Unique Venue And Personal Jurisdiction Challenges Of Foreign Corporations

In 2017, the Supreme Court rejected the Federal Circuit's longstanding interpretation of Personal Jurisdiction and Venue in patent infringement actions against domestic companies. 28 U.S.C. §§ 1391, 1400; see TC Heartland LLC v. Kraft Food Group Brands LLC, 137 S. Ct. 1514 (2017). Under TC Heartland, a domestic corporation can only be sued in its State of incorporation or a district where it has both committed acts of infringement and has a regular and established place of business. See id. In effect, the Supreme Court lessened the ability to "forum shop" in jurisdictions with favorable win rates and local patent rules. See id. Notably, the Supreme Court expressly did not address Brunette Mach. Works, Ltd. v. Krockum Indus., Inc., 406 U.S. 706 (1972) which analyzed personal jurisdiction and venue over foreign corporations. See TC Heartland, 137 S. Ct. at 1520 n.2. As such, foreign corporations, presently, are not afforded the same arguments and conveniences regarding forum shopping and unfamiliar jurisdictions. See § 1391(c)(3); id.

For this article, consider the following hypothetical: two boutique companies make hockey sticks. One is incorporated in Maine and has a principal place of business in northern Maine. The second is incorporated in Canada and has a principal place of business in New Brunswick about the length of a hockey stick away. Both companies use the same distributor which accepts title on the doorstep of both businesses and sells to the same U.S. customers. Both companies forsake all control over distribution after that transfer. In fact, both companies are ignorant to the ultimate purchasers dealing only with the distributor. As a result, the Canadian company does not have an established place of business in any state and the Maine company does not have an established place of business in any other state.

An advanced materials company, incorporated in Delaware with a principal place of business in Arizona, believes that certain IP is being infringed by the hockey stick manufacturers and brings suit against each in the District of Arizona. Both file motions to dismiss for lack of personal jurisdiction and improper venue. Citing TC Heartland, the motion is granted for the Maine company because it has no "regular and established place of business" in Arizona. 137 S. Ct. 1514. However, the motion is denied for the Canadian company a few feet away even though it also lacks a "regular and established place of business" in Arizona. This seemingly bizarre result is due to Fed. R. Civ. P. 4(k)(2) (and § 1391(c)(3)).

For reference, here are the relevant rules and statutory provisions:

28 U.S.C. 1391

(b) Venue in general. -A civil action may be brought in- (1)  a judicial district in which any defendant...