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Federal Circuit Holds TC Heartland Is an Intervening Change in the Law

The court offers clarification on a patent litigation venue issue that has caused “widespread disagreement” nationwide.

In May, the US Supreme Court issued its landmark TC Heartland decision, which held that for purposes of patent venue statute 28 U.S.C. § 1400(b), a corporation “resides” in its state of incorporation. On November 15, 2017, in In re: Micron Tech., Inc., the US Court of Appeals for the Federal Circuit ruled that the TC Heartland decision was an intervening change in the law that excuses waiver.[1] This decision opens the door for defendants currently involved in patent litigation to challenge venue despite not previously raising the issue in earlier pleadings.

Background

In 1957, in Fourco Glass Co. v. Transmirra Products Corp., the Supreme Court concluded that for purposes of the patent venue statute, a domestic corporation “resides” only in its state of incorporation.[2] But in 1988 Congress amended the general venue statute, 28 U.S.C. § 1391(c), to provide that “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.”[3]

The Federal Circuit held that this amendment applied to the patent venue statute, so patentees were free to file patent infringement actions anywhere an alleged infringer was subject to personal jurisdiction.[4] The Federal Circuit consistently adhered to VE Holding for 27 years.

On May 22, 2017, the Supreme Court issued its decision in TC Heartland, overruling VE Holding and holding that the amendments to Section 1391(c) did not modify the meaning of Section 1400(b), as interpreted by Fourco.[5] After TC Heartland, defendants around the country filed motions to dismiss or transfer their cases on the ground that the cases were not brought in proper venues.[6] This resulted in “widespread disagreement” among district courts over the change-of-law question of relevant waiver, with many courts finding litigants waived the issue by not challenging venue in their answers before TC Heartland was decided.[7] Although the Federal Circuit previously denied several mandamus petitions on this issue, the court addressed the issue head on in Micron.

Micron’s Case

In August 2016, Micron filed an unsuccessful motion to dismiss a patent infringement claim filed by the President and Fellows of Harvard College in the District of Massachusetts, but did not include an objection to venue under Rule 12(b)(3).[8] After TC Heartland issued, Micron moved to dismiss or transfer the case on the ground of improper venue.[9] The district court denied the motion, concluding that Micron had waived its venue defense by not objecting to venue in August 2016.[10] The court found that the TC Heartland decision merely clarified the preexisting general venue statute, and was not a change of law that made the waiver rule inapplicable.

Federal Circuit Grants Mandamus and Clarifies Law

The Federal Circuit granted Micron’s petition for a writ of mandamus and vacated the district court’s order.[11] The court clarified that TC Heartland was an intervening change in the law that excuses waiver, calling it a “common-sense” interpretation of Rule 12(g)(2).[12] “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.”[13] The court noted that pre–TC Heartland the objection would have been “futile in the sense that the [previous Federal Circuit] law bar[red] the district court from adopting it,” and “to require the assertion of the defense or objection in an initial motion to dismiss, on pain of waiver, would generally be to require the waste of resources.”[14] The court said there are still circumstances in which a district court may find that a defendant has forfeited its venue defense, but it “generally [left] for future cases the task of elaborating on when such determinations may soundly be reached and what other considerations, if any, might be relevant.”[15]

Conclusion

Defendants in pending cases filed before TC Heartland should promptly consider whether they have grounds for transfer and should expeditiously seek such transfer in appropriate cases.


[1]In re: Micron Tech., Inc., No. 2017-138 (Nov. 15, 2017).

[2]353 U.S. 222, 226 (1957).

[3]Judicial Improvements and Access to Justice Act, § 1013(a), 102 Stat. 4669.

[4]VE Holding Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574 (Fed. Cir. 1990).

[5]TC Heartland LLC v. Kraft Foods Grp. Brands LLC, 137 S. Ct. 1514, 1516 (2017).

[6]See, e.g., Westech Aerosol Corp. v. 3M Co., No. 3-17-cv-05067, Dkt. No. 35 (W.D. Wa. June 21, 2017); Elbit Sys. Land & C41 Ltd. v. Hughes Network Sys., LLC, No. 2:15 C 37, 2017 WL 2651618 (E.D. Tex. June 20, 2017); iLife Techs., Inc. v. Nintendo of Am., Inc., No. 3-13-cv-04987, Dkt. No. 245 (N.D. Tex. June 27, 2017).

[7]Micron, slip. op. at 1.

[8]Id. at 3.

[9]Id.

[10]Id.

[11]Id. at 19-20.

[12]Id. at 8.

[13]Id.

[14]Id. at 9.

[15]Id. at 16-17.

Copyright © 2017 by Morgan, Lewis & Bockius LLP. All Rights Reserved.

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About this Author

Eric Kraeutler, Complex Commercial Lawyer, Intellectual Property Attorney, Morgan Lewis, Philadelphia Law Firm
Partner

Eric Kraeutler is the leader of Morgan Lewis's Philadelphia Litigation Practice. His practice focuses on trials and appeals involving complex commercial, intellectual property, and white collar criminal matters. Mr. Kraeutler has been the lead trial lawyer in civil and criminal jury trials, civil bench trials, and arbitrations, including international arbitrations. He also has appellate experience, having argued numerous cases before the U.S. Courts of Appeals for the Third, Ninth, and Federal Circuits, as well as state appellate courts.

215-963-4840
John V. Gorman, Morgan Lewis, Intellectual Property Litigation Lawyer, Complex Commercial Disputes Attorney
Partner

John V. Gorman works with a diverse group of clients, from global corporations to nonprofits, facing complex commercial disputes and intellectual property litigation. Representing plaintiffs and defendants, John handles all phases of litigation from inception through trial and post-trial appeals. He advises on commercial cases involving patent, trademark, trade secret, and copyright disputes in federal and state courts throughout the United States. Clients turn to John for assistance with matters involving a wide range of subjects.

215.963.5157
Associate

Julie S. Goldemberg is an associate in the Litigation and Intellectual Property Practices. Ms. Goldemberg focuses her practice on intellectual property issues involving patents, trademarks, copyrights, and trade secrets. She has represented clients in patent infringement cases before federal district courts, in Section 337 investigations before the International Trade Commission, and in post-grant proceedings before the U.S. Patent and Trademark Office.

215.963.5095