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`Foreign Cos. Expected To Test Venue Rules After TC Heartland - Law360
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`Foreign Cos. Expected To Test Venue Rules After TC
`Heartland
`
`By Matthew Bultman
`Law360, New York (June 5, 2017, 8:50 PM EDT) -- Foreign companies could be at the center of
`another round of legal battles over patent venue following the U.S. Supreme Court’s decision to limit
`where U.S. companies can be sued, as patent owners look for ways around the restrictions and
`foreign companies work to stay out of plaintiff-friendly districts.
`
`The federal law covering patent venue says lawsuits can be filed where a defendant resides or where
`it has infringed and has a regular and established place of business. Ruling last month in TC
`Heartland v. Kraft Food Brands Group, the Supreme Court said “resides” means the place of
`incorporation.
`
`The decision upended the Federal Circuit’s more broad interpretation of the term, which allowed a
`company to be sued just about anywhere it made sales. But the justices were careful to say the
`ruling applied only to domestic corporations and did not extend to foreign companies.
`
`So the question becomes, what does this mean for non-U.S. defendants?
`
`John Sganga of Knobbe Martens Olson & Bear LLP said that in the short term, “the venue law on
`foreign defendants is the same as it was before TC Heartland, which is that you can sue them
`anywhere.”
`
`“The long term, though, it is kind of interesting in that the reasoning of TC Heartland does make you
`wonder whether there may well be a challenge to the venue rules as to foreign defendants in patent
`cases,” he said.
`
`The Supreme Court addressed venue restrictions for foreign companies in a 1972 decision.
`
`In Brunette Machine Works Ltd. v. Kockum Industries Inc., the court held that a foreign corporation
`can be sued for patent infringement in any judicial district. This was based on a long-standing rule
`that venue restrictions do not apply to foreign companies.
`
`In a footnote to the May 22 ruling in TC Heartland, Justice Clarence Thomas wrote that the court did
`not “express any opinion on this court’s holding” in Brunette or on the implications of the decision on
`foreign corporations.
`
`As such, it would appear that foreign companies without an established place of business in the U.S.
`can be sued anywhere personal jurisdiction is found, including the Eastern District of Texas and other
`courts perceived to be favorable to plaintiffs.
`
`For those with a U.S. subsidiary, experts expect to see more lawsuits targeting just the foreign
`parent, as patent owners attempt to get around the Supreme Court’s restrictions in TC Heartland and
`keep cases in preferred districts.
`
`“You may see some more creative attempts to try and get the foreign entities as the sole party in the
`lawsuit and try and put the liability on them,” said Adam Seitz of Erise IP PA.
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`Foreign Cos. Expected To Test Venue Rules After TC Heartland - Law360
`For example, rather than naming both Samsung Electronics and Samsung Electronics America in an
`infringement complaint, as is often done, a plaintiff might target just the South Korean parent. While
`some are skeptical this strategy will ultimately be successful, many agree it will be tested.
`
`“I think we’re going to be litigating this for a little bit. I think there are plaintiffs who are going to try
`to name just the foreign corporation,” said Yar Chaikovsky, global co-chair of Paul Hastings LLP’s IP
`practice.
`
`Another potential battleground could be whether the Supreme Court’s ruling in Brunette remains
`good law. This could lead to another case on venue similar to TC Heartland, but specifically relating
`to foreign defendants.
`
`“I would expect foreign companies to definitely challenge venue and to challenge Brunette in the
`future,” Jenny Colgate of Rothwell Figg Ernst & Manbeck PC said.
`
`It would seem there is at least a debate to be had.
`
`In TC Heartland, one of Kraft’s main arguments was that Congress effectively changed the patent
`venue statute when it amended a related statute. The justices rejected this position, saying there
`was nothing to suggest Congress intended such an outcome.
`
`But Sganga said the statute dealing with venue for foreign corporations was itself revised by a fairly
`significant amendment.
`
`“That’s another argument that I think will be interesting to see get fleshed out, which is now the
`section of 1391 that the Supreme Court was relying on in Brunette has been changed a fair amount,”
`he said, referring to Section 1391 of the U.S. Code. “I don’t know whether the Brunette reasoning
`still applies because of that.”
`
`Sganga also pointed to what might be seen as an inconsistency in the law.
`
`With TC Heartland and other decisions, the Supreme Court has in effect said the special patent venue
`statute — Section 1400(b) — is the “be all and end all” for patent venue, he said. Some might then
`question why courts are looking to another section when it comes to foreign defendants.
`
`“TC Heartland has, I think, created a little more ammunition for people who want to challenge
`Brunette and say, ‘Alright, let’s decide this once and for all: Is 1400(b) standing alone or is it kind of
`interdependent with 1391?’” he said.
`
`How these sorts of venue issues play out could impact how companies make certain decisions.
`
`For example, if courts reject patent owners’ attempts to avoid the stricter venue rules by naming just
`the foreign parent in infringement complaints, foreign companies without an established place of
`business in the U.S. might be inclined to set up a subsidiary in the country.
`
`“Right now, if you’re a foreign corporation with nothing here, you … probably can be sued anywhere,”
`Chaikovsky said, though he noted it’s uncommon for a major company not to have a U.S. subsidiary.
`Such a scenario likely applies to more nascent companies.
`
`“If you’re a growing business with growing business in the U.S., you probably should have a regular
`and established place of business in the U.S.,” he said. “If you’re already doing that right now and it’s
`brand spanking new, you might as well set it up in a venue you want to be sued in.”
`
`--Editing by Mark Lebetkin and Philip Shea.
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`All Content © 2003-2020, Portfolio Media, Inc.
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