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TC Heartland v. Kraft

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TC Heartland v. Kraft
Reference: 16-341
Issue: Patent law
Term: 2016
Important Dates
Argued: March 27, 2017 Decided: May 22, 2017
Outcome
United States Court of Appeals for the Federal Circuitreversed andremanded
Vote
8-0 toreverse andremand
Majority
Chief Justice John G. Roberts •Anthony Kennedy •Clarence Thomas •Ruth Bader Ginsburg •Stephen Breyer •Samuel Alito •Sonia Sotomayor •Elena Kagan

TC Heartland v. Kraft is a case argued during theOctober 2016 term of theU.S. Supreme Court. Argument in the case was held on March 27, 2017. The case came on awrit ofcertiorari to theUnited States Court of Appeals for the Federal Circuit. On May 22, 2017, in a unanimous opinion by JusticeClarence Thomas, the courtreversed andremanded the judgment of theFederal Circuit.

In this case, the court held that a domestic corporation only resides in the state in which the corporation is incorporated and, therefore, can only be sued in its state of incorporation.

HIGHLIGHTS

The case: Kraft Foods filed a patent infringement action against TC Heartland in afederal district court inDelaware. TC Heartland claimed that the court lacked jurisdiction to hear the case and that the case, if necessary, should be removed to afederal district court inIndiana, where TC Heartland is incorporated. The Delaware court disagreed. On appeal, TC Heartland sought a court order to compel the district court to change venue, but theappellate court denied TC Heartland's request.

The issue: What is the relevant statutory provision governing venue in patent infringement cases?

The outcome: On May 22, 2017, the court unanimouslyreversed andremanded the judgment of theFederal Circuit.

In brief: Pursuant to a patent infringement suit filed by Kraft Foods in aDelaware federal district court, TC Heartland filed motions to dismiss the complaint and, when that motion was denied, to remove the case to theUnited States District Court for the Southern District of Indiana, a jurisdiction in which TC Heartland is incorporated. TC Heartland argued that28 U.S.C. §1400(b), which requires that patent infringement lawsuits must be litigated in the defendant's state of incorporation, mandated removal of the lawsuit toIndiana. The district court in Delaware disagreed, holding that Congressional amendments to28 U.S.C. §1391(c) broadened the reach of acceptable venues for patent infringement cases. On appeal, TC Heartland sought amandamus to force removal to theSouthern District of Indiana, but a three-judge panel of theUnited States Court of Appeals for the Federal Circuit denied TC Heartland's motion for mandamus relief, holding that the district court correctly interpreted §1391(c) in accordance with the circuit court's governing precedents. Argument in the case was held on March 27, 2017.

You can review theFederal Circuit's opinionhere.^[1]

Click on the tabs below to learn more about this Supreme Court case.

Case

Background

This was a case about venue selection in patent infringement cases. TC Heartland is a limited liability company incorporated in, and organized under, the laws ofIndiana. Kraft Foods is a company headquartered incorporated in, and organized under, the laws ofDelaware. Kraft's principal place of business in the state ofIllinois. Kraft filed a lawsuit infederal district court alleging that TC Heartland's liquid water enhancer products infringed on three of Kraft's patents. TC Heartland filed two separate motions. First, TC Heartland moved to dismiss Kraft's complaint claiming that Kraft lacked personal jurisdiction underFederal Rule of Civil Procedure 12(b)(2). TC Heartland also filed a motion to either dismiss the complaint or to transfer venue to theSouthern District of Indiana. In court, TC Heartland alleged that it had no significant ties to the state ofDelaware beyond shipments of its liquid water enhancer products amounting to approximately 2% of its business revenues in 2013. Afederal magistrate judge that prepared a report on the dispute applied a precedent of theUnited States Court of Appeals for the Federal Circuit,Beverly Hills Fan Co. v. Royal Sovereign Corp., in holding that the court in Delaware had personal jurisdiction over the case. The magistrate judge also rejected TC Heartland's arguments that Congress' amendments to28 U.S.C. §1391(c) in 2011 nullified theFederal Circuit's holding inVE Holding Group v. Johnson Gas Appliance Co., which governed venue selection in patent infringement cases. The district court adopted the magistrate judge's report in all respects and denied TC Heartland's motion. TC Heartland moved to appeal to theUnited States Court of Appeals for the Federal Circuit seeking awrit ofmandamus to compel the district court to either dismiss the suit or transfer the venue.^[1]

