VE Holding Corp. v. Johnson Gas Appliance Co.

Decision Date24 October 1990
Docket NumberNos. 90-1270,90-1274,s. 90-1270
Parties, 16 U.S.P.Q.2d 1614 VE HOLDING CORPORATION, Plaintiff-Appellant, v. JOHNSON GAS APPLIANCE COMPANY, Defendant-Appellee.
CourtU.S. Court of Appeals — Federal Circuit

Alan B. Rich, Johnson & Gibbs, P.C., Dallas, Tex., argued for plaintiff-appellant. With him on the brief was Thomas L. Crisman. Also on the brief were L. Dan Tucker, Hubbard, Thurman, Turner & Tucker, Dallas, Tex. and J. William Wigert, Jr. and Virginia Shaw Medlen, Limbach, Limbach & Sutton, San Francisco, Cal., of counsel.

George M. Schwab, Townsend & Townsend, San Francisco, Cal., argued for defendant-appellee. With him on the brief was Gerald P. Dodson.

Before ARCHER, PLAGER and CLEVENGER, Circuit Judges.

PLAGER, Circuit Judge.

For almost one hundred years, a specific statutory provision, currently section 1400(b) of chapter 87, title 28, U.S. Code, has set forth the bases for establishing venue in patent infringement actions. Where the defendant 'resides' is one of those bases. Supreme Court decisions, with one exception, have maintained that that provision is unaffected by other statutory provisions governing venue.

In 1988 Congress adopted a new definition of 'reside' as it applies to venue for corporate defendants. This case requires us to decide whether, by that amendment to Sec. 1391(c) of chapter 87, Congress meant to apply that definition to the term as it is used in Sec. 1400(b), and thus change this long-standing interpretation of the patent venue statute. The district courts addressing this question have arrived at conflicting results. 1

This is a case of first impression. It comes to us in the form of consolidated appeals from two judgments of the United States District Court for the Northern District of California ("District Court"), No. C89-0209 SC (May 19, 1989) ("VE Holding I "--Appeal 90-1270) and No. C89-3856 SC (Feb. 9, 1990) ("VE Holding II "--Appeal 90-1274), dismissing plaintiff/appellant's action against appellee for improper venue. We hold that Congress by its 1988 amendment of 28 U.S.C. Sec. 1391(c) meant what it said; the meaning of the term 'resides' in Sec. 1400(b) has changed. We therefore reverse the judgment in VE Holding II (Appeal 90-1274) and remand the case for further proceedings consistent with this opinion. 2

I.

Plaintiff/appellant, VE Holding Corporation ("VE"), is the holder of U.S. Patents Nos. 4,667,408, 4,704,804, and 4,731,938 ("the VE patents"). Plaintiff filed suit in the District Court against, in VE Holding I, California Pellet Mill Company ("California Pellet") and Johnson Gas Appliance Company ("Johnson"), and in VE Holding II, Johnson alone, alleging direct and contributory infringement of and inducement to infringe the VE patents. In both cases Johnson moved to dismiss for improper venue, on the grounds that it is an Iowa corporation with no regular and established place of business in the Northern District of California.

The District Court found that Johnson as an Iowa corporation did not 'reside' in California, as that term has been construed in Sec. 1400(b), and, in addition, that Johnson on the facts did not have a regular and established place of business in the Northern District of California, as the venue statute required. 3 The District Court rejected VE's argument that the 1988 amendment to Sec. 1391(c) of the venue chapter redefined the term 'reside' as it is used in Sec. 1400(b). The District Court therefore held that venue did not lie in the Northern District of California with respect to Johnson. 4 Plaintiff filed timely notice of appeal to this court. 5

II.

Venue, which connotes locality, serves the purpose of protecting a defendant from the inconvenience of having to defend an action in a trial court that is either remote from the defendant's residence or from the place where the acts underlying the controversy occurred. 1A(2) J. Moore, W. Taggart, A. Vestal, J. Wicker & B. Ringle, Moore's Federal Practice p 0.340 (2d ed. 1990). The venue statutes achieve this by limiting a plaintiff's choice of forum to only certain courts from among all those which might otherwise acquire personal jurisdiction over the defendant. 6

The Judiciary Act of 1789 included a general venue provision governing all civil suits cognizable in the federal courts. Judiciary Act of 1789, ch. 20, Sec. 11, 1 Stat. 73, 78. This Act was held applicable to patent infringement suits in Chaffee v. Hayward, 61 U.S. (20 How.) 208, 216, 15 L.Ed. 804, 851 (1857). The general venue statutes are found today in chapter 87, title 28, U.S. Code.

The first statute specifically addressed to venue in patent infringement suits was enacted a century later, in 1897. Act of March 3, 1897, ch. 395, 29 Stat. 695. The current version of this Act is found in Sec. 1400(b) of the venue chapter (chapter 87 of title 28). Section 1400(b), which has been in its present form since 1948, reads:

(b) Any civil action for patent infringement may 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.

