Key Points

• Patent venue challenges under 28 U.S.C. § 1400(b) remain strictly enforced, with little tolerance for creative pleading.
• “Regular and established place of business” in patent cases requires a physical location tied directly to the defendant under the Federal Circuit’s test.
• Sales through third‑party retailers do not establish patent venue absent leased space and a defendant’s employee or agent on site.
• Federal Circuit law governs patent venue analysis, overriding regional circuit venue principles and general venue statutes.

Unforgiving Venue Rules

Filing a patent infringement suit in the wrong court can unravel an entire litigation strategy, and a recent ruling out of the District of New Jersey is a sharp reminder of just how unforgiving venue rules are in patent cases.

The ruling by U.S. District Judge Susan D. Wigenton in Skull Shaver LLC v. The Cut Buddy transfers the action to the Middle District of North Carolina and makes clear that the heightened venue standard under 28 U.S.C. § 1400(b) leaves little room for creative pleading.

Judge Wigenton affirmed a report and recommendation by U.S. Magistrate Judge Stacey Adams that offers a roadmap for practitioners navigating the narrow path to proper venue in patent litigation — as well as a cautionary tale for those who assume the general venue playbook will suffice.

Adequate Venue Pleading

Venue in patent cases is governed by 28 U.S.C. § 1400(b) which mandates that suits be brought “in the judicial district where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business.” The requirements for adequate venue pleading in patent infringement litigation were strictly interpreted by the U.S. Supreme Court in TC Heartland LLC v. Kraft Foods Grp. Brands LLC, 581 U.S. 258, 262 (2017), in contrast to 28 § U.S.C. 1391, the general venue statute that governs most other cases.

Under § 1400(b), venue analysis “is an issue unique to patent law” and is governed by the law of the U.S. Court of Appeals for the Federal Circuit, not the law of the regional circuit. In re ZTE (USA) Inc., 890 F.3d 1008, 1012 (Fed. Cir. 2018). Here, although the plaintiff’s suit was filed in the DNJ, Judge Adams applied the law of the Federal Circuit, not the Third Circuit.

The Supreme Court has held that “a domestic corporation ‘resides’ only in its State of incorporation for purposes of the patent venue statute.” TC Heartland, 581 U.S. at 262. Here, Judge Adams found it “undisputed” that the defendant was incorporated in Delaware, failing to satisfy the first prong of 28 U.S.C. §1400(b) for proper venue in the DNJ. Adams at 3.

Plaintiff’s allegations regarding the second prong of section 1400(b) fared no better. Under the second prong, venue would be proper in the DNJ only if the defendant “has (i) committed acts of infringement in New Jersey, and (ii) has a regular and established place of business in New Jersey.” Adams at 3. Although neither party squarely addressed whether defendant’s products actually infringed the asserted patents, the Court assumed that the allegations were sufficient for purposes of deciding the motion. Adams at 4. The Court then turned to the plaintiff’s allegations regarding defendant’s “regular and established place of business.”

Three-Part Test

In 2017, the Federal Circuit established a three-part test to define a regular and established place of business in a judicial district. The test announced in In re Cray Inc., 871 F.3d 1355, 1360 (Fed. Cir. 2017) requires that:

1. There must be a physical place in the district
2. It must be a regular and established place of business; and
3. It must be the place of the defendant.

The Federal Circuit has warned courts to “be careful not to conflate showings that may be sufficient for other purposes, e.g., personal jurisdiction or the general venue statute, with the necessary showing to establish proper venue in patent cases.” Adams at 4.

In making this assessment, Judge Adams noted that relevant considerations may include whether the defendant:

• owns or leases the place or exercises other attributes of possession or control over the place
• has conditioned employment on an employee’s continued residence in the district or the storing of materials at a place in the district so that they can be distributed or sold from that place
• markets or advertises to the extent it indicates that the defendant itself holds out a place for its business in the district
• represents that it has a place of business in the district
• conducts similar activity at the place compared to the defendant’s other places of business.” Adams at 5 (citations omitted).

Judge Adams concluded that the plaintiff’s allegations regarding defendant’s “regular and established place of business” were insufficient, finding that defendant had no office or physical location in New Jersey; did not own, rent, or lease any real estate or facilities in New Jersey; had no employees or agents in New Jersey; and did not advertise or otherwise hold itself out as having a place of business in New Jersey. Adams at 5.

Judge Adams also rejected plaintiff’s argument that venue was proper because the defendant’s products are sold by third-parties, such as Walmart or CVS, in New Jersey stores, such that the defendant was “effectively storing its products on the shelves of Walmart and CVS stores in New Jersey.” Adams at 5-6. Instead, Judge Adams relied on the Federal Circuit’s requirement that “the only way that shelf space can serve as a ‘regular and established place of business’ under the patent venue statute is if the defendant has actually leased such shelf space and has an employee or agent regularly conducting business at the location.” Adams at 6 (emphasis in original). Judge Adams found neither condition met here. Adams at 7.

Judge Adams further emphasized that “the non-leased shelves at these third-party retailers are not the place of the defendant. To the contrary, they are the places of business of Walmart, CVS, and other third-party retailers.” Adams at 7 (emphasis in original). Rather than dismissing the case outright, Judge Adams recommended transferring the case to the District in which defendant resides and thus venue would be proper. Adams at 7-8.

Convenience Is No Basis

In affirming Judge Adams’ report and recommendation, Judge Wigenton rejected the plaintiff’s argument that venue was proper in New Jersey “because it is a more convenient forum given the presence of a key witness.” Wigenton at 1.

Judge Wigenton first held that plaintiff failed to raise this argument before Judge Adams and therefore waived it. Wigenton at 1. She next held that, notwithstanding the first point, “convenience is not a proper basis upon which to deny transfer in this patent infringement action.” Wigenton at 2.

Finally, Judge Wigenton held that the plaintiff “only argues that New Jersey would be preferred and failed to argue why North Carolina would be an improper venue,” and therefore failed to overcome Judge Adams’ recommendation. Wigenton at 2.

Takeaway

Venue analysis in the patent infringement context is strictly interpreted under Federal Circuit and Supreme Court precedent.

Paul W. Kalish and Jonathan J. Madara are members of the IP Litigation team in Fox Rothschild’s Princeton, NJ office and write about patent litigation decisions in the District of New Jersey. Contact Paul at pkalish@foxrothschild.com or 609.895.6751 and Jonathan at jmadara@foxrothschild.com or 609.844.7428.

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