On December 14, 2016, the Supreme Court granted certiorari in the TC Heartland case. Case No. 16-341. Regardless of whether a person favors additional patent "reform" legislation, simply tightening the patent venue rules would rein in current practices. According to Law360, in the most recent year, nearly 50% of all patent cases filed nationwide were filed in the Eastern District of Texas. Even accounting for multi-defendant cases that have been split into multiple actions because of the AIA’s joinder rules, this one district is still handling a disproportionate number of patent suits.
This focus on the Eastern District of Texas is the result of the current reading of a pair of venue statutes: 28 U.S.C. §§ 1391(c) (applicable to entities generally) and 1400(b) (governing patent suits). Section 1400(b) limits venue in patent cases to districts where an entity is incorporated or where the entity allegedly committed the acts of infringement and has a regular and established place of business. In contrast, section 1391(c) states that venue over an entity is proper wherever that entity is subject to personal jurisdiction – essentially anywhere that entity sells the product or service accused of infringement. In 1957, the Supreme Court held that the patent venue statute stood alone, that it was the sole and exclusive provision controlling venue in patent cases. Fourco Glass Co. v. Transmirra Prods. Corp., 353 U.S. 222, 229 (1957). Nevertheless, in 1990, the Federal Circuit held that section 1391(c) also applied to patent cases because of a 1988 change in the wording of section 1391(c). See VE Holding Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574 (Fec. Cir. 1990).
In turn, since the Federal Circuit’s 1990 VE Holding decision, plaintiffs have been able to file patent suits in almost any district, including the Eastern District of Texas where the judges do not often grant transfer motions or stay cases pending inter-partes review.
The TC Heartland case began when a district court in Delaware denied a motion to transfer the case to Indiana. In October 2015, the party seeking transfer petitioned the Federal Circuit for mandamus relief. The petitioner argued that the courts’ current reading of the venue statutes is wrong in light of a 2011 amendment to the general venue statute. Put simply, the petitioner argued that the 2011 change to section 1391 codified the Supreme Court’s 1957 Fuorco decision and overturned VE Holding. The Federal Circuit accepted the case but, in the end, the court denied mandamus relief. The Federal Circuit did not believe that Congress intended to overturn VE Holding. Moreover, the panel almost certainly knew that after rejecting the petitioner’s change-of-law argument it could not overturn the VE Holding decision without en banc review.
Now, however, the Supreme Court has accepted this case. Moreover, the Supreme Court is not constrained by prior Federal Circuit decisions. That is, the Supreme Court could agree that the 2011 change to the general venue statute dictates a restatement of how those statutes apply in patent cases – a return to the Fuorco holding. Or, the Supreme Court could simply overrule VE Holding, finding that the 1988 change in the law never overruled Fuorco in the first place. The Court’s decision to grant certiorari suggests it may pursue the later course. In the Court’s statement of the Question Presented, the Court reminds us that in its 1957 Fuorco decision, the Court held that the patent venue statute is not to be supplemented by the general venue statute. In other words, section 1400(b) limits venue in patent cases without regard to section 1391(c)’s more permissive language. In conclusion, the Supreme Court stated, “the question in this case is thus precisely the same as the issue decided in Fourco: whether 28 U.S.C. § 1400(b) is the sole and exclusive provision governing venue in patent infringement actions and is not to be supplemented by 28 U.S.C. § 1391(c).”
That final statement combined with the Supreme Court’s recent trend of rejecting the Federal Circuit’s precedents seems to suggest the answer: fix venue . . . fix patent litigation.