Patent infringement has long been subject to a special venue (site of litigation) statute, 28 U.S.C. 1400. Unlike general venue statutes which concentrate on where an injury took place, the nature of the parties, and convenience of the parties and courts; Section 1400 is very specific. It allows patent infringement suits only where “the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business.”
In the past, the “resides” issue, under the amended general venue statute, allowed suits under most state long-arm statutes; which allow, for example, a suit to be brought in Ohio against a non-resident in the Ohio courts, if the injury affected business or an entity within the state. This allowed certain plaintiff-friendly jurisdictions, like the Eastern District of Texas, to become hotbeds of patent infringement filings.
The Supreme Court made a major narrowing interpretation of this statute though, in 2017, in the case TC v. Heartland Bank (read here). The Court ruled that a domestic corporation “resides” only in its state of incorporation, and that following the canon that the more specific rules over the more general; the specific patent venue controlled over the general venue statute, and that “resides,” for a corporation, meant only its state of incorporation.
What the Court didn’t do, though, is deal with the second and third parts of the equation. [/box] Determining a place “where the defendant has committed acts of infringement” is fairly clear – sales or deliveries of infringing goods. But what exactly is, “a regular and established place of business?” Especially in the age of online commerce and “virtual” business presences.
Since then, court opinions have been wide ranging. In several cases, courts have said that a place of business must be a physical location that is regular and established and belongs to the accused infringer, rather than its employees. For example, the Eastern District of Texas was the wrong venue against a corporation that had only a single sales representative who worked remotely from his home in the district. Even fairly large numbers of remote workers have been held insufficient to constitute “a regular and established place of business,” as has the presence of computer servers, Amazon fulfillment centers, and the presence of subsidiary companies. However, in other cases, computer servers were considered to be “data repositories,” and therefore satisfied the test.
Overall, this has had a definite chilling effect on patent infringement litigation. Many small patent owner have limited resources for litigating in distant forums, often Delaware, and have long relied on filing in certain “patent-friendly” places.
This week the Intellectual Property Owners Association has floated a formal proposal to greatly widen the “regular and established place of business” rule. It would allow suits to be filed where the “technological activities relating to the invention that led to the application for the patent” took place, or where a plaintiff or subsidiary has a regular place of business relating to the research or development or manufacturing,” or where the defendant is the parent or subsidiary, or shares at least 50% common ownership with a U.S. company. Even broader, the proposal would open venue consideration to the “relevance of the claim to the related entity,” and would allow a facility “intended primarily” for retail sales of a product to count as a regular and established facility for venue purposes.
If patent infringement venue decision stay all over the map, and Congress doesn’t act, this seems like a matter for Supreme Court review. TC Heartland may have been clear on “resides,” but they left the bigger issue unresolved.