TC Heartland v. Kraft Foods

Monday, March 27, 2017

by Michael Viscariello, Product Marketing Manager, Anaqua

Is This The End of Forum Shopping In Patent Litigation?

Supreme Court rulings can alter the landscape of a market and restructure the way corporations do business. In a 7-1 landslide last week, the Supreme Court struck down the Federal Circuit’s decision permitting laches as a defense to patent infringement cases in SCA Hygiene v. First Quality Baby Products (“SCA Hygiene”). My last article discussed the merits of this case, its potential downstream effect on IP stakeholders, and acknowledged the Court’s ongoing evaluation of numerous Federal Circuit patent cases that are reshaping the way corporations and IP law practices do business.

Today, the Supreme Court takes up another patent infringement case to decide the hotly debated issue of venue in TC Heartland LLC v. Kraft Foods Group Brands LLC (“TC Heartland”). Among the prominent storylines permeating the courts and associated media are the back and forth struggle between the Supreme Court and the Federal Circuit along with the flagrant forum shopping taking place in the Eastern District of Texas and the District of Delaware.

Quick Background

The question in TC Heartland is whether the patent venue statute § 1400(b) is the sole and exclusive provision governing venue in patent infringement actions without supplement by the general venue statute § 1391(c)?

The language in § 1400(b) is clear and unambiguous receiving no relevant congressional or judicial revision to date. However, § 1391(c) underwent a seemingly innocuous revision in 1988 that threw patent venue on its head for the last two and a half decades. A full re-write of § 1391(c) in 2011 has not brought any clarity to the matter either

The Federal Circuit’s 1990 reinterpretation of the patent venue statute in VE Holding Corp. v. Johnson Gas (“VE Holding”) includes § 1391(c) as a supplemental provision defining a corporation’s resident status because both sections fall under the same chapter of the U.S. Code. The result - a massive shift in where plaintiffs file patent infringement cases, specifically, the Eastern District of Texas and the District of Delaware.

Flagrant Forum Shopping

By 2015, the Eastern District of Texas was home to more than 43% of patent infringement cases.[1] Notably, the District of Delaware is the second most popular district and is the district in which Kraft sued Heartland. Combined, the two districts encompass more than 50% of the current patent infringement litigation in the United States.

Law reviews, legal journals, and leading newspapers such as The New York Times, Washington Post, and Wall Street Journal regularly debate the plague of forum shopping resulting from the Federal Circuit’s interpretation, and the current practice continues to engender widespread criticism and calls for reform.[2] The Supreme Court received over 35 amicus briefs from a combined 200+ amici ranging from prominent bar associations, to law and business professors, a plethora of corporations, and other interested parties in the IP space.

SCOTUS v. Federal Circuit

In the last decade, the Supreme Court overturned 22 of 27 Federal Circuit decisions in patent cases; SCA Hygiene makes it 23 and counting.[3] The two courts, visibly, don’t see eye-to-eye when it comes to patent protection and ensuing litigation. The Federal Circuit liberally creates distinct rules in patent cases that the Supreme Court subsequently checks in favor of a consistent, fact-based analysis across the spectrum of legal disciplines, which is essentially their job.[4] According to Justice Alito in SCA Hygiene, “[p]atent law is governed by the same common-law principles, methods of statutory interpretation, and procedural rules as other areas of civil litigation.”

Policy v. The Law

Beyond the statutory analysis and other legal merits presented by Heartland and Kraft, this case presents several high-stakes policy considerations such as forum shopping and the interplay between the Federal Circuit and the Supreme Court. The policy arguments are the fodder that make the news and are the things lawyers discuss at cocktail parties leading up to a hearing. However, does the court truly give weight to, or consider, these arguments when deciding a case? In my humble legal opinion, it’s rare.

Justice Alito states in several places throughout the SCA Hygiene Opinion that “as for the various policy arguments presented, this Court cannot overrule Congress’s judgment based on its own policy views.” Alito defers to Congress stating that “applying laches within a limitations period specified by Congress would give judges a ‘legislation overriding’ role that is beyond the Judiciary’s power.”

So, what does this mean for TC Heartland and Kraft? My newest white paper discusses how the court may find and how IP professionals can stay ahead of Supreme Court decisions.

[1] Lex Machina 2015 End-of-Year Trends
[2] TC Heartland's Petition for Certiorari
[3] Tug-of-War Over Interpretations of Patent Law Continues Between The Federal Circuit and SCOTUS
[4] Id.