When 30 Years of Practice Goes Against You: Patent Venue Ruling 'Ignores' Supreme Court Precedent

• Date: 01 May 2018

Published in Landslide® magazine, Volume 10, Number 5 , a publication of the ABA Section of Intellectual Property Law (ABA-IPL), ©2018 by the American Bar Association. Reproduced with permission. All rights reserved.

This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.

When 30 Years

of Practice Goes

Against You

By James W. Dabney

On March27, 2017, the Supreme Court of the United States heard the TC Heartland LLC v.

Kraft Foods Group Brands LLC1 oral arguments. On the surface, the TC Heartland case raised

a straightforward question of statutory interpretation: the proper construction of the phrase

“the judicial district where the defendant resides,” found in 28 U.S.C. §1400(b). Beneath the

surface lay a fundamental question, which was whether preexisting Supreme Court precedent

construing that very phrase was “law” that lower federal courts were bound to respect.

In Fourco Glass Co. v. Transmirra Products Corp., the Supreme Court held that “28 U.S.C.

§1400(b) is the sole and exclusive provision controlling venue in patent infringement actions” and

that its descriptive phrase “the judicial district where the defendant resides” denotes the judicial dis-

trict where a defendant is domiciled.2 The Court adhered to this interpretation of 28 U.S.C. §1400(b)

in a series of subsequent decisions handed down between 1961 and 2000.3 TC Heartland, an Indiana

LLC, was not domiciled in the forum district and had no place of business there. Thus, if Fourco was

law, the TC Heartland case was subject to dismissal for an improper venue. Furthermore, the impro-

priety of venue was sufciently “clear and indisputable”4 that the district court’s failure to dismiss or

transfer venue under 28 U.S.C. §1406(a) was subject to immediate appellate review by way of man-

damus. Under Federal Circuit precedent, in contrast, Fourco’s interpretation of 28 U.S.C. §1400(b)

Patent Venue Ruling “Ignores”

Supreme Court Precedent

JamesW. Dabney is a partner in Hughes Hubbard & Reed LLP and an adjunct professor of law at Cornell

Law School. The author thanks John Duffy, Richard Koehl, Emma Baratta, David Lansky, Stefanie Lopatkin, and

Michael Polka for their helpful comments on drafts of this article.

Published in Landslide® magazine, Volume 10, Number 5, a publication of the ABA Section of Intellectual Property Law (ABA-IPL), ©2018 by the American Bar Association. Reproduced with permission. All rights reserved.

This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.

Image: iStockphoto

Published in Landslide® magazine, Volume 10, Number 5 , a publication of the ABA Section of Intellectual Property Law (ABA-IPL), ©2018 by the American Bar Association. Reproduced with permission. All rights reserved.

This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.

had not been treated as law since 1990. In denying mandamus

in TC Heartland, the Federal Circuit stated: “The arguments

raised regarding venue have been rmly resolved by VE

Holding, a settled precedent for over 25 years.”5

How could TC Heartland’s claimed right to relief have

been “clear and indisputable” if its assertion was contrary to

“a settled precedent for over 25 years”? Part of the answer

was, under Supreme Court precedent, “[a] question arising

in regard to the construction of a statute of the United States

concerning patents for inventions cannot be regarded as judi-

cially settled when it has not been so settled by the highest

judicial authority which can pass upon the question.”6 Equally

important, the Federal Circuit’s reasoning to not follow the

Fourco decision could be challenged as inadequate.

In its petition for a writ of certiorari,7 TC Heartland drew

the Court’s attention to ABA House of Delegates Resolu-

tion 108C adopted August8, 2016, and to the accompanying

Report of the ABA Section of Intellectual Property Law. The

latter stated that the Federal Circuit’s decisions in VE Hold-

ing and TC Heartland “misinterpret the venue statutes and

do not follow Supreme Court precedent.”8 The general venue

statute, 28 U.S.C. §1391, was amended in 2011 to include

a new subsection (a) “Applicability of Section,” which pro-

vides: “Except as otherwise provided by law—(1)this section

shall govern the venue of all civil actions brought in district

courts of the United States....”9 Section 1391(a)’s new tex-

tual reference to “law” made unavoidable the question of

whether the Supreme Court’s decision in Fourco had the sta-

tus of “law” or something else.

When TC Heartland argued to the Federal Circuit that

Fourco was “law” within the meaning of current 28 U.S.C.

