In TC Heartland LLC, v. Kraft Foods Group Brands LLC, the United States Supreme Court held that the controlling language for determining proper venue for patent infringement is solely in 28 U.S.C. 1400(b). The statute states, “[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.” Previously, courts defined “resides” in 28 U.S.C. 1400(b) the same way as it is defined “resides” in 28 U.S.C. 1391(c). “[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.” In TC Heartland, the Court announced that under the patent statute, venue for a corporate residence is limited to the district of incorporation. TC Heartland, the defendant in the case for which venue was to be determined, is an LLC. However, all proceedings prior to reaching the Supreme Court referred to TC Heartland as a corporation. Therefore, the Court maintained this approach and confined its analysis to corporations.
28 U.S.C. 1400(b) was previously considered a broad and inclusive statute that was often overlooked in the past. However, this statute is now crucially important to plaintiffs filing a patent infringement suit outside of the defendant’s district of incorporation. Plaintiffs must now use 28 U.S.C. 1400(b) to find venue. Venue for corporations will be proper where (1) the infringement occurred and (2) the defendant has a “regular and established place of business.” Although this statute is now particularly relevant, the Court left an important operative phrase, “regular and established place of business,” without a clear definition and without consistent precedent as to its interpretation or application in courts below. Plaintiffs, defendants, and the courts are now left to wrestle over it’s meaning.
To resolve the current debate, courts have turned to older cases like In re Cordis Corp. for guidance. The Cordis court interpreted the phrase quite broadly, finding that a regular and established place of business can be satisfied even without a physical presence in the district. In Cordis, the court held that venue was proper for a medical supply company that had two sales representatives with offices and inventory present in the infringement district, because these facts constituted a permanent and continuous presence in the district. The court reasoned that when activities in the district show a “permanent and continuous presence,” venue is proper in that district, because these actions are analogous to a regular and established place of business.
Before the ruling in TC Heartland, the Eastern District of Texas handled a large portion of patent infringement cases. With 57% of patent litigation cases filed in the district, it became a popular place for venue shoppers to file, and has ruled on patent litigation venue post- TC Heartland. In Raytheon Co. v. Cray, Inc., the court provided a set of four factors to consider regarding “regular and established place of business” including physical presence, defendant’s representations, benefits received, and targeted interactions. The court reasoned that these factors on their own are not dispositive, but if a business is seeking to further its commercial goals though an ongoing and continuous presence in that district, venue in that district will be proper. However, the United States Court of Appeals, Federal Circuit, promptly overturned this decision by a writ of mandamus to vacate the District Court’s order. The Court of Appeals acknowledged “the law was unclear and the error understandable,” but “the district court abused its discretion by applying an incorrect legal standard.” The court found that the four-factor test for regular and established place of business was “not sufficiently tethered to [the] statutory language and thus it fails to inform each of the necessary requirements of the statute.” The court also noted that although “no precise rule has been laid down” in TC Heartland, the Texas court had “impermissibly expand[ed] the statute.”
In other cases post TC Heartland, courts have ruled quite differently from one another. In Hand Held Products Inc. v. Code Corporation, the court determined that a defendant corporation with one sales representative, without inventory in the state, and without a license to do business in the state, does not have a regular and established place of business in that district. In Boston Scientific Corp. v. Cook Group Inc., the court held that a company must do more than simply be licensed to do business in the district to satisfy venue under 28 U.S.C. 1400(b). The Boston Scientific court concluded that venue is not proper in the district of infringement when a company is registered to do business in the district but has no physical presence or affiliated individuals in the district. Further, shipping goods into the district only establishes that the company is doing business within the district, but does not establish a permanent and continuous presence there. The same court in Prowire LLC v. Apple Inc., found that one Apple store located in the district was sufficient to give rise to a regular and established place of business. Thus, mere ability to do business in a state is not adequate to show a continuous presence. However, having a representative stationed in the district or operating a single store is enough to establish a regular and established place of business, and make venue proper in that district, assuming that there was also infringement in the district.
After TC Heartland, potential venues for patent infringement litigation are limited, or at least will require greater legal acumen to support a finding for proper venue than was previously required. Plaintiffs will likely seek a broader interpretation of “regular and established place of business” and “doing business,” under 28 U.S.C. 1391(c), to create more prospective venues. Defendants, on the other hand, will be more likely to seek a narrower interpretation of 28 U.S.C. 1400(b), for limited venue options. Further, courts will keep considering and litigants will keep arguing these competing views until a more widely accepted meaning of regular and established place of business is established.
Breana is a second year student at Widener University Delaware Law School and a Staff Member on the Delaware Journal of Corporate Law.
Suggested Citation: Breana Barker, Patent Venue After TC Heartland: Finding Meaning in “Regular and Established Place of Business,” Del. J. Corp. L (Oct. 17, 2017), www.djcl.org/blog.