Wyoming: The Next Eastern District of Texas for Patent Infringement Lawsuits?
May 23, 2017
On May 22, 2017, the Supreme Court limited the location on which patent-infringement cases can be filed, affecting the so-called “forum shopping” available to patentees.
The patent venue statute, 28 U.S.C. § 1400(b), provides 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.” In TC Heartland LLC, v. Kraft Food Brands Group LLC (2017), the Supreme Court was tasked with interpreting the scope of the term “resides.”
TC Heartland, the accused infringer, wanted the patent infringement action to be transferred to Indiana, where the company is incorporated, from Delaware, where the company ships the allegedly infringing products, but has no office. After being denied by the Delaware district court and the Federal Circuit Appeals Court, the Supreme Court took a different approach and granted the transfer.
The Supreme Court determined that for patent venue purposes, the term “resides” refers only to the company’s state of incorporation. Before this decision, a corporation’s residency referred to the state of incorporation, place where the corporation is licensed to do business, or place where the defendant was doing business as in the 28 U.S.C. § 1391(c) (1957) or for venue purposes, the corporation’s residency referred to any place where the defendant is subject to the Court’s personal jurisdiction, as in 28 U.S.C. § 1391(c) (2011).
The Supreme Court’s narrowed interpretation will greatly reduce patent infringement actions brought in districts where the accused infringers merely sell products, but do not have an established place of business. However, the ruling will have no affect on companies like Apple Inc., who have retail stores throughout the nation. As long as there is an infringing act, such as selling a product and the defendant is established in such location through a store or business facility, a patentee can still sue for patent infringement in that particular jurisdiction.
With this new limitation, patentees must choose a venue carefully. Since many companies are incorporated in business-friendly states such as Delaware and Nevada, these states may see a significant increase in patent-infringement lawsuits. Wyoming, with its no income or corporate tax whatsoever, could become the next Eastern District of Texas for patent lawsuits.
Ultimately, patent law now has a restriction on the venues available to commence infringement actions. Although, this decision does not favor patent holders, it will not drastically affect the ultimate outcome of patent-infringement cases. To be sure, Internet retailers will be celebrating the outcome of TC Heartland LLC because they can only be sued for patent infringement in their home state.