§1391(a), the court’s response was articulated in unusually

harsh language: “We nd this argument to be utterly without

merit or logic.”10 Undaunted, TC Heartland pressed its argu-

ment before the Supreme Court where the reception was quite

different. Right out of the gate Chief Justice Roberts memo-

rably asked the respondent’s counsel, “is our Fourco decision

law?”11 It soon became clear that this was no mere rhetori-

cal question. Referring to amended 28 U.S.C. §1391(a), the

chief justice continued, “Well, the current statute says ‘except

as otherwise provided by law.’ And I would have thought that

excluded overturning the Fourco decision.”12 In further dis-

cussion of whether the word “law” in 28 U.S.C. §1391(a)

encompassed the Fourco decision, Justice Kagan commented:

“for 30 years the Federal Circuit has been ignoring our

decision and the law has effectively been otherwise.”13 Distin-

guishing between “law” and “practice,” Justice Kagan asked,

“When 30 years of practice goes against you, what happens?

(Laughter.)”14

The response to Justice Kagan’s question brought to mind

the oral argument in KSR International Co. v. Teleex Inc.,15

which the author also argued, during which Justice Souter

asked a similar question concerning the Federal Circuit’s then

existing interpretation of 35 U.S.C. §103 (“Conditions for

patentability; non-obvious subject matter”):

I heard Justice Souter say something like that in the KSR

case, you know, the teaching-suggestion-motivation test has

been around so long that, at some point, the mistake becomes

the law. And—and this Court has again and again and again

stood up for its authority to declare what the law is.16

In its decision issued May22, 2017, the Supreme Court

decisively rejected any notion that “30 years of practice” in

lower federal courts was a basis for treating Supreme Court

precedent as lacking the force of law. Speaking for a unani-

mous Court, Justice Thomas stated, “We reverse the Federal

Circuit. In Fourco, this Court denitively and unambiguously

held that the word ‘reside[nce]’ in §1400(b) has a particular

meaning as applied to domestic corporations: It refers only

to the State of incorporation.”17 The Court’s analysis began

with its precedent, Fourco, and inquired whether interven-

ing legislation was sufciently clear to support a conclusion

that Fourco’s construction of 28 U.S.C. §1400(b) had been

changed. “When Congress intends to effect a change of

that kind,” the Court stated, “it ordinarily provides a rela-

tively clear indication of its intent in the text of the amended

provision.”18 “[T]he modication by implication of the set-

tled construction of an earlier and different section is not

favored.”19 In TC Heartland, the “settled construction” of 28

U.S.C. §1400(b) was taken as being the construction that the

Supreme Court had given the statute in Fourco, not the con-

struction that lower courts had placed on the statute for more

than a quarter century. The Court has often stated, “it is this

Court’s prerogative alone to overrule one of its precedents.”20

The TC Heartland decision illustrates both the force of

Supreme Court precedent and the weakness of assertions that

legislation has impliedly overruled Supreme Court precedent

without explicitly saying so. In this respect, the TC Heartland

decision resembles KSR, in which the Court reafrmed that

35 U.S.C. §103 “codied” pre-1952 Supreme Court prec-

edent.21 TC Heartland won its case in the Supreme Court,

and thereafter was able to reach a prompt settlement with the

plaintiff/respondent. This happened because TC Heartland

recognized the conict between Supreme Court and Federal

Circuit precedent. Thus, TC Heartland effectively raised the

controlling law in the district court, and TC Heartland effec-

tively preserved the point for appellate review. Defendants

that did not raise the venue issues TC Heartland raised were

found to have waived this argument.22 However, the Federal

Circuit gave some of those litigants a potential reprieve.23

The TC Heartland decision also illustrates that giving

voice to Supreme Court precedent—or deliberately choos-

ing not to do so—is an important tool in a practical litigator’s

toolbox. This is especially true if conict between Supreme

Court and lower court precedent has not been previously

acknowledged. The Federal Circuit has noted, “A decision

that fails to consider Supreme Court precedent does not con-

trol if the court determines that the prior panel would have

reached a different conclusion if it had considered control-

ling precedent.”24 The Federal Circuit has similarly stated that

where “a decision does not ‘squarely address[] [an] issue,’

a court remains ‘free to address the issue on the merits’ in a

subsequent case.”25

The Supreme Court has construed and applied many

provisions of the current Patent Act. The Supreme Court