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Wednesday, March 01, 2017

The Federal Circuit and "Patent Exceptionalism": Part III

As discussed in Parts I and II, legal doctrines developed by the Federal Circuit are often derided as “exceptionalist,” particularly on issues of procedure.  At the end of this month, the Supreme Court will hear TC Heartland v. Kraft Foods—a case concerning venue in patent cases which, at first glance, seems to fit that mold.  However, as Paul Gugliuzza (Boston University) and I have argued in a recent article and discussed elsewhere, venue is one area of Federal Circuit procedural law that is not, in fact, exceptional.  Rather, the Federal Circuit’s understanding of the patent venue statute—i.e., that it allows corporate defendants to be sued in any district where they are subject to personal jurisdiction—is completely consistent with venue in other federal civil cases.   

The question in TC Heartland is whether the patent venue statute, 28 U.S.C. § 1400(b), is supplemented by the general venue statute, 28 U.S.C. § 1391.  Section 1400(b) provides that patent infringement actions may be brought “where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business.” While § 1400(b) does not define the term “resides,” the general venue statute does.  Specifically, § 1391(c) says that corporate defendants reside in districts where they are subject to personal jurisdiction.  For more than twenty-five years, the Federal Circuit has held that the term “resides” in the patent venue statute should be defined according to § 1391(c).        

So, why has the Supreme Court decided to weigh in on this issue now?  First, the petitioner in TC Heartland argues that the Supreme Court decided this precise question in Fourco Glass Co. v. Transmirra Prods. Corp., 353 U.S. 222 (1957), and that the Federal Circuit has failed to follow that decision.  It is true Fourco held that the general venue statute—as it read at the time—did not supplement the patent venue statute.  But over the past sixty years, the general venue statute has been amended several times, and the plain language now makes clear that § 1391(c)’s residency definition applies to the patent venue statute.  Second, and perhaps more importantly, the Supreme Court has taken up this issue for policy reasons.  Today, roughly 40% of all patent cases are filed in the Eastern District of Texas. In East Texas, plaintiff discretion over forum selection has incentivized judges to adopt rules and practices favorable to patent holders in an effort to attract cases, and it has encouraged litigants to engage in unseemly tactics to influence prospective jurors. Rather than resorting to a tortured interpretation of the venue statute, however, any reform to forum choice in patent cases should come from Congress.    

Posted by Megan La Belle on March 1, 2017 at 11:39 AM | Permalink

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