The Impact of <i>TC Heartland</i> on Copyright Venue

Background on TC Heartland

In 2011, Kraft Foods filed suit for patent infringement in the District of Delaware against TC Heartland, an Indiana corporation. TC Heartland argued that venue was improper because it is not incorporated in Delaware, has no significant operations in Delaware, and infringement activity in Delaware was not alleged. The district court and Federal Circuit disagreed, relying on a liberal construction of patent venue, dominant since the 1990's, that concludes §1391(c) supplies §1400(b)'s definition of “resides,” namely, wherever the defendant corporation is subject to personal jurisdiction. Because TC Heartland arguably sold products into Delaware, both courts found personal jurisdiction and therefore proper venue.

The Federal Circuit first announced this interpretation in VE Holding after Congress materially amended Section 1391 for the first time. VE Holding Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574 (Fed. Cir. 1990) cert. denied, 499 U.S. 992 (1991). Congress codified Sections 1391 and 1400 together in 1948 based on a number of earlier statutes. In Fourco, the Supreme Court held this meant Congress intended the patent venue statute to stand on its own as an entirely separate standard. 353 U.S. at 226. In 1988, Section 1391's first revisions inserted new language that led the Federal Circuit to conclude this intent had changed: the statute now began “[f]or purposes of venue under this chapter,” which included §1400(b). In 2011, amendments replaced this language with “for all venue purposes,” but also added the saving clause “[e]xcept as otherwise provided by law.”

In the unanimous TC Heartland opinion, the Supreme Court clearly held that Congress did not intend to impact Section 1400 with its revisions to Section 1391. Citing Fourco, Justice Thomas held that Congress could not have intended to change the long-established relationship between §§1391 and 1400 without a clear statement of intent to overrule precedent. Id. at 8.

Translating to the Copyright Context

Prior to TC Heartland, venue for copyright suits under §1400(a) could be proper on three grounds.

First, plaintiffs could bring suit where the defendant “resides,” meaning place of incorporation. Fourco, 353 U.S. at 226; General Electric Co. v. Bucyrus-Erie Co., 550 F. Supp. 1037 (S.D.N.Y. 1982).

Second, some courts held that plaintiffs could bring suit where the defendant “resides” as supplemented by §1391(c), defining “resides” for corporate defendants as wherever they are subject to personal jurisdiction. In broad terms, this means anywhere the corporation has minimum contacts. International Shoe Co. v. State of Washington, 326 U.S. 310 (1945).

Third, plaintiffs could bring suit where the defendant “may be found.” For years, courts have generally interpreted this “may be found” language in §1400(a) as coextensive with personal jurisdiction under International Shoe and its progeny. See, Paul Goldstein, Goldstein On Copyright 15:38-40 (3d ed. 2016) (citing cases applying this principle). For instance, in Mode Art Jewelers, a suit alleging copyright infringement on costume jewelry, the court held “a corporation is 'found' in any district in which personal jurisdiction might be obtained over it.” Mode Art Jewelers Co. v. Expansion Jewelry Ltd., 409 F. Supp. 921 (S.D.N.Y. 1976).

While the first venue option is quite limited, the second and third options provide plaintiffs with broad discretion regarding where to bring suit.

So what does TC Heartland mean for §1400(a)?

According to the “whole act rule” of statutory construction, the same terms within a statute must be read together, typically sharing the same meaning unless indicated otherwise. Gustafson v. Alloyd Co., 513 U.S. 561 (1995); United States v. DiCristina, 726 F.2d 92 (2d Cir. 2013). Sections 1400(a) and 1400(b), enacted together in 1948 and unchanged since, both use the word “reside” in the same way mere sentences apart. Thus, “resides” for §1400(a) purposes would likely be restricted under the Court's logic in TC Heartland if put to the test. In other words, “resides” means place of incorporation and is not modified by Section 1391(c).

The only remaining question is whether the Court's decision in TC Heartland requires revisiting the “may be found” language by employing the same textual analysis to determine what Congress intended when it used that language in §1400(a).

Despite long-standing precedent in lower courts, it is not entirely clear that in 1948, when Congress used the phrase “may be found” in §1400(a), it intended venue to be proper in every district where a defendant may be subject to personal jurisdiction. Moreover, to find what Congress meant by “may be found,” one may need to look all the way back to 1909.

Section 1400(a) contains the same relevant language as Section 35 of the Copyright Act of 1909, which stated “[t]hat civil actions, suits, or proceedings arising under this Act may be instituted in the district of which the defendant or his agent is an inhabitant, or in which he may be found.” 17 U.S.C. §35. When Congress enacted §1400(a), it repealed and largely restated this section of the 1909 Act. See, Ex parte Collett, 337 U.S. 55, 61 n.11 (1949).

