TC Heartland: Change of Law or Mere Clarification?
This May, the Supreme Court overruled 27 years of Federal Circuit precedent in TC Heartland LLC v. Kraft Foods Group Brands LLC.[1] District courts, however, remain split on whether the decision presents a clarification or an alteration of venue requirements in patent cases. In TC Heartland, the Supreme Court ruled that the 1988 amendment to the general venue statute, 28 U.S.C. § 1391, did not change the meaning of the patent venue statute, 28 U.S.C. § 1400(b).[2] Section 1400(b) says 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.”[3] In 1990, in VE Holding Corp. v. Johnson Gas Applicance Co., the Federal Circuit held that Section 1391, as amended, applied to the residence requirement of Section 1400(b);[4] thus the test for venue under Section 1400(b) was “whether the defendant was subject to personal jurisdiction in the district of suit at the time the action was commenced.”[5] In TC Heartland, the Supreme Court reaffirmed Fourco Glass Company v. Transmirra Products Corporation, and clarified that 1400(b)’s residence option refers to a defendant’s state of incorporation.[6]
Since TC Heartland, district courts have struggled with the issue of whether the decision was an intervening change of law permitting parties in patent litigation to raise venue concerns despite having waived the issue earlier in the case.[7] The majority of federal districts, including popular patent litigation venues such as the Northern District of California, have held that because the Supreme Court essential held that Fourco has been binding law since 1957, TC Heartland did not excuse a patent defendant’s venue waiver.[8] Courts adopting this approach include the Northern[9] and Southern[10] Districts of California, the Eastern[11] and Southern[12] Districts of Texas, the Eastern District of Virginia,[13] the District of Massachusetts,[14] the Southern District of Ohio,[15] and the Southern District of Mississippi.[16] In contrast, a number of district courts – including the Western District of North Carolina,[17] the Eastern District of Tennessee,[18] the District of Minnesota,[19] the Northern District of Georgia,[20] the District of Nevada,[21] the Western District of Washington,[22] and the Western District of Virginia[23] – have held that because of the previous widespread reliance on VE Holding, TC Heartland should be viewed as an intervening change of law. The Northern District of Illinois, the District of Oregon, and the District of Delaware remain split on the issue.[24]
Delaware is illustrative. In August, U.S. District Judge Richard G. Andrews briefly noted that a defendant had waived its objection to venue in spite of TC Heartland;[25] in September, Judge Leonard Stark held that TC Heartland effected an intervening change of law.[26] With its decision in Hand Held Productions, Inc. v. Code Corporation, the District of South Carolina took a compromise approach, noting that while TC Heartland was technically not an intervening change in law, because waiver is an equitable doctrine, the court could use its discretion in determining whether the defendant had waived its right to challenge the venue.[27]
Courts holding that TC Heartland was an intervening change of law have several arguments in their favor. First, TC Heartland arguably addressed a different question than Fourco, which was whether Congress changed the meaning of §1400(b) when it amended §1391.[28] Second, the Supreme Court denied certiorari of VE Holding, thus making the case the de facto authority on the issue of §1400(b)’s meaning until TC Heartland.[29] A defendant who raised the argument that §1400(b)’s residence provision required incorporation prior to TC Heartland would not have been successful in district court,[30] as VE Holding effectively precluded such arguments for 27 years.[31] Judge Stark’s opinion noted that the Supreme Court did nothing to suggest that it viewed the Federal Circuit as acting beyond its authority in its VE Holding decision.[32]
The majority of district courts take a different approach, arguing that, “[t]he Supreme Court’s decision makes it clear that Fourco was always correct and VE Holding Corp. was always wrong.”[33] These courts note that a lower court’s erroneous statutory interpretation affects perception of law, not law itself;[34] and that the Federal Circuit cannot overturn Supreme Court precedent.[35] According to this view, 27 years of reliance do not change the harsh reality that a party could have raised the venue defense and prevailed as the plaintiff did in TC Heartland,[36] however unlikely that may have been.
The Federal Circuit has yet to step in to remedy the district split on whether TC Heartland was an intervening change of law,[37] although it has clarified the meaning of “regular and established place of business” under §1400(b).[38] If and when it decides whether TC Heartland was the “sea change” it appears to be, its decision will settle the issue, unless, of course, the Supreme Court also has its say in a few decades from now.
Footnotes
