The question presented in TC Heartland LLC v. Kraft Foods Group Brands LLC is seemingly straightforward: Does the statute governing venue generally, 28 U.S.C. § 1391(c), supplement the patent venue statute, 28 U.S.C. § 1400(b)? In particular, the issue is whether § 1391(c)(2)’s broad residency definition, which provides that a corporate defendant “shall be deemed to reside . . . in any judicial district in which such defendant is subject to the court’s personal jurisdiction,” should be read into § 1400(b), which provides that a patent infringement action “may be brought in the judicial district where the defendant resides.” If a corporate defendant “resides” wherever a court has personal jurisdiction over it, a patent owner will typically have many choices of where it may sue that corporation for infringement.
TC Heartland is incorporated and headquartered in Indiana, while Kraft Foods is incorporated in Delaware and headquartered in Illinois. Kraft Foods sued in the District of Delaware, arguing that TC Heartland established personal jurisdiction—and thus venue—when it knowingly shipped a large number of allegedly infringing goods into that forum. The Federal Circuit held that the patent venue statute is supplemented by the broad definition of residency in § 1391(c). TC Heartland now asks the Supreme Court to reverse the decision and to hold that § 1400(b) is the sole and exclusive statute governing venue in patent infringement actions.
The case itself has garnered much attention because the same broad venue rules also allow non-practicing entities—so-called “patent trolls”—to sue in the Eastern District of Texas. Indeed, the policy implications of the case have taken center stage among many commentators.
The issue of where patent owners may sue alleged infringers is an important one, and this case will determine whether patent owners, like federal plaintiffs generally, have numerous choices, or whether they are limited by the narrow patent venue rules that the Supreme Court has already said should stand alone.
Prof. J. Devlin Hartline, Assistant Director, Center for the Protection of Intellectual Property (CPIP) and Adjunct Professor, Antonin Scalia Law School, George Mason University
This Teleforum discussed what Victor Schwartz has labelled "Deep-Pocket Jurisprudence™." According to Mr. Schwartz, this occurs when state appellate courts expand tort law to include an innocent defendant because the wrongdoer is "judgment proof" or cannot be reached by the judicial process. The Supreme Court of Iowa has used the term and condemned the practice.
This call focused on the possible enactment of federal civil justice reform. On March 9 and 10th 2017 the House of Representatives passed three federal civil justice reform measures, namely the H.R. 720, Lawsuit Abuse Reduction Act, H.R. 725, Innocent Party Protection Act and H.R.925, the Fairness in Class Litigation Act. Each enjoy strong support from Speaker Paul Ryan and this marks the earliest in a congressional term that such federal civil justice reform measures have passed the House. Nevertheless, it remains to be seen whether they will pass through the Senate and be approved by President Trump.
Victor E. Schwartz, Partner, Shook, Hardy & Bacon LLP
On March 6, 2017, the Supreme Court released its 5-3 decision in Pena-Rodriguez v. Colorado. The majority opinion, written by Justice Kennedy, reveresed and remanded the case holding that when there is a juror's clear statement that he or she relied on racial stereotypes or animus to convict a criminal defendant, the Sixth Amendment requires that the trial court consider the evidence of the statement and any resulting denial of the jury trial guarantee. John Richter, Partner at King & Spalding, joined us to discuss the important ramifications of the Court's striking decision.
On March 21, 2017, the Supreme Court will hear oral argument in Microsoft v. Baker. The case involves a class action lawsuit against the Microsoft Company by plaintiffs who alleged that during games on their Xbox video game console, the game disc would come loose and scratch the internal components of the device, permanently damaging the Xbox. Since only .4% of Xbox consoles experienced this issue, the district court determined that "a class action suit could not be certified and individuals in the suit would have to come forward on their own." The named plaintiffs voluntarily dismissed their claims with prejudice. The case was then appealed to the U.S. Court of Appeals for the Ninth Circuit where the court overturned the lower court's decision and held that the district court misapplied the law and abused its discretion in removing the class action allegations.
As Microsoft v. Baker comes before the Supreme Court, the major question is whether or not appellate courts have the jurisdiction to review a class action suit after the plaintiffs voluntarily dismiss their claims with prejudice.
Cory L. Andrews, Senior Litigation Counsel, Washington Legal Foundation
May a patent owner use contracts to prohibit any resale or reuse of its patented products beyond the initial purchaser? OnTuesday, March 21, 2017, the Supreme Court will hear oral argument in Impression Products v. Lexmark International, which raises this important question.
Lexmark makes patented toner cartridges and sells them with a contract restriction that the cartridges not be resold or refilled. Impression Products buys used Lexmark toner cartridges, refills, and resells them. Lexmark argues that because the license accompanying the original sale of the cartridges prohibits transferring the cartridges, any reuse and refilling of the cartridges is an unauthorized use and thus a patent infringement. If Lexmark’s argument wins, then manufacturers of patented goods will be able to restrict downstream uses of their goods by use of licenses, and no privity of contract will be required to hold third parties liable. On the other hand, defendant Impression Products argues that the “patent exhaustion” doctrine should operate here to restrict Lexmark from asserting any patent rights after a first, authorized sale. Also at issue is whether first sales in foreign countries instead of the U.S. should affect the outcome.
The case will have significant effects on the ability of patent owners to control the downstream uses of their patented products, and may affect the ability of patent owners to prevent the importation of “grey market” goods that have been lawfully sold in other countries, similarly to the Supreme Court’s holding in the 2013 copyright case of Kirtsaeng v. John Wiley & Sons, Inc.
Professor David Olson of Boston College Law School offered impressions and predictions after the Court heard oral argument.
Prof. David S. Olson, Associate Professor, Boston College Law School