Lesson Menu: Venue, TC Heartland Progeny
One year after TC Heartland – where the US Supreme Court clarified that the patent venue statute requires residency-based venue to be supported by a defendant’s place of incorporation – lessons on venue continue to be on the menu at the Court of Appeals, several in May 2018 alone to be exact. Patent litigation has a specific venue statute. 28 USC §1400(b) (“[a]ny 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.”). TC Heartland defined “resides” to be a defendant-corporation’s place of incorporation only.
Since the decision, practitioner studies have been published on TC Heartland’s impact on where new patent cases are filed. E.g., one study shows that the Eastern District of Texas, previously the most popular venue accounting for nearly 44% of all filings, now only accounts for a mere 13% of all new filings. Posting of J. Gray., Gray on Claims, http://grayonclaims.com (Oct. 16, 2017). The study reflects that the District Court of Delaware is now centerstage in patent filings and that in every other more popular jurisdiction, including the D. Del, N.D. Cal, C.D. Cal and N.D. Ill, filings have nearly doubled. Thus, TC Heartland has significantly changed where patent cases are initiated.
As any good lawyer might wonder, however, most patent practitioners are still curious as to the lawful boundaries of the envelope on §1400(b)?... Apparently, most (probably rightly) judge that venue still matters. TC Heartland’s progeny at the Court of Appeals provides some guidance on the limitations and allowances of §1400.
For example, in September of 2017 a Court of Appeals panel provided some guidance in In re: Cray. In re: Cray further clarified limitations on §1400(b) outside of the residency clause, requiring that a “regular and established place of business” not simply be where some employees worked remotely from home but need be “a physical place in the district… a regular and established place of business [,and] the place of the defendant.” So, litigants are likely less able to rely on the place-of-infringement clause in §1400(b) for venue after In re: Cray, resulting in more emphasis on the residency clause.
In May 2018, the Court of Appeals for the Federal Circuit issued three separate opinions clarifying §1400(b).
[if !supportLists]· [endif]In re: HTC – articulating that §1400(b) does not pertain to suits against aliens;
[if !supportLists]· [endif]In re: ZTE – indicating that the burden of proof for venue is on the plaintiff; and
[if !supportLists]· [endif]In re: BigCommerce – stressing that “residence” is judicial-district specific, not state specific.
First, In re: HTC regarded a petition for writ of mandamus from the District Court of Delaware’s denial of motion to dismiss/transfer for improper venue brought by a Taiwanese based company, HTC, preferring suit in their subsidiary’s place of incorporation: the Western District of Washington. Case No.: 2018-130 (Fed. Cir. May 09, 2018). The Court of Appeals panel denied the writ stating that the petitioner could not establish that it had no other adequate means to attain relief because appeal from the final judgment would provide adequate relief. “Given the availability of adequate relief on appeal, mandamus review of improper-venue decisions is generally inappropriate.” at 5. Also, the petitioner did not establish a “clear and indisputable” right to issuance of the writ because suits against aliens – like Taiwanese companies – are still wholly outside the operation of all subject-matter-specific federal venue laws under §1391(c)(3)(“a defendant not resident in the United States may be sued in any judicial district…”). Nothing in the recent Congressional amendment to §1391 expressed clear intent to change this or make it unsettled law.
Second, In re: ZTE involved another petition for writ of mandamus to vacate the Eastern District of Texas’ denial of motion to dismiss for improper venue. Case No.: 2018-113 (Fed. Cir. May 14, 2018). With respect to §1400(b), the district court ruled that defendant, ZTE, failed to show that it did not have a “regular and established place of business” in the Eastern District of Texas based upon a call center located therein. The Court of Appeals panel, however, granted the writ, deciding that the ultimate burden of proof for a motion to dismiss for improper venue is a substantive patent matter, i.e., governed by Federal Circuit law, and that a plaintiff bears the burden of showing that venue is proper. This burden-shifting away from the movant, is consistent with other exclusive venue statues as indicated by precedent and leading treatises. The case was remanded with instructions to do the same.
Third, In re: BigCommerce involves an additional petition for writ of mandamus from the Eastern District of Texas’ denial of motion to dismiss/transfer for improper venue. Case No.: 2018-122 (Fed. Cir. May 15, 2018). The defendant, BigCommerce, is incorporated in the Western District of Texas with no place of business in the Eastern District of TX. The Court of Appeals panel granted the writ. As to §1400(b)’s residence clause, the judicial district in which a defendant is incorporated is thee only district in the state where venue is proper. The panel pointed to the plain language of §1400(b) which states that the “action… may be brought in the judicial district…” and Congress expressly allowing for plural districts in other venue statutes while failing to do so in §1400(b) to demonstrate congressional intent for a singular district in this instance.
Accordingly, the “envelope” on patent venue is still forming a year after TC Heartland. With these recent lessons learned, practitioners, however, may be more aggressive in their litigation filing strategies, e.g., against foreign defendants, or decide to be more conservative, e.g., limiting suit to the very district of venue’s basis.