Venue
On appeal of its motion for a writ of mandamus, TC Heartland advanced the argument that, in TC Heartland's view,28 U.S.C. §1400(b) superceded28 U.S.C. §1391(c) for patent law cases and, as such, TC Heartland could not be sued in Delaware. The tension between the two statutes was explained by Ronald Mann ofSCOTUSBlog. He wrote,^[2]

“

Section 1400 states that a 'civil action for patent infringement may be brought in the judicial district where the defendant resides'; the last time the Supreme Court examined the statute (its 1957 decision inFourco Glass v Transmirra Products), it concluded that this meant 'the state of incorporation only.' Thus, under Section 1400 as read inFourco, patent suits against a corporation would have to be brought in the state in which the defendant is incorporated ... The general venue statute, Section 1391, by contrast, states: 'For all venue purposes … [a corporation] shall be deemed to reside, if a defendant, in any judicial district in which such defendant is subject to the court’s personal jurisdiction with respect to the civil action in question.' Because large businesses are likely to have sufficiently pervasive business activities to be subject to personal jurisdiction throughout the nation, that section makes venue generally appropriate in most districts.^[3]

”

The circuit panel rejected TC Heartland's argument, holding that "the venue statute was amended in 1988 and inVE Holding, this court held that those amendments rendered the statutory definition of corporate residence found in § 1391 applicable to patent cases. InVE Holding, we found that the Supreme Court’s decision inFourco with regard to the appropriate definition of corporate residence for patent cases in the absence of an applicable statute to be no longer the law because in the 1988 amendments Congress had made the definition of corporate residence applicable to patent cases."^[1]

Put another way, the Federal Circuit held the Supreme Court's ruling inFourco was voided once Congress modified §1391(c) because those amendments made §1391(c) an applicable statute for determining corporate residence in patent cases andFourco only had force in the absence of an applicable statute. So, §1391(c) was not undermined by §1400(b) for purposes of determining venue for patent infringement cases as TC Heartland had argued.

Personal jurisdiction
TC Heartland also advanced the argument that the district court in Delaware only had specific personal jurisdiction over the infringing acts that occurred in Delaware. The circuit panel, however, rejected this argument as incompatible with that court's precedent inBeverly Hills Fan Co. v. Royal Sovereign Corp. InBeverly Hills Fan, the Federal Circuit held that "the due process requirement that a defendant have sufficient minimum contacts with the forum was met where a nonresident defendant purposefully shipped accused products into the forum through an established distribution channel and the cause of action for patent infringement was alleged to arise out of those activities." Put simply, personal jurisdiction can be established any time an alleged infringer ships infringed products into a state in which the infringer does not reside and that the infringement claim is based, in part, on these shipments.^[1]

According to the panel, this was what transpired in this dispute. The panel opinion stated, "Heartland admits that it shipped orders of the accused products directly to Delaware under contracts with what it characterizes as 'two national accounts' that are headquartered outside of Delaware. And Heartland does not dispute that Kraft’s patent infringement claims arise out of or relate to these shipments. This is sufficient for minimum contacts." The circuit panel noted that an assertion of jurisdiction must also be reasonable under its precedent inBeverly Hills Fan, but said that TC Heartland did not dispute the reasonableness of the district court's exercise of jurisdiction.^[1]

Having failed to show that its right to amandamus was clear and indisputable, the circuit courtaffirmed the district court's denial of the writ of mandamus sought by TC Heartland.

Petitioner's challenge

TC Heartland, thepetitioner, challenged the holding of theUnited States Court of Appeals for the Federal Circuit that its precedents inVE Holding Group v. Johnson Gas Appliance Co. andBeverly Hills Fan Co. v. Royal Sovereign Corp. governed in this case.

Certiorari granted

On September 12, 2016, TC Heartland, thepetitioner, initiated proceedings in theSupreme Court of the United States in filing apetition for awrit ofcertiorari to theUnited States Court of Appeals for the Federal Circuit. TheU.S. Supreme Court granted TC Heartland's certiorari request on December 14, 2016. Argument in the case was held on March 27, 2017.

