The Supreme Court of the United States, (“SCOTUS”) in its recent decision in TC Heartland LLC v. Kraft Foods Group Brands LLC, significantly altered patent litigation in US law by reducing the possible forums available to plaintiffs to bring infringement actions against domestic defendants.
Background and SCOTUS Ruling
On examining the sheer volume of patent litigation in the United States District Court for the Eastern District of Texas (“EDTX”), one might assume that it is a hotbed of innovative activity or a notorious marketplace for patent infringement. In 2015 alone, 2500 infringement suits had been filed in this Court, representing slightly less than half of all federal patent suits in the country.
The EDTX Court’s popularity, however, is for factors largely unrelated to the happenings in the Eastern District of Texas. The EDTX Court is preferred by many patent owners suing alleged infringers due to its procedural rules which are favourable to plaintiffs and its reputation of being owner-friendly.
The reason so many plaintiffs could approach the EDTX was due to the interpretation of certain US federal statutes dealing with the jurisdiction of courts. The general venue statute, applicable to all civil actions, states that a suit may be instituted in any court where the defendant resides, which, for the purpose of that statute, was interpreted by the SCOTUS in its decision in Fourco Glass Co. v. Transmirra Products Corp. to mean any place where it is subject to the personal jurisdiction of the court. However, the requirement of residence of a corporation under the patent venue statute, is only its state of incorporation.
In VE Holding Corp. v. Johnson Gas Appliance Co., a federal appeals court had held that the residence rule under the general venue statute would take precedence over the rule in the patent venue statute. This innocuous ruling allowed plaintiffs to institute infringement suits in any court where the defendant had any presence, howsoever tenuous. This also led to a rising tide of ‘patent trolls’ or non-practicing entities, which now had a comparatively easy model to embroil defendants in litigation and extract settlements or even damages from them.
In TC Heartland, the defendant/petitioner sought to rely upon the rule in the general venue statute to sue the plaintiff/respondent in the district court at Delaware, although the alleged infringing corporate was not incorporated in Delaware and only shipped the infringing products into that state. The SCOTUS overruled the decision in VE Holding, affirmed Fourco, and laid down that the residence of a corporation for the purpose of a patent infringement suit, is where the corporation is incorporated. This limitation on where a defendant corporation can be sued will certainly put a lot of lawyers at EDTX out of business, but its value lies in reigning in forum-shopping plaintiffs who will be constrained to file their suits in a jurisdiction with an actual connection to the dispute, instead of a court in which they are more assured of victory.
No Place Like Home – The Recent Crackdown on Forum Shopping in India
There is no patent-specific rule for jurisdiction in India, and patent infringement cases are governed under the general provision under Section 20 of the Civil Procedure Code, 1908. Section 20 allows a plaintiff to institute a suit in the district court or high court which has territorial jurisdiction where the defendant resides or carries out business; or where the cause of action arises. The explanation to Section 20 provides that a corporation shall be deemed to carry on business at its sole or principal office in India or, in respect of any cause of action arising at any place where it has also a subordinate office, at such place.
The Trademark Act, 1999 and the Copyright Act, 1957, however, are long-arm statutes. Under Section 134 of the Trademark Act and Section 62 of the Copyright Act respectively, plaintiffs can institute a suit where they reside or carry on business, or personally work for gain.
Since the Delhi High Court had held in Horlicks v Heinz, that the doctrine of forum non conveniens was not applicable in India, for some time, confusion reigned about the appropriate forum for a trademark or copyright suit, which resulted in corporate plaintiffs, with multiple branch offices, exploiting this additional choice of forum to institute suits in locations where they had such subordinate offices but without any substantial connection to the dispute. Often, the preferred venue for litigants, as such, the EDTX for Indian plaintiffs, was the Delhi High Court, which (to its credit) is known for having experience in handling IPR litigation and faster disposal of cases, but is also known to favour plaintiffs, for example, in liberally granting ex parte injunctions.
This trend, however, has been sought to be reigned in by courts, in particular, surprisingly, by the Delhi High Court itself, as well as the Supreme Court. The Delhi High Court has sought to curtain this trend. In 2009, the court had expressed its displeasure at litigants invoking its jurisdiction on tenuous connections with, by imposing costs on an eager litigant in Microsoft v Dhiren Gopal and Ors. Further, by its recent decision in Federal Express v Fedex Securities, the court held that ‘cause of action’ under Section 20, requires more than a ‘trivial and incidental’ connection to the dispute.
In IPRS vs Sanjay Dalia, the Supreme Court noted that the intention behind the enactment of the long-arm provisions under the trademark and copyright statutes was to prevent inconvenience to plaintiffs ‘suffering from financial constraints’, who would find it difficult to pursue defendants in far-flung jurisdictions, if the jurisdiction was limited to the defendant’s place of residence only. Therefore, the plaintiffs were provided an additional forum for their added convenience and to prevent the mischief of having unscrupulous defendants drag them to courts across the county. However, the Court held that the intention of the parliament in enacting these statutes could not have been to reverse the mischief and enable the Plaintiffs to drag defendants to far-flung locations instead! In fact, in Sanjay Dalia, the plaintiffs (somewhat absurdly) sought to invoke the jurisdiction of the Delhi High Court by contending that the bulk of IPR litigation takes place in Delhi and lawyers in Delhi have greater expertise, and therefore, the Court should allow the Plaintiffs leave to file the Suit in Delhi. Thankfully, this contention was rightly rejected by the Supreme Court.
In Sanjay Dalia, the Supreme Court essentially held that the explanation to Section 20 of the CPC, concerning the deeming provision for corporates, would also be applicable to corporate plaintiffs proceeding under the long-arm provisions under Section 134 of the Trademark Act and Section 62 of the Copyright Act. The court thereby clearly curtailed the actions of plaintiffs dragging defendants to jurisdictions where they had branch offices, without any cause of action having arisen in such places. However, the judgement also gave way to conflicting interpretations by the Bombay High Court and the Delhi High Courts in regards to the precise scope of the Plaintiffs additional right to invoke jurisdiction. As things stand, the Bombay High Court has held that the long-arm statutes are in addition to Section 20 of the CPC, and grant an entirely new right to a plaintiff to institute a suit where its principal or registered office is located, irrespective of cause of action or defendant’s location. However, the Delhi High Court has interpreted Sanjay Dalia to be disentitled from instituting a Suit where its principal office is located, if the cause of action has arisen in some different location where the plaintiff has a subordinate office.
Jurisprudence on forum shopping is fast evolving in India. Hopefully, the court can soon develop a more comprehensive rules or principles on what constitutes a substantial cause of action to allow a plaintiff to institute a suit under Section 20 read with the Trademark Act and the Copyright Act, in a manner that balances the plaintiff’s right to institute infringement cases with a defendant’s right not to be dragged to a venue as per the plaintiffs (and their lawyers’) whims. Moreover, one hopes that the conflicting stances on the issue of long-arm jurisdiction taken by the Bombay and Delhi High Courts will soon be addressed and reconciled.