TC Heartland

TC Heartland LLC v. Kraft Foods Group Brands LLC (S.Ct. 2017) is the foundational patent venue decision: BACKGROUND: Kraft Foods filed a patent infringement suit against TC Heartland (an Indiana LLC, a sweetener company) in the District of Delaware; TC Heartland was incorporated in Indiana and had no regular physical presence in Delaware; TC Heartland argued Delaware was improper venue under § 1400(b); LOWER COURT HISTORY: the District of Delaware found venue proper based on Federal Circuit precedent under VE Holding Corp. v. Johnson Gas Appliance Co. (Fed. Cir. 1990); the Federal Circuit affirmed; TC Heartland sought certiorari; THE QUESTION PRESENTED: does 28 U.S.C. § 1400(b) apply to the exclusion of 28 U.S.C. § 1391 in patent infringement cases, and for § 1400(b), does a corporation 'reside' only in its state of incorporation?; SUPREME COURT'S HOLDING (8-0 decision, Justice Thomas): § 1400(b) is the sole and exclusive provision governing venue in patent infringement actions; § 1391 (the general venue statute) does not apply to patent infringement cases; 'resides' under § 1400(b) for domestic corporations means only the state of incorporation; the Fourteenth Judicial Act of the First Congress established this meaning; Congress's 1988 amendment to § 1391 did not change § 1400(b)'s specialized meaning; VE HOLDING OVERRULED: the Federal Circuit's 1990 decision was wrong; § 1391(c)(1) ('resides' = subject to personal jurisdiction) does not expand § 1400(b); the Court relied on Fourco Glass Co. v. Transmirra Products Corp. (S.Ct. 1957), which had previously held the same thing.

VE Holding Corp. v. Johnson Gas Appliance Co. (Fed. Cir. 1990) created 27 years of expansive patent venue: VE HOLDING'S HOLDING: § 1391(c) (general venue statute's definition of corporate residence as any district where subject to personal jurisdiction) applies to § 1400(b)'s 'resides' language; because a corporation is subject to personal jurisdiction wherever it does business in the US, venue was proper in virtually any federal district; PRACTICAL EFFECT: patent holders could file wherever they wanted; forum shopping became widespread; the Eastern District of Texas emerged as the dominant patent venue: Marshall, TX (Judge Gilstrap); local patent rules favoring plaintiffs; fast case management; pro-plaintiff jury pool; difficult to transfer cases; WHY EDTX BECAME DOMINANT: plaintiff-friendly local rules; quick trial dates (2-3 years); low chance of transfer even to more convenient forums; historically high damage awards; proximity to Dallas for attorneys; small community = consistent, predictable judges; SCALE OF EDTX DOMINANCE: at peak, EDTX handled ~40-45% of all US patent cases; more patent filings than all other districts combined in some years; Judge Gilstrap alone had a larger patent docket than any other individual judge in US history; CRITICISM: judicial inefficiency (one district handling 40%+ of national patent docket); no connection between cases and the district (product never sold in Marshall, TX); 'patent tourist' phenomenon; TC HEARTLAND'S IMPACT: EDTX filing share dropped significantly; cases moved to Delaware, NDCA, WDTX; WDTX/Waco under Judge Albright attracted plaintiff-side filers post-2017 with efficient case management.

The second prong of § 1400(b) — regular and established place of business + acts of infringement — required immediate interpretation after TC Heartland: IN RE: CRAY INC. (Fed. Cir. 2017): the Federal Circuit addressed what constitutes a 'regular and established place of business' under § 1400(b); THREE REQUIREMENTS: (1) there must be a physical place in the district — a building, storage facility, or fixed physical location; (2) it must be a regular and established place — not merely temporary, sporadic, or transient; ongoing presence, not a one-time visit; (3) it must be the defendant's place of business — not merely an employee's home; the defendant must ratify the use of the employee's location as a place of business; WHAT QUALIFIES: manufacturing plants; distribution centers; data centers in the district; server farms; offices leased by the defendant; retail stores; warehouses; WHAT DOES NOT QUALIFY: employee's home office (even if employee has worked there for years); hotel rooms during a trade show; temporary pop-up locations; third-party offices visited by defendant's employees; cloud computing nodes (no physical presence of defendant); FACTORS COURTS CONSIDER: whether the defendant owns or leases the space; whether the defendant stores inventory there; whether the defendant's name appears on the location; whether customers interact with the defendant at that location; whether the defendant advertises the location; REMOTE WORK ERA: Cray's three-part test is difficult to satisfy for purely remote workers; many tech companies have employees distributed nationally but few physical offices; this limits patent venue for defendants with WFH workforces.