Arguments

Question presented

Question presented:

"The patent venue statute, 28 U.S.C. § 1400(b), provides that patent infringement actions 'may be brought in the judicial district where the defendant resides .... ' The statute governing '[v]enue generally,' 28 U.S.C. § 1391, has long contained a subsection (c) that, where applicable, deems a corporate entity to reside in multiple judicial districts. InFourco Glass Co. v. Transmirra Products Corp., 353 U.S. 222 (1957), this Court held that § 1400(b) is not to be supplemented by§ 1391(c), and that as applied to corporate entities, the phrase 'where the defendant resides' in § 1400(b) 'mean[s] the state of incorporationonly.' Id. at 226. The Court's opinion concluded: 'We hold that 28 U.S.C. § 1400(b) is the sole and exclusive provision controlling venue in patent infringement actions, and that it is not to be supplemented by the provisions of 28 U.S.C. § 1391 (c).' Id. at 229 .
Federal Circuit precedent holds to the contrary. Although Congress has not amended §1400(b) sinceFourco, the Federal Circuit has justified its departure fromFourco’s interpretation of§ 1400(b) based on amendments to § 1391(c). As stated in the decision below, Federal Circuit precedent holds that 'the definition of corporate residence in the general venue statute, §1391(c), applie[s] to the patent venue statute, 28 U.S.C. § 1400' (App. 4a) and that 'Fourco was not and is not the prevailing law' (App. Sa) on where venue is proper in patent infringement actions under § 1400(b).
The question in this case is thus precisely the same as the issue decided inFourco:
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)."^[4]

Audio

Audio of oral argument:^[5]

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Transcript

Transcript of oral argument:[6]

Outcome

Decision

JusticeClarence Thomas delivered the opinion for a unanimous court. The court held that a domestic corporation only resides in the state in which the corporation is incorporated and, therefore, can only be sued in its state of incorporation.^[7]

Opinion

In his opinion for the court, Justice Thomas noted the conflicting statutory provisions under examination in this case. He wrote,^[7]

“

The patent venue statute, 28 U. S. C. §1400(b), provides 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.' InFourco Glass Co. v. Transmirra Products Corp., ... this Court concluded that for purposes of §1400(b) a domestic corporation 'resides' only in its State of incorporation. In reaching that conclusion, the Court rejected the argument that §1400(b) incorporates the broader definition of corporate 'residence' contained in the general venue statute, 28 U. S. C. §1391(c). ... Congress has not amended §1400(b) since this Court construed it inFourco, but it has amended §1391 twice.Section 1391 now provides that, '[e]xcept as otherwise provided by law' and '[f]or all venue purposes,' a corporation 'shall be deemed to reside, if a defendant, in any judicial district in which such defendant is subject to the court’s personal jurisdiction with respect to the civil action in question.' ...

The issue in this case is whether that definition supplants the definition announced inFourco and allows a plaintiff to bring a patent infringement lawsuit against a corporation in any district in which the corporation is subject to personal jurisdiction. We conclude that the amendments to §1391 did not modify the meaning of §1400(b) as interpreted byFourco. We therefore hold that a domestic corporation 'resides' only in its State of incorporation for purposes of the patent venue statute.^[3]

”

In announcing the court's decision, Justice Thomas noted that the key consideration for the court was whether Congress intended for §1391 to change the meaning of §1400(b) when Congress amended §1391. In the court's view, Congress did not intend such a change. Thomas wrote, "when Congress intends to effect a change ... it ordinarily provides a relatively clear indication of its intent in the text of the amended provision. The current version of §1391 does not contain any indication that Congress intended to alter the meaning of §1400(b) as interpreted inFourco. Although the current version of §1391(c) provides a default rule that applies '[f]or all venue purposes,' the version at issue inFourco similarly provided a default rule that applied 'for venue purposes.' ... In this context, we do not see any material difference between the two phrasings."^[7]

As a result of the court's opinion, the judgment of theFederal Circuit wasreversed and the case wasremanded for further proceedings.