United States: Making The Sausage: Lower Courts Grapple With The Supreme Court's TC Heartland Venue Decision

The United States Supreme Court decided earlier this year that a 1957 opinion is still valid and still limits venue choices for patent infringement actions under 28 U.S.C. § 1400. See TC Heartland LLC v. Kraft Foods Group Brands LLC, 581 U.S. ___ (2017) (citing Fourco Glass Co. v. Transmirra Products Corp., 353 U.S. 222, 226 (1957)). In its extensively-covered TC Heartland decision issued in May, the Court held that "[a]s applied to domestic corporations, 'reside[nce]' in § 1400(b) refers only to the State of incorporation," where the accused infringer has a "regular and established place of business" in the venue. While framed as merely confirmation of precedent from the 1950s, many practitioners and commentators viewed this decision as a dramatic change in the patent litigation landscape.

Since TC Heartland came down, lower courts have applied the new paradigm in differing ways. As trends have developed in recent months, we thought it useful to provide a sampling of the various approaches to venue issues post-TC Heartland. These issues include, for example, whether defendants who did not contest venue prior to the TC Heartland decision waived the defense of improper venue because the case was—or was not—an "intervening change" in the law, and how to assess whether a defendant has regular and established place of business in a particular venue.

As to the waiver issue, an Arizona district court recently allowed the defendant, Cree Incorporated, to amend its answer and transfer the case to North Carolina where Cree is incorporated. See OptoLum Incorporated v. Cree Incorporated, No. CV-16-03828-PHX-DLR, 2017 U.S. Dist. LEXIS 114717, at *12 (D. Ariz., July 24, 2017). The plaintiff, OptoLum Incorporated, argued that Cree waived its defense of improper venue because Cree omitted the defense in its answer to the complaint and its initial motion to dismiss. However, Cree argued that the defense of improper venue was not available to it before the TC Heartland case issued. The court agreed that Cree did not waive the venue defense because "TC Heartland changed the venue landscape... For the first time in 27 years, a defendant may argue credibly that venue is improper in a judicial district where it is subject to the court's personal jurisdiction but where it is not incorporated and has no regular and established place of business." Id. at *9-10 (quoting Westech Aerosol Corp. v. 3M Co., No. C17-5067-RBL, 2017 U.S. Dist. LEXIS 95768, 2017 WL 2671297, at *2 (W.D. Wash. June 21, 2017)). Further, the court rejected the opposite holding in at least eight recent cases from California and Texas (among other jurisdictions). See OptoLum, 2017 U.S. Dist. LEXIS 114717, at *5 (distinguishing Cobalt Boats, LLC v. Sea Ray Boats, Inc., No. 2:15cv21, 2017 U.S. Dist. LEXIS 90728, 2017 WL 2556679, at *3 (E.D. Va. June 7, 2017); Elbit Sys. Land & C4I Ltd. v. Hughes Network Sys., LLC, 2:15-CV-00037-RWS-RSP, 2017 U.S. Dist. LEXIS 94495, 2017 WL 2651618, at *20 (E.D. Tex. June 20, 2017); iLife Techs., Inc. v. Nintendo of Am., Inc., No. 3:13-cv-04987, 2017 U.S. Dist. LEXIS 98698, 2017 WL 2778006, at *5-7 (N.D. Tex. June 27, 2017); The Chamberlain Grp., Inc. v. Techtronic Indus. Co., No. 16-C-6097, 2017 U.S. Dist. LEXIS 107955 (N.D. Ill. June 28, 2017); Amax, Inc. v. ACCO Brands Corp., No. 16-10695-NMG, 2017 U.S. Dist. LEXIS 101127, 2017 WL 2818986, at *2-3 (D. Mass. June 29, 2017); Infogation Corp. v. HTC Corp., No. 16-cv-01902, 2017 U.S. Dist. LEXIS 103645, 2017 WL 2869717, at *4 (S.D. Cal. July 5, 2017); Navico, Inc. v. Garmin Int'l, Inc., No. 2:16-CV-190, 2017 U.S. Dist. LEXIS 106461, 2017 WL 2957882, at *2-3 (E.D. Tex. July 11, 2017); Reebok Int'l Ltd. v. TRB Acquisitions LLC, No. 3:16-cv-1618-SI, 2017 U.S. Dist. LEXIS 109576, 2017 WL 3016034, at *3 (D. Or. July 14, 2017)). The Arizona court concluded that TC Heartland was a "sea change" regarding venue in patent law and granted the transfer motion.

