In re BigCommerce: Federal Circuit Continues to Limit the Scope of Proper Patent Venue

Despite going undisturbed for nearly 30 years, the patent venue statute — 28 U.S.C. § 1400(b) — has undergone a near-complete overhaul by appellate courts in just the past 12 months. Starting with the U.S. Supreme Court’s ruling in TC Heartland in May 2017, followed by the Federal Circuit’s In re Cray decision later that year, and underscored by two more recent circuit court cases, the trend toward narrowing the available fora for patent plaintiffs continued this week with the Federal Circuit’s precedential opinion in In re BigCommerce.

Taking a cue from TC Heartland, the Federal Circuit drilled down on what it means to “reside” in a state for patent venue purposes, specifically when a defendant is incorporated in a state having multiple judicial districts. Parting with recent rulings from the Eastern District of Texas, the Federal Circuit on May 15 concluded that a corporate defendant “resides” only in a single judicial district in its state of incorporation: either the district in which its principal place of business is located or, failing that, the district in which its registered office is located.

For Multi-District States, BigCommerce Limits “Residence” to a Single Judicial District

With TC Heartland a year ago, the Supreme Court curtailed the definition of “residence” such that corporate defendants in patent cases reside only in their state of incorporation. (See our prior analysis in “Litigation Alert: Supreme Court Announces New Limits on Venue in Patent Cases, Blunting Key Troll Tool ”) In In re Cray in September 2017, the Federal Circuit clarified that the “regular and established place of business” language of the venue statute could not be read broadly to include virtual or electronic presences, or the homes of remote employees. (See Fenwick article “Federal Circuit Provides Much Needed Patent Venue Guidance Post TC Heartland ”) Then, in two subsequent cases — In re Micron and In re ZTE — the Federal Circuit assessed waiver and the burden of proof in the context of § 1400(b), unequivocally placing on plaintiffs the burden to demonstrate proper venue.

Even after TC Heartland, lower courts split on the issue of where a corporate defendant “resides” under § 1400(b) when the state of incorporation has multiple judicial districts. BigCommerce, the defendant in the latest case, In re BigCommerce, is incorporated in the State of Texas and headquartered in Austin, which is located in the Western District of Texas. Plaintiffs Diem and Express Mobile separately brought patent infringement suits against BigCommerce in the Eastern District of Texas. Relying on TC Heartland, BigCommerce moved to dismiss or transfer the cases for improper venue.

The district court denied BigCommerce’s motions. In doing so, it interpreted TC Heartland and § 1400(b) and ruled that where a state contains more than one judicial district, the corporate defendant resides in every judicial district within the state for venue purposes.

On a petition by BigCommerce for writ of mandamus, the Federal Circuit vacated the district court’s orders. The Federal Circuit first found that the plain language of the venue statute “speaks to venue in only one particular judicial district in the state.” Second, the court reviewed the predecessor statute to § 1400(b), which stated that jurisdiction could be established “in the district of which the defendant is an inhabitant, or in any district in which the defendant… shall have… a regular and established place of business.” Third, the Federal Circuit examined the Supreme Court’s holding in Stonite Products v. Melvin Lloyd, in which the Supreme Court found venue improper when a defendant having its principal place of business in the Eastern District of Pennsylvania was sued in the Western District of Pennsylvania. Finally, the panel in BigCommerce rejected respondents’ argument that the “realities of modern business” counseled in favor of a flexible approach to venue. In no uncertain terms, the Federal Circuit wrote that it “cannot ignore the requirements of the statute merely because different requirements may be more suitable for a more modern business environment.”

Going forward, the Federal Circuit articulated a straightforward analysis to the “resides” prong of § 1400(b). If a defendant is incorporated in a state having multiple judicial districts and has its principal place of business within the state, the defendant resides in the district in which its principal place of business is located. If a defendant’s principal place of business is not within its state of incorporation, the defendant resides in the district in which its registered office is located.

Why BigCommerce Matters

The BigCommerce decision provides new guidance on the rapidly evolving patent venue landscape. For plaintiffs, it means even more limitations on where patent infringement lawsuits may be filed, and reduces plaintiffs’ ability to take corporate defendants to court away from their actual places of business. For defendants, it offers additional certainty when assessing exposure to patent lawsuits in particular venues. For defendants whose principal place of business is outside their state of incorporation, BigCommerce also serves as a reminder that a “registered office” — even the address of a registered agent for service of process — may serve as a hook for venue in a patent infringement case.

*Raj Utreja is a summer associate in Fenwick's litigation group.