Brandon G. Smith( left) and Payson LeMeilleur(right) of Knobbe Martens.

Over a year ago, the Supreme Court held in TC Heartland v. Kraft Food Groups, that venue for patent suits against domestic corporations is limited to either the defendant's state of incorporation, or where the defendant has a regular place of business and committed allegedly infringing acts. TC Heartland caused a dramatic shift in the location of patent infringement suits, most notably pulling suits out of the Eastern District of Texas. TC Heartland left a number of open questions. Recent Federal Circuit and district court opinions have sought to answer at least some of these questions. This article summarizes some of those opinions and offers some suggestions on how they may affect California corporations in various scenarios.

California Corporations Sued in California

There has been relatively little litigation regarding TC Heartland option (1), in part because the defendant's home state has long been a clear option for proper venue. However, TC Heartland brought to light a lingering issue: in multi-district states of incorporation does the patent venue statute (28 U.S.C. Section 1400) permit suits all districts, or just one. In states like California and Texas, where certain districts are perceived as particularly plaintiff friendly, the issue can have a significant impact.

The Federal Circuit addressed this issue in In re BigCommerce, 860 F.3d 978 (Fed. Cir. 2018). The Federal Circuit ruled that the patent venue statute allows suit in only one district within a multi-district state of incorporation. The court set forth a two-step hierarchical test for determining that single district: the judicial district where the corporation maintains its principal place of business, or failing that the judicial district in which its registered office is located. This simple test has several practical implications.

The key implication of BigCommerce is that California corporations are no longer subject to a patent infringement suit anywhere in California. For California corporations with their principal place of business in California, patent infringement suits will be limited to what is effectively the corporation's home venue. As a practical example, BigCommerce requires a California corporation with its principal location in Orange County to be sued in the Central District of California. It does not matter if that corporation has offices all over California. A patent owner cannot make that corporation defend a patent infringement lawsuit in the Southern, Eastern, or Northern Districts of California. As a result of this effective home forum requirement, it is possible that patent-owners will escalate attempts to use TC Heartland's option (2) as a hook for proper venue. Newly formed California corporations should consider BigCommerce when determining where to locate their headquarters.

The other implication is for California corporations with their principal place of business outside of California. These corporations are subject to suit in whichever venue their registered office is located. These corporations will likely want to consider their circumstances and determine whether their registered office is in district in which they view as amenable to being a defendant in a patent litigation.

California Corporations Sued Outside California

Much of the post-TC Heartland litigation has focused on option (2) and specifically the definition of a regular, established place of business.  Numerous articles have been written on this topic, and a full analysis is beyond the scope of this article. The leading case on option (2) is In re Cray, 871 F.3d 1355 (Fed. Cir. 2017). Cray requires that the “place” be “a physical, geographical location …  from which the business of the defendant is carried out.”  It further requires that the place “must for a meaningful time period be stable, established.” District courts continue to apply Cray to numerous situations, and a factually intensive analysis is required for any scenario.

California corporations should carefully assess their non-California “locations” in view of Cray. A brick and mortar location will almost certainly provide proper venue over the corporation.  However, a purely virtual presence is likely insufficient. Close issues may arise with “pop-up” shops, limited engagements, convention booths from which product is sold, and other more transient “locations.” Another “location” corporations should consider is remote employees who conduct business based out of their home. This was the issue in Cray, and the Federal Circuit did not foreclose the argument that such a location could establish venue over the employer.

Other Implications of 'TC Heartland'

Another, lesser noticed implication of TC Heartland is that it has effectively foreclosed the argument that patent infringement suits are subject to what is colloquially known as “pendent venue.” Pendent venue is a practice where proper venue for one cause of action (e.g., trademark infringement) bootstraps venue for another cause of action (e.g., patent infringement) that would otherwise be improper.Even before TC Heartland pendent venue for patent infringement was difficult, but it was not impossible. For example, in Hsin Ten Enterprise USA v. Clark Enterprises, 138 F. Supp. 2d 449 (S.D.N.Y. 2000), the plaintiff successfully used venue for state law claims to bootstrap venue for its patent claims. After TC Heartland, district courts have uniformly ruled that pendent venue does not overcome other venue issues for patent infringement suits. At least one court has suggested pendent venue for patent infringement suits is now categorically barred. National Products v. Akron Res. Inc., C15-1984JLR, 2018 WL 1457254 (W.D. Wash. 2018).

Plaintiffs with both patent and non-patent claims will need to consider whether it is desirable to subject non-patent claims to the limited forum choices of the patent venue statute. The general venue statute (28 U.S.C. Section 1391) is broader and other forums may be available for the non-patent claims. This issue will be particularly acute when bringing suit against a corporation that only has locations in its state of incorporation. Under TC Heartland, any patent infringement claims must be brought in the defendant's home venue.  In contrast, the general venue statute may allow the nonpatent claims to be brought in plaintiff's home forum or some other perceived plaintiff-friendly forum.

Payson LeMeilleur and Brandon G. Smith are attorneys in the Irvine office of intellectual property law firm Knobbe Martens. LeMeilleur is a partner who has litigated patent infringement cases in U.S. District Courts nationwide, as well as at the Federal Circuit and International Trade Commission. He has represented both plaintiffs and defendants in many technological areas, including pharmaceuticals and mechanical, biomedical and electronic devices. He can be reached at [email protected]. Smith is an associate whose practice focuses on litigation with an emphasis on patent, trademark, copyright, trade secret, and data privacy matters. He can be reached at [email protected].