The U.S. Supreme Court ruling in TC Heartland LLC v. Kraft Foods Group Brands LLC may significantly limit where plaintiffs can sue domestic corporations, and potentially also unincorporated entities, for patent infringement. Prior to the U.S. Supreme Court decision in TC Heartland on May 22, 2017, patent litigation could be brought anywhere the defendant corporation would be subject to personal jurisdiction, including states where a defendant did nothing more than advertise and ship products. Now, proper venue for patent litigation is limited to districts within the state where the defendant (1) resides, which for a corporation is only the state of incorporation; or (2) committed acts of alleged infringement and has a regular and established place of business. A recent decision in the Eastern District of Tennessee, Maxchief Invs. Ltd. v. Plastic Dev. Grp., LLC, held that the TC Heartland decision is not limited to domestic corporations, but also unincorporated entities, such as limited liability companies, who “reside” in their state of organization. In other words, no longer can relatively few sales in a state by the domestic entity defendant be sufficient grounds to sue the defendant in that state.
Judge Gilstrap of the Eastern District of Texas, who handles a disproportionately large percentage of the nation’s patent lawsuits, presented a factor test in Raytheon Co. v. Cray, Inc. he will be following to determine proper venue: (1) physical presence of the Defendant in the district, (2) Defendant’s representations about its presence in the district, (3) benefits of the Defendant received from its business in the district, (4) and the Defendant’s targeted interactions with the district. Whether this test will be followed by other jurisdictions is yet to be determined, but different courts in different states have begun to establish their own jurisprudence on this issue. For instance, a court in the Eastern District of Texas has since ruled that two full-time direct sales representatives created a “regular and established place of business,” while a court in the Northern District of California has ruled that a few employees spending less than 25% of their time working in the district does not. Until this issue is clarified by an appellate court, litigants should look to the prior rulings of the district and judge in question for some hint of whether or not venue is proper under the “real and established place of business” prong, but will still often be dealing with a relatively high level of uncertainty.