Part 1: In the Heart of the TC Heartland Decision: Continued Uncertainty

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SCOTUS Reverses Decades Old Decision: Ultimately Serves Only to Introduce Additional Uncertainty

by: Patrick Anderson | May 22, 2017

Today, the Supreme Court of the United States issued a unanimous opinion in TC Heartland, LLC v Kraft Foods Group Brands LLC.

By reversing a decades-old decision and upending many years of settled practice, large corporations won another victory in their ongoing battle against tort liability. For decades, legal scholars studied boring cases with fascinatingly curious names like “International Shoe” and “World Wide Volkswagen,” and ultimately learned that any sufficiently large corporation was, more-or-less, subject to jurisdiction anywhere in the country.

Congress then made venue and jurisdiction equivalent “for all venue purposes” for corporations, by defining residence as anywhere a corporation is subject to personal jurisdiction. But since “all venue purposes” apparently doesn’t mean “all” venue purposes, the Court today throws more uncertainty into an already unbalanced, uncertain arena.

On the surface, one could be easily fooled into thinking that Heartland simplifies venue by confining patent lawsuits to the state of incorporation.

Such analysis, however, misses the key part of the opinion: “the word ‘reside[nce]’ in §1400(b) … refers only to the State of Incorporation.” (emphasis added). Meanwhile, §1400(b), in all its glory, states that “[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.” (emphasis added). The second prong of that test goes completely unaddressed by the Court, and no final decision as to the defendant has been reached. Lower courts are given no guidance whatsoever on how the decision may effect the ‘acts of infringement + regular place of business” prong, nor how the decision may effect venue for foreign corporations.

Also, Heartland fails to address any issues regarding states with multiple districts. As noted above, a patent infringement case may be brought in “the” district where the defendant resides. However, since residence has been defined only to mean the State of incorporation, any state with multiple districts may now see intra-state venue battles. Does “the judicial district where the defendant resides” mean any judicial district in the state? Or is venue limited to the one judicial district within the state whose territory covers the defendant’s address?

Today’s decision ultimately serves only to introduce additional uncertainty, which increases, rather than decreases, transaction costs associated with patent enforcement and licensing. The de-facto policy prior to today has collapsed venue and jurisdiction into a single test and largely eliminates the need to develop substantial judicial scholarship on the second prong of §1400(b). The new rule introduced today will require separate analyses and development of virgin legal territory (read: expensive) that benefits no one apart from hourly-fee lawyers.

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