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Giving Defendants a Second Chance: Failure to Assert Improper Venue Prior to TC Heartland is Not a Waiver Under the Federal Rules

In its May 2017 decision in TC Heartland LLC v. Kraft Foods Group Brands, LLC, 137 S.Ct. 1514 (2017), the Supreme Court shocked the patent world by restricting the range of permissible venues in patent infringement cases for  domestic corporations.  (See our prior posts, here and here).  The Federal Circuit has now found – in its seemingly obvious and “common sense” conclusion in In re Micron Technology, Inc., Case 2017-138 (Fed. Cir. November 15, 2017) – that TC Heartland “changed the controlling law.”  The Federal Circuit’s decision resolves a pronounced split among district courts and, importantly, means that a defendant who failed to assert improper venue when filing a motion to dismiss before May 2017 did not necessarily waive the defense under the federal rules and therefore may seek transfer to an alternative jurisdiction where venue is proper under TC Heartland.

Before the Federal Circuit’s decision, district courts were split as to whether TC Heartland actually represented an intervening change in the law on venue because the Supreme Court suggested in TC Heartland that it was merely reaffirming its 60-year old holding in Fourco Glass Co. v. Transmirra Products Corp., 353 U.S. 222 (1957).  In both Fourco Glass and TC Heartland, the Supreme Court held that, for purposes of patent venue, a US company resides only in its state of incorporation.  But in VE Holding Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574 (Fed. Cir. 1990), the Federal Circuit broadened this interpretation in view of certain statutory amendments, finding that a US company resides in any judicial district having personal jurisdiction over the company.  Hence the question:  Did TC Heartland change the law or not?

Courts holding that TC Heartland did not change the law on venue include those in Delaware, California (Northern and Central District), Illinois (Northern District), Massachusetts, Mississippi (Southern District), Oregon, Texas (Eastern, Northern and Southern District), and Virginia (Eastern District).  Courts holding that TC Heartland did change the law on venue include those in Arizona, Georgia (Northern District), Minnesota, Nevada, North Carolina (Western District), Tennessee (Eastern District),  Virginia (Western District), and Washington (Western District).

In Micron, the Federal Circuit finds that TC Heartland “clearly (if not quite expressly)” overruled VE Holding, and reminds the district courts that:

[c]ircuit-court precedent is binding on district courts notwithstanding the mere possibility that the Supreme Court might come to disapprove that precedent.

The Court then provides an analysis of the rules regarding waiver of a venue defense as set forth in the Federal Rules of Civil Procedure 12(h)(1)(A) and 12(g)(2).  Under these rules, the issue is whether the venue defense provided by TC Heartland was “available” to the defendant when it made an initial motion to dismiss.  The Federal Circuit concludes as a matter of law that the venue defense was not available before the TC Heartland decision, because VE Holding was controlling precedent under which such arguments would have been improper.  The mere failure of a defendant to raise the defense prior to TC Heartland therefore does not constitute a waiver under the federal rules.

In the case at hand, Micron moved to dismiss or transfer on the grounds that venue was improper under TC Heartland.  The District Court of Massachusetts denied Micron’s motion, finding that it had waived the defense when – prior to the TC Heartland decision – Micron filed an initial motion to dismiss on other grounds.  The district court, however, did not address the venue arguments on their merits.  The Federal Circuit therefore vacated the order and remanded so that the district court could consider the merits as well as any other potential bases to deny transfer – for example, because of delay in bringing the motion or acquiescence to venue.

The Federal Circuit’s decision should facilitate the transfer of pending cases – previously stuck in limbo after TC Heartland – that are improperly located under the new venue rules.  However, that number is decreasing as those cases are resolved.  In addition, the Federal Circuit emphasizes that district courts may exercise discretion in deciding motions to dismiss for improper venue, pointing to the stated purpose of the Federal Rules of Civil Procedure “to secure the just, speedy, and inexpensive determination of every action and proceeding” and to the inherent powers of the courts to manage their own affairs.

Accordingly, this decision may stand primarily as a reminder that Federal Circuit authority is binding – unless and until the Supreme Court overturns it.

© Copyright 2020 Squire Patton Boggs (US) LLPNational Law Review, Volume VII, Number 320

TRENDING LEGAL ANALYSIS


About this Author

Tamara Fraizer Ph.D. Intellectual Property Attorney Squire Patton Boggs Palo Alto, CA & San Francisco, CA
Partner

Tamara Fraizer helps her clients assess intellectual property (IP) related issues, leverage and enforce IP rights and defend against IP claims. Tamara’s expertise is patent litigation and she has litigated numerous patent cases in federal courts across the nation and at the US International Trade Commission. Tamara is also a patent lawyer who prosecutes patents before the US Patent and Trademark Office (PTO) and handles post-grant challenges to them. In addition to fighting for her clients in the courts and at the PTO, Tamara relies upon over 18 years of legal experience to provide her...

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Christopher W. Adams Intellectual Property & Technology Attorney Squire Patton Boggs Washington DC
Of Counsel

Chris Adams’ combination of more than 10 years of information technology (IT) industry work with more than 12 years of intellectual property (IP) experience provides him with the rare ability to help both emerging growth and global companies negotiate the thicket of legal issues related to IT and computer internet technology (CIT). That is why technology innovators and service providers, software developers, and universities – across a gamut of security and internet areas – seek Chris’ counsel to help them thoroughly exploit their IP assets. He guides clients in creating and protecting patents and other forms of IP through commercialization, licensing and, when needed, enforcement.

Before joining the firm, Chris gained hands-on IT and CIT industry experience at several Northern Virginia federal government IT solutions providers. His experience extends to all phases of the software development lifecycle, as well as other IT and CIT areas, and he holds many industry certifications.

Although Chris has vast experience in the IT and CIT areas, his chemistry background has often come into play in his legal work. As a result, Chris has a substantial amount of IP experience in the life and health sciences.

Christopher is a member of the Advisory Committee of the Squire Patton Boggs Foundation, which promotes the role of public service and pro bono work in the practice of law and the development of public policy.

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