The House Report for the 1909 Act states that “[t]he new provision 'or in which he may be found' was inserted for the reason that to limit the institution of actions to the district of which the defendant is an inhabitant would fail to reach the case of an infringer of the copyright of dramatic works or of city directories, etc., Who travels from State to State and whose real habitation it might be difficult to locate.” H.R. Rep. NO. 2222, 60th Cong., 2d Sess. (1909).

Divining more about congressional intent can be difficult because case law regarding the meaning of the “may be found” language under the 1909 Act is limited.

In Lumiere v. Made Edna Wilder, Inc., 261 U.S. 174 (1923), the Supreme Court considered the scope of the 1909 Act's venue provision. In doing so, the Court noted that venue under the anti-trust laws was proper “in the case of corporations, [in] the 'district whereof it is an inhabitant' or 'any district wherein it may be found or transacts business.'” The Court held “[i]t is not reasonable to conclude that Congress intended in copyright cases to give a right far greater than these.”

At least one court specifically held that the “may be found” language in the 1909 Act should have the same meaning as under the anti-trust laws. In Deutsch v. Times Publishing Corp., 33 F. Supp. 957, 958 (S.D.N.Y. 1940), the court noted that “[t]he word 'found' with respect to suits under the Anti-Trust Laws has been held to mean that the foreign corporation must be doing business in the district in such manner and to such an extent that its actual presence there is established.” The court noted that “[i]t seems fair to assume when Congress enacted the Copyright Laws, it used the word 'found' as defined by the courts and in no other way.”

In decisions from that time, the Supreme Court more than once noted that this “found” language in Section 12 of the Clayton Act, 15 U.S.C. §22, generally means “doing business” in the district and has a narrower meaning than simply transacting business in a district. See, United States v. Scophony Corp. of Am., 333 U.S. 795, 807 (1948) (“This construction gave the words 'transacts business' a much broader meaning for establishing venue than the concept of 'carrying on business' denoted by 'found' under the preexisting statute and decisions.”); United States v. National City Lines, Inc., 334 U.S. 573, 583 (1948) (noting that Congress was “convinced that restricting the choice of venue to districts in which the defendant 'resides or is found' was not adequate to assure that the suit could be brought where the cause of action arose, and therefore insisted on change in order to assure that result.”); Eastman Kodak Co. v. Southern Photo Materials Co., 273 U.S. 359, 374 (1927) (“To construe the words 'or transacts business' as adding nothing of substance to the meaning of the words 'or is found,' as used in the Anti-Trust Act, and as still requiring that the suit be brought in a district in which the corporation resides or is 'found,' would to that extent defeat the plain purpose of this section.”); People's Tobacco Co. v. American Tobacco Co., 246 U.S. 79, 84 (1918) (“Section 7 of the Sherman Act provides that suits of the character of the one now under consideration may be brought in the district in which the defendant 'resides or is found.' When applied to a corporation this requirement is the equivalent of saying that it must be present in the district by its officers and agents carrying on the business of the corporation. In this way only can a corporation be said to be 'found' within the district.”)

Thus, while courts have for years held that venue in copyright matters is coextensive with personal jurisdiction, arguments could be made that the higher standard for “doing business” in a district controls venue in copyright matters. This is especially so given the Supreme Court's more restrictive reading of the “doing business” standard in connection with a finding of general jurisdiction.

On the other hand, another takeaway from the Court's logic in TC Heartland is reluctance to overturn long-standing precedent, in that case, Fourco, without a clear statement from Congress. TC Heartland, 581 U.S. at 8. Given more than 50 years of interpretation by many courts of “may be found” as roughly equivalent to personal jurisdiction (specific or general), compared to roughly 20 for VE Holding, the Court would perhaps be more likely to promote stability by affirming precedent if confronted with the question. Moreover, the Court might find that “may be found” is a more elastic standard that need not have the same meaning as it did at the turn of the last century.

Conclusion

Lower courts and patent litigators will be figuring out the implications of TC Heartland in the months and years to come, with potentially serious consequences for business, innovation and distribution of caseloads. It remains to be seen whether litigants will seek to revisit the scope of venue for copyright cases and whether TC Heartland will spur reconsideration of the longstanding rule that venue properly lies wherever the defendant is subject to personal jurisdiction.

***** J. Alexander Lawrence is a partner in Morrison and Foerster LLP's New York office. Mr. Lawrence was assisted in preparing the article by Nathaniel Joshua Tisa, a summer associate with the firm.