Federal Circuit Holds TC Heartland Changed the Law

December 13, 2017

According to Federal Circuit Court, SCOTUS’ Decision in TC Heartland Represents a Change in the Law

The U.S. Supreme Court’s decision in TC Heartland represented a change in the law, according to the Federal Circuit Court of Appeals. The key patent decision resolves a split among the district courts and should allow for venue transfer in many more patent infringement cases.

Federal Circuit Holds TC Heartland Changed the Law

Photo courtesy of Piotr Miazga (Unsplash.com)

Supreme Court’s Decision in TC Heartland

In TC Heartland v. Kraft Foods Group Brands, 581 U. S. ____ (2017), the Supreme Court held that patent infringement lawsuits must be filed where the defendant is incorporated, limiting the ability to pursue cases in more favorable jurisdictions. As Justice Clarence Thomas wrote on behalf of the Court, “a domestic corporation ‘resides’ only in its state of incorporation for purposes of the patent venue statute.” 

The Supreme Court ruling overturned the Federal Circuit Court of Appeals’ interpretation of two venue statutes. The patent venue statute, 28 U.S.C. § 1400(b), provides that patent infringement actions “may be brought in the judicial district where the defendant resides…” Meanwhile, under 28 U.S.C. § 1391(c), a corporation is deemed to be a resident of “any judicial district in which such defendant is subject to the court’s personal jurisdiction…”

In its decision, the Supreme Court rejected the Federal Circuit’s long-standing precedent holding that 1988 amendments to the venue statute “rendered the statutory definition of corporate residence found in § 1391 applicable to patent cases.” Accordingly, the Court’s decision significantly reduced the number of places where a corporate defendant may be sued, limiting suits to districts where the defendant is incorporated or the defendant infringes the patent and has a regular and established place of business.  

Waiver of Improper Venue Claims

In the wake of the Supreme Court’s decision, the venue is now improper in hundreds of pending patent infringement suits. However, the district courts have failed to agree on whether the improper venue claims have already been waived.

A defendant objecting to the venue may file a motion to dismiss for improper venue under Federal Rule of Civil Procedure 12(b)(3). However, Rule 12(g)(2), in relevant part, states that “a party that makes a motion under this rule must not make another motion under this rule raising a defense or objection that was available to the party but omitted from its earlier motion. Rule 12(h)(1)(A) further provides for a waiver when a defendant omits an “available” venue defense from an initial motion to dismiss.

In In re: Micron, No. 17-00138 (Fed. Cir. Nov. 15, 2017), Micron Technology, Inc. petitioned for a writ of mandamus, seeking to set aside the district court’s denial of its motion to dismiss or transfer the case for improper venue. The court concluded that the Supreme Court’s decision in TC Heartland was not a change of law that would make Rule 12(g)(2) and hence Rule 12(h)(1)(A) inapplicable.

The Federal Circuit reversed. It held that the Supreme Court’s decision changed the controlling law and was not merely a course correction. Accordingly, the venue objection was not available to Micron when it filed its original motion to dismiss. As the court’s opinion explains:

The Rule 12 waiver question presented here is whether the venue defense was “available” to Micron in August 2016. We conclude as a matter of law that it was not. The 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…

This is a common-sense interpretation of Rule 12(g)(2). Where controlling law precluded the district court, at the time of the motion, from adopting a defense or objection and on that basis granting the motion, it is natural to say, in this context, that the defense or objection was not “available” to the movant.

Notably, the Federal Circuit further noted that “Rule 12(h)(1) is not the sole basis on which a district court might, in various circumstances, rule that a defendant can no longer present a venue defense that might have succeeded on the merits.” Accordingly, forfeiture may still occur even where Rule 12(h)(1) is inapplicable. By way of example, the appeals court highlighted that a motion brought too close to trial may still be denied.

If you have any questions or if you would like to discuss your copyright, trademark, or patent legal needs, feel free to contact me, William Samuels, at 201-806-3364.

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