TC Heartland v. Kraft: Any Effect On Venue For Non-U.S. Companies?

Last month, the Supreme Court (in TC Heartland v. Kraft) recounted prior precedent standing for the proposition that 28 U.S.C. 1400(b) is the sole and exclusive statute for determining venue in a patent case, and that 1400(b) is not to be supplemented by the general venue statute, 28 U.S.C. 1391(c). The Court went on to rule that 1400 (b) limits venue to districts where a U.S. corporation (1) “resides” (state of incorporation) or (2) has a regular and established place of business/commits acts of infringement. Press reports have characterized TC Heartland as a significant blow to patent trolls and their preferred district, the Eastern District of Texas.

But what about non-U.S. corporations? Does TC Heartland affect them?

The short answer is “no.”

But the long answer is “maybe” …

In a footnote in TC Heartland, the Supreme Court stated that “we do not address here [implications for non-U.S. corporations], nor do we express any opinion on this Court’s holding in Brunette Machine Works Ltd. v Kockum Industries, Inc., 406 U.S. 706 (1972) (determining proper venue for foreign corporations under then existing statutory regime).”

In Brunette Machine Works, the issue was whether Section 1400(b) or 28 U.S.C. 1391(d) (as it existed in 1972 under the “then existing statutory regime”) determined venue in patent cases for non-U.S. corporations. The Supreme Court ruled that Section 1391(d) determined venue in patent cases for non-U.S. corporations, meaning that venue was proper for non-U.S. corporations in any district (Section 1391(d) stated that “an alien may be sued in any district”).

In particular, the Supreme Court noted that “Section 1391(d) is not derived from the general venue statutes that § 1400(b) was intended to replace. Section 1391(d) reflects, rather, the longstanding rule that suits against alien defendants are outside those statutes. Since the general venue statutes did not reach suits against alien defendants, there is no reason to suppose the new substitute in patent cases was intended to do so.”

“§ 1391(d) is properly regarded not as a venue restriction at all, but rather as a declaration of the long-established rule that suits against aliens are wholly outside the operation of all the federal venue laws, general and special,” the Supreme Court stated. An important consideration for the Supreme Court was that “to hold the venue statutes applicable to suits against aliens would be in effect to oust the federal courts of jurisdiction in most cases, because the general venue provisions were framed with reference to the defendant's place of residence or citizenship, and an alien defendant is, by definition, a citizen of no district.”

So, under Brunette Machine Works, venue is proper for non-U.S. corporations in any district, and TC Heartland does not change this.

But here’s the catch … or the “maybe.”

Section 1391(d), as it existed in 1972, no longer exists. Concepts from this statute were incorporated into Section 1391(c)(3) in 2011.

So, on one hand, there is the argument that Brunette Machine Works and the “long standing rule” that suits against non-U.S. defendants are outside general venue statutes lead to the conclusion that venue for non-U.S. companies is proper in any district.

But, on the other hand, there is the argument that Section 1391(d), the section at issue in Brunette Machine Works, was incorporated into the general venue statute (Section 1391(c)) in 2011 and because Section 1400(b) is the sole and exclusive statute for determining patent venue which is not to be supplemented by Section 1391(c), Brunette Machine Works should not apply and venue for non-U.S. companies should be governed by Section 1400(b) as interpreted in TC Heartland.

Time will tell which argument wins at the Supreme Court. But in the meantime, non-U.S. companies should consider whether to challenge venue if they have been sued for patent infringement in a district where they do not have a regular and established place of business and/or have not committed acts of infringement.