November 28, 2017

Federal Circuit Answers Lingering Venue Question in Patent Infringement Cases

Anne E. McClellan and Jimmie W. Pursell

The federal circuit has just answered a lingering venue question in patent infringement cases in In re Micron Tech., Inc., 2017-138, 2017 WL 5474215, at *1 (Fed. Cir. Nov. 15, 2017), holding that the United States Supreme Court’s recent decision in TC Heartland LLC v. Kraft Foods Group Brands LLC, 137 S. Ct. 1514, 1515, 197 L. Ed. 2d 816 (2017), constitutes a change in law that allows defendants sued in venues in which they are not incorporated or do not have a regular and established place of business to raise the venue defense made available by TC Heartland, even if the defense has previously been waived through omission from the answer or first motion to dismiss.

Historical Treatment of Venue in Patent Infringement Matters
The issue of proper venue in patent infringement cases has long been the subject of the Supreme Court’s attention, specifically the interplay of 28 U.S.C. § 1400(b) and 28 U.S.C. § 1391(c). Section 1400(b) provides that an 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.” Under the more general venue statute, 28 U.S.C. § 1391(c), a corporation is deemed to reside in any district in which it is subject to personal jurisdiction, which is broader than § 1400(b). In 1957, the Supreme Court held in Fourco Glass Co. v. Transmirra Products Corp., 353 U.S. 222 (1957), that section 1400(b) is the “sole and exclusive” means for determining venue in patient infringement actions, rejecting application of section 1391(c) in patent infringement cases.

Following Fourco, Congress amended section 1391(c) to provide that “[f]or purposes of venue under this chapter, a defendant that is a corporation shall be deemed to reside in any judicial district in which it is subject to personal jurisdiction at the time the action is commenced.” Based on that amendment, the Federal Circuit held in VE Holding Corp. v. Johnson Gas Appliance Co., 917 F. 2d 1574 (Fed. Cir. 1990), that section 1391(c) was applicable to patent infringement actions because § 1400 is in the same chapter as section 1391.

In 2011, Congress again amended § 1391 to now state that “[e]xcept as otherwise provided by law,” § 1391 “shall govern the venue of all civil actions brought in district courts of the United States,” and “[f]or all venue purposes,” a corporation “shall be deemed to reside, if a defendant, in any judicial district in which such defendant is subject to the court's personal jurisdiction with respect to the civil action in question.” 28 U.S.C. §§ 1391(a) and (c). Following that amendment, there was no change in venue case law until 2017.

On May 22, 2017, the Supreme Court issued its unanimous decision TC Heartland LLC v. Kraft Foods Group Brands LLC, 137 S. Ct. 1514, 1515, 197 L. Ed. 2d 816 (2017), held that “the amendments to § 1391 did not modify the meaning of § 1400(b) as interpreted by Fourco.” The Supreme Court further noted that Fourco had remained good law, and there was no indication from Congress that it intended to ratify the V.E. Holding decision in its 2011 amendment of§ 1391. To the contrary, the Supreme Court found that the amended language strengthened the Fourco holding. TC Heartland LLC made clear that § 1400(b) is the sole and exclusive provision governing venue in patent infringement cases. However, a question remained as to how district courts should handle cases already pending when TC Heartland was decided in which the defendants had not challenged venue because, under V.E. Holding Corp., Federal Circuit law did not permit such a challenge. That question was recently answered by the Federal Circuit in In re Micron Tech., Inc., 2017-138, 2017 WL 5474215, at *1 (Fed. Cir. Nov. 15, 2017).

TC Heartland Is a Change of Law Allowing Defendants to Object to Venue
In June 2016, Harvard filed a patent infringement case in the District of Massachusetts against Micron, which is incorporated in Delaware and has its principal place of business in Idaho. Harvard alleged that venue was proper in because Micron was subject to personal jurisdiction in Massachusetts. In August 2016, Micron filed a motion to dismiss under Rule 12(b)(6), Fed.R.Civ.P., for failure to state a claim, but it did not object to venue under Rule 12(b)(3). After the Supreme Court issued its decision in TC Heartland, Micron filed a motion to dismiss or transfer the case on the ground that the District of Massachusetts was not a proper venue. The District of Massachusetts denied Micron’s motion, finding that it had waived its objection by not including it in the first motion to dismiss. The District Court rejected Micron’s argument that TC Heartland constituted a change of law so as to relieve Micron of any alleged waiver under Rule 12(h)(1).

The Federal Circuit granted mandamus review of the District Court’s decision, finding “special circumstances” existed because there was “considerable litigation producing disparate results” regarding “whether TC Heartland effected a change of controlling law such that the Rule 12(h)(1)(A) waiver rule was inapplicable.”

Under Rules 12(h)(1) and 12(g)(2), a defendant waives a venue defense if it fails to include the defense in its Rule 12(b) motion to dismiss if that defense was “available” at the time of the motion. Thus, the crucial question for the In Re Micron Court was whether the venue defense under TC Heartland was “available” to Micron at the time it filed its motion to dismiss in August 2016. The Federal District held that “[t]he venue objection was not available until the Supreme Court decided TC Heartland because, before then, it would have been improper, given controlling precedent, for the district court to dismiss or to transfer for lack of venue.” It explained that the “common-sense interpretation of Rule 12(g)(2)” is that a defense is not “available” to a party if it is futile based on controlling precedent, finding TC Heartland constituted “a sufficiently sharp change of law” from V.E. Holding Corp. to justify allowing the defendant to pursue the otherwise untimely venue objection. However, the Federal Circuit declined to rule on the merits of Micron’s motion, noting that the District Court has inherent authority apart from Rule 12(h(1) to find a defendant forfeited a venue objection, and it therefore remanded Micron’s motion to the District Court for a ruling consistent with the Federal Court’s decision.

Anne E. McClellan and Jimmie W. Pursell are members of Jennings, Strouss & Salmon, PLC, in Phoenix, Arizona.

Anne E. McClellan and Jimmie W. Pursell