Broad patent venue rules allowing corporations to be sued for patent infringement almost anywhere are under siege both in Congress and in the courts. Yet, a non-patent case that was recently granted certiorari by the Supreme Court, although not widely noted in intellectual property law circles, may provide another potential front in this ongoing battle.
As we reported in a prior blog, at least two bills were introduced in the last session of Congress that would have restricted patent cases to districts where the defendant (1) is incorporated, (2) has its principal place of business, or (3) has a physical facility performing manufacturing or research and development of an accused product. See “Venue Equity and Non-Uniformity Elimination Act” (S. 2733); “Innovation Act” (H.R. 9). Then, on December 14, 2016, in In re TC Heartland LLC, the Supreme Court agreed to hear a challenge to the Federal Circuit’s 25-year old precedent, which holds that venue in a patent case is not limited to judicial districts in which the defendant has an established place of business but rather is proper in any district where an entity is subject to a court’s personal jurisdiction. VE Holding Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574 (Fed. Cir. 1990). Other Federal Circuit precedent holds that such jurisdiction exists in any judicial district where a defendant purposefully shipped accused products through an established distribution channel and the claim arises out of those activities. Beverly Hills Fan Co. v. Royal Sovereign Corp., 21 F.3d 1558, 1571 (Fed. Cir. 1994). In combination, these two decisions essentially guarantee that patent suits can be brought against most corporations almost anywhere in the United States.
While the Supreme Court’s decision to hear TC Heartland’s case is widely thought to spell certain change in patent venue law, the recent certiorari grant in Bristol-Myers Squibb Co. v. Superior Court of California, San Francisco County (No. 16-466) offers another possibility for change. Bristol-Myers is a products liability case involving numerous plaintiffs who brought suit in California over alleged adverse consequences from a prescription drug. The Supreme Court of California, in a 4-3 decision, affirmed the lower court’s rejection of the drug company’s challenge to personal jurisdiction that the non-California plaintiffs’ claims did not “arise out of or relate to” the drug company’s contacts with California. The dissenting opinion argued that the majority’s minimization of how related a plaintiff’s claims must be to the defendants contacts with the forum state “expands specific jurisdiction to the point that, for a large category of defendants, it becomes indistinguishable from general jurisdiction[,]” i.e., jurisdiction over controversies unrelated to defendant’s contacts with the forum state based on the sheer extensiveness of the defendant’s contacts. An amicus brief in support of Bristol-Myers’ cert petition filed by the U.S. Chamber of Commerce and the American Tort Reform Association contended that the California Supreme Court’s holding “would impose unfair burdens on businesses, [and] permit forum-shopping that undermines the integrity of the judicial system[.]”
Based on the cert grant, the U.S. Supreme Court now appears set to decide when a claim sufficiently “arises out of or relates to” a defendant’s contacts with the forum state. Although Bristol-Myers is not a patent case, it involves the same specific jurisdiction criteria that the Federal Circuit has found satisfied in patent cases by product shipments into a forum. Therefore, it is possible that a Supreme Court decision that tightens the nexus between the claims and the defendant’s acts that is required to establish specific personal jurisdiction may curb patent owners’ abilities to bring suit in as wide array of fora as is possible under current Federal Circuit precedent.