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US: Federal Circuit denies venue transfer in TC Heartland

USGavelIn follow up to our earlier post the Court of Appeals for the Federal Circuit has denied TC Heartland LLC’s (“TC”) petition for a writ of mandamus to direct the U.S. District Court for the District of Delaware to either dismiss or transfer the patent infringement suit filed against it by Kraft Foods Group Brands LLC (“Kraft”). Kraft filed suit against TC in 2014 alleging that TC’s sale of liquid water enhancer products infringed three of Kraft’s patents. After its motion to dismiss for lack of personal jurisdiction was denied, TC filed its petition. TC based its petition on two legal theories: (1) that it did not “reside” in Delaware for venue purposes according to §1400(b) and (2) that the Delaware District Court lacks specific personal jurisdiction.

Regarding venue, TC argued that Congress’ 2011 amendments to the general venue statute, § 28 U.S.C. §1391(c), demonstrated an intent to render §1391(c)’s definition of corporate residence, i.e. any forum that has personal jurisdiction over the defendant corporation, inapplicable to venue for patent cases.  According to TC’s petition, Congress intended to codify federal common law that a corporate residence is its place of incorporation as described in the Supreme Court’s 1957 decision in Fourco Glass Co. v. Transmirra Products Corp.  The Federal Circuit disagreed, however, dismissing TC’s arguments as “utterly without merit or logic.”  The Court reaffirmed that Congress’ 1988 amendments to the venue statute and the Federal Circuit’s decision in VE Holding v. Johnson Gas Appliance Co. together instruct that the statutory definition of corporate residence in §1391(c) applies to patent cases.

Regarding personal jurisdiction, the Federal Circuit, relying on its decision in Beverly Hills Fan v. Royal Sovereign Corp., held that TC’s contacts with Delaware were sufficient because TC purposefully shipped the accused products into Delaware under two contracts and the cause of action for patent infringement was alleged to arise out of those activities. The Court affirmed that the District Court’s exercise of jurisdiction was reasonable.

Thus, the Federal Circuit was unwilling to upset the status quo allowing plaintiff-friendly venues (like the Eastern District of Texas) to remain popular for patent infringement action filings. Unless Congress intervenes via legislation or the VE Holding decision is revisited en banc or by the Supreme Court, this status quo seems likely to persist.