Act of June 25, 1948, ch. 646, 62 Stat. 869, 936.

Patent law is not alone in having a particular venue statute that differs in its terms from the general venue provisions applicable to other federal causes of action. For example, in addition to sections dealing with venue in diversity jurisdiction cases, 7 federal question cases, 8 and venue regarding suits against aliens, 9 the venue chapter contains provisions for suits in certain cases by a national banking association, 10 for suits for collection of internal revenue taxes, 11 for suits regarding Interstate Commerce Commission orders, 12 and for stockholder's derivative actions. 13 Other particular venue provisions appear elsewhere in the Code, accompanying the substantive law provisions governing specific areas. See, e.g., 46 U.S.C. App. Sec. 688 applying to Jones Act cases; 15 U.S.C. Secs. 15, 22 applying to antitrust actions.

In all of these areas in which particular venue statutes apply, the question can be raised--to what extent do the general venue provisions of chapter 87 supplement what is contained in the special provision, whether that special provision is contained in chapter 87 or elsewhere. The issue appears to arise infrequently; the few decisions suggest that the answer depends very much on the precise language of the relevant statutes along with, in appropriate cases, other evidence of Congressional intent. Facially, there is little consistency from area to area.

In the Jones Act and antitrust areas, for example, the courts have read the general venue provisions into the special provisions. See Pure Oil Co. v. Suarez, 384 U.S. 202, 86 S.Ct. 1394, 16 L.Ed.2d 474 (1966) (Jones Act); Go-Video, Inc. v. Akai Elec. Co., Ltd., 885 F.2d 1406 (9th Cir.1989) (antitrust); Adams Dairy Co. v. National Dairy Prods. Corp., 293 F.Supp. 1135 (W.D. Mo.1968) (antitrust). In applying these particular venue provisions, courts have concluded that the Congressional intent was to 'enlarge' the plaintiff's choice of forum by reading the special venue provisions as supplemental to, rather than superseding, the general venue provisions. See Pure Oil, 384 U.S. at 206, 86 S.Ct. at 1397 ("there is nothing to show a congressional purpose negativing the more natural reading of the two [Jones Act and general] venue sections together"); Delong Equip. Co. v. Washington Mills Abrasive Co., 840 F.2d 843, 855 (11th Cir.1988) ("In a federal antitrust case, venue may be established under [15 U.S.C. Sec. 15 or Sec. 22], or the general federal venue statute, 28 U.S.C. Sec. 1391(b).")

In the patent field, that has not been the case. The Supreme Court in 1942 and again in 1957 took a restrictive view of venue in patent infringement cases, holding in effect that the meaning of the terms used in Sec. 1400(b) was not to be altered or supplemented by other provisions found in the venue statutes. Fourco Glass Co. v. Transmirra Prods. Corp., 353 U.S. 222, 77 S.Ct. 787, 1 L.Ed.2d 786 (1957); Stonite Prods. Co. v. Melvin Lloyd Co., 315 U.S. 561, 62 S.Ct. 780, 86 L.Ed. 1026 (1942); followed in In re Cordis, 769 F.2d 733, 226 USPQ 784 (Fed.Cir.1985). But see, Brunette Mach. Works, Ltd. v. Kockum Indus., Inc., 406 U.S. 706, 92 S.Ct. 1936, 32 L.Ed.2d 428 (1972), discussed below.

As written, section 1400(b) dictates that venue is proper when either of two tests is satisfied: (1) the defendant resides in the judicial district, or (2) the defendant has committed acts of infringement and has a regular and established place of business in the judicial district. The Supreme Court in Fourco confirmed that for defendants that are corporations, 'resides' meant the state of incorporation only. Section 1391(c), the general venue section which addressed the question of where corporations may be sued, and which contained language about the residence of corporations, did not supplement the specific provisions of Sec. 1400(b). Id. 353 U.S. at 229, 77 S.Ct. at 792.

At the time the Supreme Court's decision in Fourco was handed down, Sec. 1391(c) consisted of one sentence which read:

(c) A corporation may be sued in any judicial district in which it is incorporated or licensed to do business or is doing business, and such judicial district shall be regarded as the residence of such corporation for venue purposes.

The first clause (up to the comma) established venue for corporations. The second clause either was surplusage since the term 'residence' was not used in the first clause as one of the bases for venue or, if it applied to plaintiffs as well as defendants (see discussion and cases cited in Robert E. Lee & Co. v. Veatch, 195 F.Supp. 528, 530 (W.D.S.C.), rev'd, 301 F.2d 434 (4th Cir.1961)), was at best confusing. In addition to this difficulty, problems with this subsection arose regarding venue in multidistrict states....

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