In an exemplary case going the other way, the defendant Brunswick Corp. filed a motion to transfer arguing that TC Heartland was intervening law and provided an exception to the waiver doctrine. See Cobalt Boats, LLC v. Sea Ray Boats, Inc. & Brunswick Corp., No. 2:15cv21, 2017 U.S. Dist. LEXIS 90728, at *1 (E.D. Va., Jun 7, 2017). The Eastern District of Virginia court disagreed and denied the motion. The court reasoned that Brunswick waived the argument by "failing to timely and sufficiently object" to venue until after the TC Heartland decision. The court further noted that the intervening law exception to waiver was not available because TC Heartland "merely affirms the viability of Fourco," which has "continued to be binding law since it was decided in 1957, and thus, it has been available to every defendant since 1957."

Beyond this rift on the question of waiver, Chief Judge Leonard Stark in the District of Delaware recently issued two interesting opinions on this issue. In one, he transferred the case due to improper venue and, in the other, he ordered further discovery to better inform the decision. Boston Scientific Corp. and Boston Scientific Scimed, Inc. v. Cook Group Inc. and Cook Medical LLC, C.A. No. 15-980-LPS-CJB (D. Del. Sept. 11, 2017); Bristol-Myers Squibb Co. and Pfizer Inc. v. Mylan Pharmaceuticals Inc., C.A. No. 17-379-LPS (D. Del. Sept. 11, 2017).

In Boston Scientific, the court concluded that a company must have a "regular and established place of business... through a permanent and continuous presence" in Delaware. Chief Judge Stark reasoned that venue is improper in when a company is only "registered to do business here, or only maintains a website that is accessible in Delaware, or simply ships goods to unaffiliated individuals or third-party entities here." The court further reasoned that the defendant's contacts did not amount to a regular and established place of business because it lacked physical facilities in Delaware, corporate offices or employees in Delaware, and its sales representatives did not live in Delaware. In Bristol-Myers Squibb, Chief Judge Stark ordered further discovery because he was unable to determine whether the defendant had a "regular and established place of business" in Delaware. He applied the same reasoning as in Boston Scientific regarding establishing a place of business in Delaware. Here, CJ Stark reasoned that defendant's business model includes a large amount of litigation that is based in Delaware, which could count as a place of a business. However, he did note that defendant did not have a "regular and established place of business" in Delaware, and could not make a final decision until discovery is taken on defendant's activities.

One of the first judges to articulate a test for analyzing the substance of a transfer motion under the new standard was Judge Rodney Gilstrap of the Eastern District of Texas. In denying a motion to transfer, Judge Gilstrap set out a four-factor test to determine a "place of business," which include (1) physical presence, (2) defendant's representations, (3) benefits received, and (4) targeted interactions with the district. See e.g., Raytheon Co. v. Cray, Inc., No. 2:15-CV-01554-JRG, 2017 U.S. Dist. LEXIS 100887 (E.D. TX, June 29, 2017). On September 25, 2017, the Federal Circuit reversed Judge Gilstrap's decision. In re Cray, Inc., 2017-129 (Fed. Cir. 2017). We wrote about that decision in more detail here, in which the court articulated a new three-prong test for determining whether a defendant has a regular and established place of business in a particular jurisdiction:

  1. a physical place, i.e., a physical, geographical location in the district from which the business of the defendant is carried out, such as a building or part of a building set apart;
  2. the place of business must be "regular" and "established," i.e., not transient or sporadic; and
  3. the "regular" and "established" place of business must be that of the defendant, "not solely a place of the defendant's employee."

Although the Federal Circuit has not yet been asked to resolve the waiver question, practitioners now have its three-prong test for assessing venue. This provides much needed guidance on the selection of venue as a plaintiff, or whether to advance an improper venue defense and move to dismiss on this basis as a defendant. We will keep you posted as more updates become available.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions