Friday, April 29, 2016

CAFC addresses venue, personal jurisdiction in Heartland case

The issues:

Heartland argues that it is entitled to a writ of mandamus
based on two legal theories. First, it argues that it
does not “reside” in Delaware for venue purposes according
to 28 U.S.C. § 1400(b). Second, it argues that the
Delaware district court lacks specific personal jurisdiction
over it for this civil action. We conclude that a writ of
mandamus is not warranted. The arguments raised
regarding venue have been firmly resolved by VE Holding,
a settled precedent for over 25 years. The arguments
raised regarding personal jurisdiction have been definitively
resolved by Beverly Hills Fan, a settled precedent
for over 20 years. As a panel, we are bound by the prior
decisions of this court.

Of venue:

Heartland argues that the “law” otherwise defined corporate residence
for patent cases and therefore the statutory definition
found in § 1391(c) is no longer applicable to patent
cases. As Heartland itself acknowledges, “most special
venue statutes have not been held to encompass particular
rules about residency, and thus subsection (c) can
apply to such statutes wherever they are found in the
U.S. Code.” Pet. 7–8. The patent venue statute, 28
U.S.C. § 1400(b), provides in its entirety: “Any civil action
for patent infringement may be brought in the judicial
district where the defendant resides, or where the defendant
has committed acts of infringement and has a regular
and established place of business.” It is undisputed that
the patent venue statute itself does not define corporate
residence and thus there is no statutory “law” that would
satisfy Heartland’s claim that Congress intended in 2011
to render § 1391(c)’s definition of corporate residence
inapplicable to venue for patent cases.


In VE Holding, we found that
the Supreme Court’s decision in Fourco with regard to the
appropriate definition of corporate residence for patent
cases in the absence of an applicable statute to be no
longer the law because in the 1988 amendments Congress
had made the definition of corporate residence applicable
to patent cases. 28 U.S.C. § 1391(c) (1988) (“For the
purposes of venue under this chapter”). In 1988, the
common law definition of corporate residence for patent
cases was superseded by a Congressional one. Thus, in
2011, there was no established governing Supreme Court
common law ruling which Congress could even arguably
have been codifying in the language “except otherwise
provided by law.”

Heartland cites to a single sentence in a footnote in
the Supreme Court’s decision in Atlantic Marine Construction
Co. v. United States District Court for the Western
District of Texas, 134 S. Ct. 568, 577 n.2 (2013), to
argue “the Supreme Court showed its belief that § 1391 is
not applicable to patent cases, and § 1400 is.” Reply 9.
Heartland’s argument misses its mark. The Supreme
Court’s footnote states in its entirety: “Section 1391
governs ‘venue generally,’ that is, in cases where a more
specific venue provision does not apply. Cf., e.g., § 1400
(identifying proper venue for copyright and patent suits).”
Atl. Marine Constr. Co., 134 S. Ct. at 577 n.2. It is undisputed
that § 1400 is a specific venue provision pertaining
to patent infringement suits. But what Heartland
overlooks, and what Atlantic Marine does not address, is
that § 1400(b) states that venue is appropriate for a
patent infringement suit “where the defendant resides”
without defining what “resides” means when the defendant
is a corporation.

Of personal jurisdiction

Heartland’s argument regarding personal jurisdiction
in this case is, as the Magistrate Judge noted, difficult to
follow.3 Heartland appears to be arguing that 1) the
Supreme Court’s recent decision in Walden v. Fiore, 134
S. Ct. 1115, 1121 n.6 (2014), makes clear that specific
personal jurisdiction can only arise from activities or
occurrences taking place in the forum state, and
2) Federal Circuit case law makes clear that each act of
patent infringement gives rise to a separate cause of
action, such that 3) the logical combination of these two
points of law means that the Delaware district court has
specific personal jurisdiction over Heartland for allegedly
infringing acts that occurred in Delaware only, not those
occurring in other states.4 Applied to the facts of record,
under Heartland’s argument, the Delaware district court
would only have specific personal jurisdiction over the
approximately 2% of Heartland’s 2013 sales of the accused
product (i.e., 44,707 cases of the accused product
that generated at least $331,000 in revenue) that Heartland
shipped into Delaware. Thus, to resolve nationwide
the same issues as in this Delaware infringement suit,
Kraft would have to bring separate suits in all other
states in which Heartland’s allegedly infringing products
are found. Alternatively, under Heartland’s argument,
Kraft could opt to bring one suit against Heartland in
Heartland’s state of incorporation.5


Heartland’s arguments are foreclosed by our decision
in Beverly Hills Fan. In that case, we held that the due
process requirement that a defendant have sufficient
minimum contacts with the forum was met where a nonresident
defendant purposefully shipped accused products
into the forum through an established distribution channel
and the cause of action for patent infringement was
alleged to arise out of those activities. Beverly Hills Fan,
21 F.3d at 1565; see also Acorda Therapeutics Inc. v.
Mylan Pharm. Inc., Nos. 2015-1456, 2015-1460, 2016 WL
1077048, at *7 (Fed. Cir. Mar. 18, 2016) (determining that
the minimum contacts requirement was met where a
defendant contracted with a network of independent
wholesalers and distributors to market the accused product
in Delaware, the forum state). Such is the case here.
Heartland admits that it shipped orders of the accused
products directly to Delaware under contracts with what
it characterizes as “two national accounts” that are headquartered
outside of Delaware. And Heartland does not
dispute that Kraft’s patent infringement claims arise out
of or relate to these shipments. This is sufficient for
minimum contacts.

general link:

The Register wrote of the venue issue:

The court denied the appeal, reaffirming a 1990 ruling that allows a company doing business nationally in America to be sued in any US district court. This, in turn, means that plaintiffs can hand-pick the courts they use to bring forward patent infringement suits – and they usually pick the courts that back those alleging infringement.

The case has been closely followed by technology companies due to the precedent TC Heartland would have set had its appeal been successful. Intellectual property law reformers hoped that a ruling in Heartland's favor would restrict the practice of "patent trolling" by preventing IP-holding firms from using plaintiff-friendly courts (such as the Eastern Texas District Court) to file infringement claims in hopes of winning a decision or striking a settlement.


The CAFC had written that
VE Holding Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574 (Fed. Cir. 1990)
remained good law after the 2011 Congressional amendments.

In VE Holding, this court held that the
definition of corporate residence
in the general venue statute, § 1391(c), applied to the patent venue statute, 28
U.S.C. §1400. The 2011 amendments
to the general venue statute relevant to
this appeal were minor.


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