An important ruling handed down in July by the United States Supreme Court has altered some of the rules about where lawsuits for patent infringement may be filed. As a result of the ruling in TC Heartland v. Kraft Food Group, a patent infringement lawsuit against a domestic corporation may now be filed only in the state where the allegedly infringing defendant is incorporated or in jurisdictions where the defendant operates a “regular and established place of business.”
The high court’s decision in TC Heartland v. Kraft Food Group will make it much costlier in the future for many would-be plaintiffs to protect their patents by pursuing patent infringement lawsuits. If you are a business owner and you believe that your business is a victim of patent infringement, or if you have other questions or concerns regarding intellectual property protection, now more than ever, you will need the advice and insights of an experienced Washington, D.C. patent attorney.
Prior to the TC Heartland ruling, a patent infringement action could be filed in any jurisdiction where the defendant routinely offered the allegedly infringing item for sale. Because many goods are sold nationally, patent owners could usually file an infringement lawsuit in the federal district court of their choice.
Thus, most patent infringement actions were filed in the small number of courts perceived as patent-owner friendly: the Northern District of California or the Eastern District of Texas, for example. As the same judges routinely dealt with patent infringement cases, outcomes became predictable.
WHAT MADE THE TC HEARTLAND CASE DIFFERENT?
TC Heartland asked Supreme Court justices to interpret the provision of federal law which requires a patent infringement lawsuit to be filed in either “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.” The justices decided unanimously that “the judicial district where the defendant resides” is the state where the alleged patent infringer is incorporated.
A plaintiff who is bringing a patent infringement lawsuit will have the option to file in the state where the defendant is incorporated or in the federal court districts where the defendant “has a regular and established place of business.” TC Heartland defines “the judicial district where the defendant resides,” but how have the federal courts defined “a regular and established place” of business? A recent decision from the U.S. District Court for the Eastern District of Texas provides some insight.
In Raytheon Company v. Cray, Inc. (2017), Judge Rodney Gilstrap asked four questions on the way to defining “a regular and established place of business”:
– Does the defendant have a physical presence – property, infrastructure, inventory, or people – in the district?
– Does the defendant represent that it has a presence in the district?
– Does the defendant benefit from its presence in the district?
-Does the defendant engage “in a targeted way with existing or potential customers, consumers, users, or entities” in the district?
WHAT CONSTITUTES A “REGULAR” PLACE OF BUSINESS?
In Raytheon v. Cray, the District Court decided that the defendant had in fact established a regular place of business in the district due to a sales rep’s seven years of work in that district. The sales rep was salaried, given support from an adjacent district, and reimbursed for mileage, cell phone fees, and other routine business expenses. An “office” telephone number with an area code in the district was used to sell products to customers in the district.
Other district court rulings offer further insight into how judges define “a regular and established place of business.” In Clopay v. Newell Co., Inc. (1981), the U.S. District Court for the District of Delaware ruled that renting space for ten salespersons creates a regular and established place of business. And in Brunswick Corp. v. Suzuki Motor Co. (1983), the U.S. District Court for the Western District of Wisconsin ruled that when a defendant’s employees “own or rent homes here, and they essentially work out of their homes,” a regular place of business is established.
However, in LoganTree v. Garmin International, Inc. (2017), the U.S. District Court for the Western District of Texas determined that merely being “authorized to do business” in a district, establishing a website with a list of distributors in the district, and selling activity trackers in the district to distributors did not create a “regular and established place of business.” And in Stuebing Automatic Machine Company v. Gavronsky (2016), the U.S. District Court for the Southern District of Ohio decided that while defendants may have “been in this district for business,” a physical presence alone does not establish “a regular place of business.”
WHAT IS THE LESSON OF THESE PATENT INFRINGEMENT CASES?
These cases and other patent infringement cases indicate that when multiple employees are permanently conducting the business of the defendant in a district, the courts are more likely to find a “regular and established place of business.” Alternatively, a small number of employees merely taking orders or making sales of items shipped from outside a district may not meet the court’s requirements for a “regular and established place of business.”
The Supreme Court decision in TC Heartland will probably be an advantage for defendants while making the enforcement of a patent owner’s rights in a patent infringement case somewhat more difficult. For instance, a patent holder who wants to bring an action against multiple defendants for infringing a single patent may now need to file different individual lawsuits in different districts. Previously, plaintiffs could sometimes consolidate a claim if multiple defendants sold items in a common state. Judges who have never handled patent cases (or have little experience) are now more likely to, meaning less predictable (and costlier) outcomes.
The right of businesses to protect and patent their discoveries and creations is so fundamental that the U.S. Constitution’s framers included it as a basic right. Do not hesitate to speak at once with a Washington, D.C. patent attorney if you believe that your business is a victim of patent infringement. Business owners with any questions or concerns regarding patent infringement – as well as those who need to obtain patents – should have the sound legal advice and insights of an experienced Washington, D.C. patent attorney.