In May 2017, the U.S. Supreme Court issued an opinion in TC Heartland LLC v. Kraft Foods Grp. Brands, LLC that set the stage for patent litigation to increase in Georgia. The Supreme Court held that the term “resides” in the venue statute for patent infringement cases refers only to the defendant’s state of incorporation. This ruling eliminated the most common way of asserting patent venue in district court litigation—for the last few decades, proper patent infringement venue was satisfied by the term “resides” because that term had been coextensive with personal jurisdiction. Now, plaintiffs may be turning to the other test for statutory patent venue, i.e., district courts in the state where the defendant has committed acts of infringement and has a “regular and established place of business.”
Under either the residence or place of business theory of venue, the result is that more patent cases are expected to be filed in Georgia in the long term, and the nature of the patent cases filed here will change, with more defendants being incorporated in Georgia or having a physical location here.
Before TC Heartland, patent cases flourished in district courts perceived by plaintiffs as having fast-moving dockets and patent-friendly juries. For example, in 2016 about a third of the approximately 4,500 patent cases were filed in the Eastern District of Texas. The defendants in many of those cases were not incorporated in Texas, and they did not have a physical business location there. Thus, had those cases been filed under the new law, the district court may not have had proper venue. This was true for many of the patent infringement cases filed in district courts all over the country—indeed, before TC Heartland, patent venue was merely a single sentence at the end of the explanation about the court’s personal jurisdiction. But with a stricter test for venue than for personal jurisdiction, more cases will likely return to defendants’ home states.
Have patent infringement case filings increased so far in 2017 in the Northern District of Georgia? Not yet. Year over year, starting at the end of May (when the Supreme Court decided TC Heartland), there has not been much of a change in patent infringement filings in the Northern District of Georgia, even though over the same period newly filed cases have significantly dropped in the Eastern District of Texas. One reason filings may not have increased yet in Georgia is because of the uncertainty in the law after TC Heartland—that opinion only interpreted the residence theory of venue, but that theory had been so commonly used that little precedent had developed for the “regular and established place of business” theory. Since May, plaintiffs who wanted a sure venue may have relied on the “residence” theory, which would explain the increased patent case volume in the District of Delaware.
That will almost certainly change as the case law normalizes on patent venue, which is beginning to happen. In September, the Federal Circuit in In re Cray resolved one major question about the “regular and established place of business” test for venue, clarifying that the test required a “physical” location, perhaps paving the way for more assertions of venue under this theory in 2018. Before Cray, in the several months after TC Heartland, the best precedent for the “regular and established place of business” theory had been a denied petition for a writ of mandamus from 1985 in the case In re Cordis. Not only was that case more than 30 years old, it also was issued when the Federal Circuit itself was literally less than three years old, having only recently been “ordain[ed] and establish[ed]” by Congress with exclusive patent appellate jurisdiction. See 28 U.S.C. § 1295; Art. III, § 1 of the Constitution.
With precedent like this, who could blame plaintiffs for filing under a residence theory of venue in Delaware? However, many plaintiffs still reasonably took the approach that under the dated Cordis ruling they could proffer some evidence of the defendant’s business in the venue. After all, the risk of being wrong was only a transfer. But with the Federal Circuit’s contemporary and clear precedent from Cray, plaintiffs will be far more confident about where proper venue lies.
As a result, patent infringement filings will likely increase in Georgia in 2018, driven by cases against defendants incorporated here, as well as those with a strong physical presence here. A contrarian view is that most midsized or large companies have a physical location in another state. While this may be true, corporate formalities should still reign because, under Cray, it is the physical place of a defendant—not any of its subsidiary entities—that matters. For that reason, the cases that would have previously been filed in non-Georgia districts against Georgia-based companies must now be filed here.
Notwithstanding such an increase, at the very least, we can expect a change in the nature of patent infringement cases in Georgia federal district courts, trending toward defendants that are physically located or incorporated in Georgia.
Sharad K. Bijanki is an intellectual property attorney at Parker Poe. His practice focuses on patent litigation and post-grant proceedings before the Patent Trial and Appeal Board of the U.S. Patent and Trademark Office.