Venue Trends for Patent Litigation After TC Heartland

On May 22, 2017, the Supreme Court of the United States uprooted decades of precedent through its decision in TC Heartland v. Kraft Foods Group Brand, 137 S. Ct. 1514 (2017). Prior to TC Heartland, personal jurisdiction was enough to establish venue under 35 U.S.C. §1400(b), which gave plaintiffs the option to sue a defendant in any district where it sold an allegedly infringing product. Thus, the plaintiff could sue a defendant in the plaintiff’s own “backyard” by simply ordering a product online and having it shipped to their home state. However, in one fell swoop, the Supreme Court has now essentially required the plaintiff to go to the defendant. Following the decision in TC Heartland, a domestic corporation may now only be sued in either the state where it is incorporated or a state where it has committed acts of infringement and has a regular and established place of business. This decision struck a blow to plaintiffs by limiting the places where a defendant could be sued. However, a year has passed since the decision and plaintiffs have not given up hope in their attempts to circumvent the rule.

Post TC Heartland, issues regarding the applicability of pendent venue have been on the rise. Pendent venue allows a court to exercise, otherwise improper, venue over a claim where venue is proper over other claims, in the interest of judicial efficiency. Thus, plaintiffs have resorted to stacking their complaints with claims in which the court does have proper venue, in order to argue that the court should exercise pendent venue and retain jurisdiction over the patent infringement claims in the name of saving judicial time and resources. Courts, however, have consistently rejected this argument, finding, the Supreme Court’s decision in TC Heartland, prescribing the circumstances under which a defendant can be brought into court, cannot be supplanted by the exercise of pendent venue. See Jenny Yoo Collection, Inc. v. Watters Design Inc., 2017 WL 4997838 (S.D.N.Y. Oct. 20, 2017); Wet Sounds, Inc. v. Powerbass USA, Inc., 2018 WL 1811354 (S.D. Tex. Apr. 17, 2018); Olivia Garden, Inc. v. Stance Beauty Labs, L.L.C., 2018 WL 3392063 at *3 (N.D. Cal. 2018).

Plaintiffs have also attempted to base venue on the operations of related entities, specifically a defendant’s corporate affiliates. In these situations, the plaintiff may name both the parent and subsidiary company in its suit because one of the two is incorporated in the plaintiff’s home state. The plaintiff then asserts that the agency relationship between the two is sufficient for the court to retain jurisdiction over both so long as venue is proper over one. This approach however has similarly been met with no success, with courts consistently holding that after TC Heartland, for a regular and established place of business of a subsidiary to be imputed to a corporate relative, there must be a lack of corporate separateness. See Soverain IP, LLC v. AT&T, Inc., 2017 WL 6452802 (E.D. Tex. 2017); Symbology Innovations, LLC v. Lego Systems, Inc., 2017 WL 4324841 (E.D. Va. Sept. 28, 2017).

Nevertheless, there may be some light at the end of this tunnel for plaintiffs. A line of cases from the district of Delaware have suggested that venue may be proper where it is based on the presence and activities of a corporate family. See Bristol-Myers Squibb Company v. Mylan Pharmaceuticals, Inc., 2017 WL 3980155 (D. Del. Sept. 11, 2017); UCB, Inc v. Mylan Technologies, Inc., 2017 WL 5985559 (D. Del. December 1, 2017); Mallinckrodt IP v. B. Braun Medical Inc., 2017 WL 6383610 (Dec. 14, 2017). A corporate family is a group of corporations consisting of a parent corporation and all of its subsidiaries, in which the parent corporation owns directly or indirectly a one hundred percent interest. Allowing venue to be based on the presence and activities of a corporate family builds off of the Federal Circuit’s holding in Minnesota Mining & Manufacturing Co. v. Eco Chemicals, Inc., in which the court held that venue in patent infringement case may be proper with regard to one corporation by virtue of the acts of another, intimately connected, corporation. 757 F.2d 1256 (Fed. Cir. 1985). These cases give rise to question of whether the corporate veil must be pierced in order to impute venue onto a corporate affiliate, or whether venue can be proper simply because the entity is a part of a corporate family that is present and active in the plaintiff’s choice of judicial forum. At least one court has rejected this approach, explaining that while the Supreme Court did not address circumstances in which companies residing in various states are affiliated corporate entities, its broad unqualified language in TC Heartland precludes finding venue is appropriate simply because the plaintiff’s complaint cannot be filed in one judicial district and the defendant is a corporate family. See Tower Laboratories, Ltd. V. Lush Cosmetics Limited, 285 F.Supp.3d 321, 324 (D.D.C. 2018). Considering the district discord, this issue will likely make its way to the Federal Circuit by next year.

* Amaris Gyebi was a 2018 Summer Associate with Beusse Wolter Sanks & Maire, PLLC and is an incoming Associate in August 2019. This blog post was supervised by Terry Sanks and Amber Davis.