January/February 2018
IP Litigator
By David K. Mroz; Samhitha Muralidhar Medatia
Parties often want to litigate in forums they find favorable. While plaintiffs have the unique advantage of selecting the initial forum, defendants can challenge that selection on jurisdictional or venue grounds. The Supreme Court’s decision in TC Heartland LLC v. Kraft Foods Group Brands, LLC last year tightened the law on patent venue, providing defendants more avenues to argue improper venue. As courts wrestle with post-TC Heartland venue challenges, they must balance applying the proper law of venue with practical realities—including determining whether a party waived its right to challenge venue. While courts are approaching this question differently, the safer bet for a defendant wanting to challenge venue is to move quickly, or else risk waiving a venue defense.
The patent venue statute provides two avenues to establish proper venue. First, a case for patent infringement "may be brought in the judicial district where the defendant resides[.]"1 Second, a case may be brought "where the defendant has committed acts of infringement and has a regular and established place of business."2 TC Heartland clarified the first standard by defining where a corporate defendant "resides."3 The Court held that, for purposes of patent venue, a corporation "resides" only in its state of incorporation.4 Before TC Heartland, a broader corporate residency definition applied in the venue analysis—one encompassing any forum where a court could exercise personal jurisdiction.5 Now, after TC Heartland, absent a showing that a defendant is incorporated in the forum state, a party seeking to establish venue must show that the defendant has both committed acts of infringement and has a regular and established place of business in the district.
What does it mean to have a regular and established place of business in a district? The U.S. Court of Appeals for the Federal Circuit in In re Cray Inc. addressed this issue.6 Interpreting Section 1400(b), the Federal Circuit identified three statutory venue requirements: (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.7 If any of these conditions are not met, venue is not appropriate. The Federal Circuit emphasized that each case depends on its own facts, and that any venue analysis must be tied to the statutory language. In the Cray case, the Federal Circuit found that the defendant employee’s home office was not the "place of the defendant," which meant no venue existed.8 Relevant to this analysis were the facts that the defendant did not own or lease the home, did not appear to have a hand in selecting the home’s location, did not store inventory or conduct demonstrations there, and did not condition employment on the employee maintaining a home office in the district.9
As Cray held, the inquiry as to what constitutes a "regular and established place of business" depends highly on the facts. For example, one court found that an employee living in one district but working in another location did not establish venue.10 Another court made a similar finding in a situation involving an expired lease on a commercial property.11 In contrast, venue was found in a case where a call center operated in partnership with a third party.12 As the law of venue develops, courts will no doubt be faced with more unique and challenging factual scenarios such as those described above.
Unlike subject matter jurisdiction, defendants may waive their argument that venue is improper.13 The Federal Rules of Civil Procedure provide that defendants waive a venue defense "that was available to the party" when they omit it from an initial motion to dismiss or fail to include it in a responsive pleading.14 After TC Heartland, district courts split over whether rule-based waiver was triggered by a defendant’s failure to plead a venue defense. The Federal Circuit, in In re Micron Technology, however, clarified that TC Heartland constituted a change in the law such that rule-based waiver did not apply.15 But the Federal Circuit also made clear that, apart from the Federal Rules of Civil Procedure, "district courts have authority to find forfeiture of a venue objection."16 This more flexible standard allows courts to consider factors involving case efficiency and time to trial in finding waiver even when rules-based waiver does not apply.17
For example, the Eastern District of Virginia found waiver because the case had "reached the point of no reasonable return" and trial was imminent before the request was made.18 Similarly, a magistrate judge in the Eastern District of Texas recommended a finding of waiver where the defendants waited four and five months after TC Heartland was decided before asserting a venue defense, even though the defendants explained they were negotiating with plaintiff during that time regarding venue.19 Given the fact-intensive, and thus unpredictable nature of the venue analysis, as well as the new flexibility afforded to courts making waiver decisions, the safest bet is for a defendant to move to change venue as quickly as possible to avoid waiver.
TC Heartland tightened the venue standards a plaintiff must satisfy when filing a lawsuit, which makes it easier for a defendant to win a venue challenge. But a defendant can quickly lose this upper hand—and see its rights under TC Heartland vanish—by waiting to file its motion. The longer the wait, the more likely it is a court will find waiver. So file those venue challenges early.
Endnotes
1 28 U.S.C. § 1400(b).
2 Id.
3 TC Heartland LLC v. Kraft Foods Group Brands LLC, 137 S. Ct. 1514 (2017).
4 Id. at 1517.
5 See 28 U.S.C. § 1391(c) ("For all venue purposes … an entity with the capacity to sue and be sued in its common name under applicable law, whether or not incorporated, 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[.]").
6 In re Cray Inc., 871 F.3d 1355 (Fed. Cir. 2017).
7 Id. at 1360.
8 Id. at 1364–1365.
9 Id.
10 Koninklijke KPN N.V. v. Kyocera Corp., No. 17-87-LPS-CJB, 2017 WL 6447873, at *2 (D. Del. Dec. 18, 2017).
11 Personal Audio, LLC v. Google, Inc., No. 15-CV-350, 2017 WL 5988868, at *8 (E.D. Tex. Dec. 1, 2017).
12 American GNC Corp. v. ZTE Corp., No. 4:17-CV-620, 2017 WL 5157700, at *1 (E.D. Tex. Nov. 7, 2017)
13 See Neirbo Co. v. Bethlehem Shipbuilding Corp., 308 U.S. 165, 167–168 (1939) ("The jurisdiction of the federal courts—their power to adjudicate—is a grant of authority to them by Congress and thus beyond the scope of litigations to confer. But the locality of a law suit—the place where judicial authority may be exercised—though defined by legislation relates to the convenience of litigants and as such is subject to their disposition. . . .Being a privilege, it may be lost.").
14 See Fed. R. Civ. P. 12(g)(2)–(h)(1).
15 In re Micron Technology, Inc., 875 F.3d 1091, 1094 (Fed. Cir. 2017).
16 Id. at 1101.
17 Id. at 1101–1102.
18 Cobalt Boats, LLC v. Brunswick Corp., No. 15-CV-21, 2017 WL 6034504, at *12 (E.D. Va. Dec. 4, 2017).
19 Kaist IP US LLC v. Samsung Electronics Co., No. 2:16-CV-01314-JRG-RSP (E.D. Tex. Dec. 18, 2017).
Reprinted with permission from the IP Litigator, published by Wolters Kluwer. This article is for informational purposes, is not intended to constitute legal advice, and may be considered advertising under applicable state laws. This article is only the opinion of the authors and is not attributable to Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, or the firm's clients.
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