” where the defendant “has a regular and established place of business,” and in states in which the defendant is incorporated.6
The TC Heartland decision may provide some relief to those accused of patent infringement who previously were subject to infringement suits in any district capable of asserting personal jurisdiction. Importantly, the decision may discourage forum shopping. The Eastern District of Texas, for example, has acquired a reputation as a patent owner-friendly “rocket docket” jurisdiction.7 In the wake of TC Heartland, it remains to be seen whether patent owners will still be able to take advantage of filing in such districts. In calendar year 2016, 4,529 patent cases were filed in district courts around the nation.8 Of those, 1,662 (37%) were filed in the Eastern District of Texas. The District of Delaware, with 454 (10% of) filings, was a distant second place. For the first half of 2017 (leading up to the TC Heartland decision on May 22), 1,639 patent cases were filed, with 543 (33%) of those filings in the Eastern District of Texas.9 In the six months following the TC Heartland decision, however, 2,031 patent cases were filed, only 238 (14%) of which were in the Eastern District of Texas.10
Figure 1 below shows a selection of seven districts that receive a significant percentage of patent case filings.
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As the chart shows, patent filings in the Eastern District of Texas fell by approximately 19% compared to filings made in the first half of 2017. This suggests that patent owners are now less certain that filing in the Eastern District of Texas will be beneficial. Overall patent case filing has remained relatively consistent, as other districts have observed an increase in patent case filings. The District of Delaware, for example, saw a jump of approximately 11% in the number of patent filings in the period of 2017 following the TC Heartland decision. The Central and Northern Districts of California also observed modest increases comparing the same time periods. As more time passes and patent owners become more familiar with the new venue rules, the data are likely to crystallize further.
Patent owners should be mindful that forum shopping may be a tougher task in the post-TC Heartland world. While the basis for proper venue may still be fairly broad if the alleged infringer is a large nationwide business,11 the patent owner can no longer be certain of its ability to haul many smaller alleged infringers before the court of the patent owner’s choosing.12 As the ruling itself is still relatively fresh, it remains to be seen how clearly and consistently it will be applied. The Eastern District of Texas’ own Judge Rodney Gilstrap has opined on the issue of what constitutes proper venue in the wake of TC Heartland. In Raytheon v. Cray, Judge Gilstrap ruled that a “permanent and continuous presence” is satisfied by the employment of a local sales executive, and that there was no requirement for defendant have “a physical presence” in the form of an “office or store.”13 Judge Gilstrap laid out a “totality of the circumstances” approach to ascertaining whether a defendant satisfies the “regular and established place of business” prong of the patent venue statute: The court should consider whether there is a physical presence in the district, whether defendant has made representations that it has such a presence, whether defendant has derived benefits from a presence in the district, and whether defendant has engaged in targeted interactions within the district.14 The Federal Circuit, however, was unconvinced by Judge Gilstrap’s venue determination, granting Cray’s petition for a writ of mandamus and directing transfer of the case because “[t]he district court’s four-factor test [was] not sufficiently tethered to [28 U.S.C. § 1400’s] statutory language and thus [] fails to inform each of the necessary requirements of the statute.”15
In summary, the general status of venue in patent cases is somewhat clouded. It is evident that patent owners are more hesitant to file suit in the Eastern District of Texas, though this is subject to change as more courts interpret the Supreme Court’s ruling. Patent owners wishing to play it safe can continue to sue where the domestic defendant is incorporated, and accused infringers currently litigating in remote forums may consider moving for a transfer. For the Northern District of Illinois, where patent case filings had already been on the rise prior to TC Heartland,16 practitioners should expect patent filings to continue to increase.
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1No. 16-341, 581 U.S. ___ (2017).
2See 28 U.S.C. § 1391(c) (2012).
3See 28 U.S.C. § 1400(b) (2012).
4See Fourco Glass Co. v. Transmirra Prods. Corp., 353 U.S. 222, 226 (1957).
5Id.
628 U.S.C. § 1400(b).
7See, e.g., Judge Shopping in the Eastern District of Texas, 48 LOY. U. CHI. L.J. 539 (2016)
8In 2016, patent cases were filed in a total of 85 districts.
9In the period between January 1, 2018 and May 21, 2017, patent cases were filed in 69 districts.
10In the period between May 22, 2017 and November 15, 2017, patent cases were filed in 74 districts.
11See, e.g., Prowire LLC v. Apple Inc., Case No. 1:17-cv-002 (D. Del. Aug. 9, 2017) (holding that a single Apple store in the forum was enough to satisfy the venue requirement).
12See, e.g., Stuebing Automatic Machine Co v. Gavronsky, Case No. 1:160cv-00576 (S.D. Ohio June 12, 2017) (granting motion to change venue where neither defendant resided nor maintained a place of business in Ohio).
13See Raytheon v. Cray, No. 2:15-CV-01554-JRG (E.D. Tex. June 29, 2017).
14Id. at 22–26.
15In re Cray Inc., No. 17-129 at 10 (Fed. Cir. Sept. 21, 2017).
16See R. David Donoghue, Patent Cases Significantly Up in the Northern District of Illinois, CHICAGO IP LITIGATION (Mar. 24, 2017), https://www.chicagoiplitigation.com/2017/03/patent-cases-up-significantly-in-the-northern-district-of-illinois/.