Emory Law News Center

Analysis: TC Heartland LLC v. Kraft Foods
By Timothy R. Holbrook | July 19, 2017

Holbrook

Timothy R. Holbrook:
Professor of Law

You consult an attorney about a case you think you should win. What would your reaction be if your attorney told you that the likelihood that you will win may depend on the geographic location of the court in which you sue? Why should a case’s outcome depend not on the facts but instead where you file suit? 

This idea of “forum shopping”—picking a court that maximizes the chance you will win your case —is generally frowned upon. Such variability generally offends our sense of justice and fairness. Such offense is particularly the case in patent law. Why should my patent rights depend on what court I sue in, when the U.S. Patent and Trademark Office has granted me a patent on my invention that covers the entire United States? 

In fact, Congress acted in 1982 to avoid such forum shopping in patent cases. Congress recognized that some appellate courts were hostile to patent rights, invalidating almost all of them. To avoid this dynamic, and to reinvigorate the patent system, Congress created the U.S. Court of Appeals for the Federal Circuit—an appellate court with national jurisdiction over patent appeals. No matter where you file your case—California, Florida, Georgia or Iowa—your appeal goes to the federal circuit. And that court establishes national substantive patent law. So, one would think forum shopping in patent cases would be a thing of the past. 

But that would not be the case. Forum shopping has been rampant in patent law. In particular, the U.S. Court of Appeals for the Eastern District of Texas has almost 40 percent of all patent cases filed in the United States. Now, the Eastern District does not include Houston or Dallas. The district covers no major cities. So how is it that patent owners (particularly “patent trolls”—entities that manufacture nothing but earn their money through patent infringement suits) are able to sue there? 

The location where you can sue—“venue” in legal language—for patent law is governed by 28 U.S.C. § 1400(b). This provision makes venue appropriate under two scenarios: “where the defendant resides” or “where the defendant has committed acts of infringement and has a regular and established place of business.” What has driven forum shopping by patent holders is the former definition—where the defendant resides. Particularly, where do corporations reside? 

In 1957, in the case Fourco Glass Co. v. Transmirra Products Corp., 353 U.S. 222 (1957), the Supreme Court made clear that the answer was simple: a corporation resides where it was incorporated. Thus, if a corporation is incorporated in Delaware, the defendant can always be sued in the federal court in Delaware. 

Such was the law for 33 years. But this state of affairs all changed in 1990, when the federal circuit decided VE Holding Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574 (Fed. Cir. 1990). The court concluded, in light of some amendments Congress made to the venue statute, that a defendant “resides” anywhere that the corporation is subject to personal jurisdiction. Given the rules on personal jurisdiction, many corporations could be dragged into nearly any court in the United States, even if they do not have a regular place of business there, based on their infringing activity.  

With this broad definition, patentees were free to look for district courts that would favor their case, looking at factors such as how quickly cases were resolved and whether a court generally favored patent owners. Numerous empirical studies demonstrated that there was variation in success rates among the district courts, with the Eastern District of Texas being viewed as quite pro-patent holder. Patent assertion entities (aka patent trolls) particularly liked filing in the Eastern District given its pro-patent leanings. 

But, what’s old is new again. In TC Heartland LLC v. Kraft Foods Group Brands LLC, No. 16-341, 2017 WL 2216934 (U.S. May 22, 2017), the Supreme Court rejected the federal circuit’s interpretation of the statute and confirmed that its holding in Fourco remains the law: a corporation resides only in its state of incorporation.  

The patent litigation landscape, therefore, has changed dramatically. The prevalence of the Eastern District of Texas is likely to end, and the District of Delaware—where many corporations are incorporated—may become more important. Of course, lost in this discussion of the negatives of forum shopping is the upside: the Eastern District of Texas has developed considerable expertise in patent law. Many commentators had decried the lack of specialization at the trial level. TC Heartland means that we may lose that de facto specialization, but perhaps for the greater good of mitigating abusive forum shopping.  

Timothy R. Holbrook, professor of law