TC Heartland dramatically reshaped where patent cases are filed across the US: IMMEDIATE POST-TC HEARTLAND SHIFTS (2017-2019): EDTX filing share dropped from ~40% to ~20-25%; Delaware rose to become the leading patent district (most corps incorporated in Delaware); NDCA increased due to tech company HQs; LONG-TERM PATTERNS: DISTRICT OF DELAWARE: consistently high filing volume; routine cases; experienced patent judges (Judges Andrews, Burke, Connolly, Williams, Noreika); multidistrict patent cases; efficient management; WESTERN DISTRICT OF TEXAS (WDTX) — WACO: Judge Alan Albright specialized his Waco division docket in patents (2019-present); plaintiff-friendly efficient management; set aggressive trial dates; WDTX became #1 or #2 in patent filings 2020-2022; Federal Circuit mandamus orders forced transfer of some cases (In re: Apple 2021); some judges in Austin added to patent cases to reduce Albright's backlog; post-Albright appointment changes: other WDTX judges now share patent cases; EASTERN DISTRICT OF TEXAS: still significant; defendants' logistics operations (warehouses, distribution centers) create venue in EDTX; 'acts of infringement' requirement met by sales in any district with a physical presence; NORTHERN DISTRICT OF CALIFORNIA: Apple, Google, Meta, Salesforce, Oracle HQs; appropriate venue for major tech companies; slower docket but patent judges experienced; DISTRICT OF NEW JERSEY: pharma company HQs; Hatch-Waxman ANDA cases clustered here; ITC FILINGS NOT AFFECTED: ITC § 337 investigations have no venue requirement; ITC filings increased post-TC Heartland as litigants added ITC to their strategy against foreign defendants.

TC Heartland requires both plaintiffs and defendants to think carefully about venue: FOR PATENT PLAINTIFFS (patent holders and NPEs): IDENTIFY PROPER VENUES: for each defendant, determine state of incorporation; identify any regular and established places of business in desirable districts; DELAWARE STRATEGY: sue in Delaware if defendant is a Delaware corporation (most are); Delaware is plaintiff-friendly with experienced patent courts; USE OF MULTIPLE DEFENDANTS: multiple defendants in the same case may be in different proper venues; careful coordination required; WATCH WDTX: Judge Albright's Waco division remains attractive for patent plaintiffs despite mandamus exposure; fast trial dates put pressure on defendants to settle; ITC PARALLEL: add ITC complaint alongside district court for defendants with US imports; FOR DEFENDANTS: VENUE CHALLENGE IS MANDATORY: must challenge improper venue in first responsive pleading (FRCP 12(h)) or it is waived; timely § 1406(a) motion to dismiss or transfer; DECLARATORY JUDGMENT PREEMPTION: if litigation is anticipated, file a DJ action in the defendant's home district; establishes proper venue; may deny plaintiff choice of forum; CONVENIENCE TRANSFER (§ 1404(a)): even in proper venues (e.g., WDTX) where convenience factors favor transfer, file § 1404(a) motion; mandamus if denied; TRACK CORPORATE STRUCTURE: domestic subsidiaries may create local venues; operating in a district through a wholly-owned subsidiary may create venue against the parent (contested; circuit-specific); WORK-FROM-HOME ANALYSIS: employees working remotely from within a district generally do not create venue; but if the company formally designates them as a local presence (advertises the address, ships inventory there), Cray factors may be satisfied.