Michael C. Smith 2017-12-20 05:24:22
On May 22, the U.S. Supreme Court issued a highly anticipated decision that substantially narrowed the venues in which a patent holder could file a case alleging patent infringement. Four months later, on September 21, the Court of Appeals for the Federal Circuit provided litigants with substantial guidance on the newly relevant language in the patent venue statute. The new decisions have drastically reduced Texas federal courts’ share of patent case filings. Venue in Patent Cases Under 28 U.S.C § 1400, patent infringement cases may be brought in the judicial district where (1) the defendant resides, or (2) where the defendant has committed acts of infringement and has a regular and established place of business. In 1990, the Federal Circuit interpreted the meaning of “resides” in § 1400 to mean anywhere the company was subject to personal jurisdiction. TC Heartland In TC Heartland LLC v. Kraft Foods Grp Brands, LLC,1 the Supreme Court set aside that interpretation and held that for domestic corporations, the term “resides” in § 1400 means only the defendant’s state of incorporation. The court did not express any opinion on the implications of the decision on foreign corporations, thus for the moment, leaving the law with respect to venue against foreign corporations and unincorporated associations untouched. As a result, where previously a corporation could be sued for patent infringement anywhere it sold or offered an accused product for sale, now it can only be sued in its state of incorporation, or where it commits infringing acts and has a “regular and established place of business.” Even before TC Heartland, patent filings in Texas federal courts had been dropping, with most of the drop coming in “bulk filer” cases. But immediately after the Supreme Court’s holding, filings in the patent-laden Eastern District of Texas dropped approximately half from even the new lower levels. In the 150-day window before TC Heartland, 543 patent cases—a full 33 percent of all patent cases filed nationwide—were filed in the Eastern District of Texas, but in the 150 days after TC Heartland, only 14 percent of patent cases (237) were filed there. In re Cray The Supreme Court’s decision in TC Heartland focused attention on the “regular and established place of business” option for venue under § 1400(b), which for the first time since 1990 was broader than the “resides” prong. The first guidance from the Federal Circuit on the interpretation of this statutory language after TC Heartland was In re Cray,2 in which the Federal Circuit rejected a district court’s interpretation of the patent venue statute as not requiring that the defendant’s place of business be a physical one. Instead, its analysis revealed three general requirements relevant to the inquiry: 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’s opinion in In re Cray provided litigants with substantial guidance on the issue of what can be argued to constitute a “regular and established place of business” under § 1404(b)’s second option. In its wake, patent litigants are beginning to explore what activity meets the test, including when one entity’s activities occurring at a physical place in a district can be imputed to another, what proof is required to make or defend against an allegation of improper venue, and what effect the new test will have on cases involving multiple defendants and on pharmaceutical patent litigation under the Hatch-Waxman Act. Notes 1) 137 S.Ct. 1514 (2017). 2) 871 F.3d 1355 (Fed. Cir. 2017). MICHAEL C. SMITH is a partner in Siebman, Burg, Phillips & Smith in Marshall, where he focuses on complex commercial and patent litigation in federal court. He is a former chair of the Texas Bar Journal Board of Editors, a former chair of the Litigation Section of the State Bar of Texas, and the editor of O’Connor’s Federal Rules * Civil Trials. His Eastern District of Texas Federal Court Practice blog can be found at EDTexweblog.com.
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