The Continuing Saga to Reduce Forum-Shopping in Patent Litigation

Texas lawyers and their clients for many years have been dragged, kicking and screaming, to the United States District Court for the Eastern District of Texas for patent litigation. While it rarely made sense for the litigation to be in East Texas, once the case was filed there, getting the case transferred to a proper venue was practically impossible. You only had to drive through Marshall, Texas to see the cottage legal services industry that sprang up from the ground to see what patent litigation had done to the community.  The real problem was that Plaintiff’s in patent litigation would come up with nearly any excuse or connection to make sure the patent litigation was filed in East Texas.

That all changed with the United States Supreme Court’s decision in TC Heartland LLC v. Kraft Foods Group Brands, LLC., 137 S. Ct. 1514, 1521, 197 L.Ed. 2d 816 (2017). TC Heartland held that under 28 U.S.C. 1400(b) a domestic defendant corporation resides only in its state of incorporation. A recent case clarified TC Heartland and reduced forum-shopping in patent litigation a step further when it was faced with the issue of whether a domestic corporation incorporated in a state having multiple judicial districts “resides” for the patent-specific venue statute in each and every district in that state under 28 U.S.C. 1400(b). In re BigCommerce, Inc., 2018 U.S. App. LEXIS 12591, *7 (Fed. Cir. May 15, 2018). Holding that a corporation does not reside in each and every judicial district of the state, the Federal Circuit looked at the plain language of Section 1400(b).

Section 1400(b) states that that “Any 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.” According to the Court, a plain reading of “the judicial district” speaks to venue in only one particular judicial district in the state. In re BigCommerce, Inc., 2018 U.S. App. LEXIS 12591, *7 (Fed. Cir. May 15, 2018), citing, NLRB v. Canning, 134 S.Ct. 2550, 2561, 189 L.Ed2d 538 (2014) and Rumsfeld v. Padilla, 542 U.S. 426, 434, 124 S.Ct. 2711, 159 L.Ed.2d 513 (2004) (holding the consistent use of the definite article indicates that there is generally one one proper respondent.”); see also Hertz Corp. v. Friend, 559 U.S. 77, 93, 130 S.Ct. 1181, 175 L.Ed.2d 1029 (2010) (holding that because “place” in the phrase “principal place of business” in 28 U.S.C. 1332 is singular, it must be a single place). The court also went on and held that it was evident from the general venue rules that if Congress wanted venue to potentially lie in multiple districts, it said so clearly.  In re BigCommerce, Inc., 2018 U.S. App. LEXIS 12591, *8 (Fed. Cir. May 15, 2018).

While the Federal Circuit acknowledged that it is sometimes difficult to determine where a principal place of business is located in a state, it held that “a universally recognized foundational requirement of corporate formation” is the designation of a registered office that will serve as a physical presence within the state for a newly formed corporation. In the absence of an actual principal place of business, the public is entitled to rely on the designation of the registered office as the place where the corporation resides.

As a result, the Federal Circuit held that, under 28 U.S.C 1400(b), in a state with multiple judicial districts, a corporate defendant shall be considered to “reside” only in a single judicial district within that state where it maintains its “principal place of business. or, failing that, the judicial district in which its registered office is located.  In re BigCommerce, Inc., 2018 U.S. App. LEXIS 12591, *16 (Fed. Cir. May 15, 2018). Besides the impact on patent litigation and venue, the In re BigCommerce, Inc. case is a continuing trend to enforce venue statutes strictly and to reduce forum shopping even more than courts and legislatures have already done so.

The opinions in this blog are solely the author’s and any comments, replies or suggestions can be sent to john@jrjoneslaw.com.

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