TC Heartland/Micron Free Oath from the Eastern District of New York

In In re: Oath Holdings Inc., [2018-157] (November 14, 2018), the Federal Circuit granted Oath Holdings petition for mandamus, and remanded the case with the district court with the instruction that the district court either dismiss or transfer the case.

In March 2016, Oath was sued for patent infringement in the United States District Court for the Eastern District of New York.  While Oath conducts business in the State of New York, it is incorporated in Delaware, and it does not have “a regular and established place of business” in the Eastern District.  Within 21 days of the Supreme Court’s decision in TC Heartland, although it had answered the Complaint, Oath filed a motion pursuant to Rule 12(b)(3), to dismiss for improper venue.  The district court found that Oath had waived the right to challenge venue.  Oath petitioned for mandamus, but because the Federal Circuit in Micron said TC Heartland effected a relevant change in the law, such that failure to present the venue objection earlier did not come within the waiver rule, the Federal Circuit instructed Oath to raise the matter with the district court.  Oath did, but the district court did not change its ruling, so Oath filed a second petition for mandamus.

The Federal Circuit said that given its on point ruling in Micron, its order on Oath’s first mandamus petition based directly on Micron, and the district
court’s reasoning in nevertheless standing by its initial conclusion, we think that this case involves the narrow and exceptional circumstance in which mandamus is important for proper judicial administration.

The Federal Circuit rejected respondent’s argument that Micron does not apply because it arose under First Circuit law, while the present case arises under Second Circuit law, concluding that issues of waiver or forfeiture of patent-venue rights under §1400(b) and §1406(a) are governed by Federal Circuit law.  The Federal Circuit went on to observe that there was no Second Circuit precedent that would suggest a different result than in Micron, and thus Micron answers the entire question of waiver under Rule 12(g)(2) and (h)(1) for purposes of this case: there was no such waiver.

The Federal Circuit concluded that Oath had not waived or forfeited its
venue rights. Because it was undisputed that venue was improper in the Eastern District of New York, the case may not remain there. The Federal Circuit ordered the district court to either dismiss the case or transfer the case to a “district or division in which it could have been brought.”

There Can Be Only One (District for Venue Purposes)

In In re Bigcommerce, Inc., [2018-122] (May 15, 2018), the Federal Circuit granted petitions for mandamus, requiring that transfer of cases from the Eastern District of Texas.

The Federal Circuit held that a domestic corporation incorporated in a state having multiple judicial districts “resides” for purposes of the patent-specific venue statute, 28 U.S.C. § 1400(b), only in the single judicial district within that state where it maintains a principal place of business, or failing that, the judicial district in which its registered office is located.  Because the petitioner did not “reside” in the Eastern District of Texas under this interpretation, the Federal Circuit granted the petitions for mandamus.

Perhaps Out of Guilt, the Federal Circuit Grants Mandamus to Permit Venue Challenge

In In re Micron Technology, Inc., [2017-138] (November 15, 2017), the Federal Circuit granted Microns’ petition for Mandamus to permit it to challenge venue of the patent infringement case brought against it.   The District of Massachusetts refused to allow the challenge, finding that the Supreme Court’s decision was not a change of law that would make
Rule 12(g)(2) and hence Rule 12(h)(1)(A) inapplicable.

The Federal Circuit concluded as a matter of law that a venue defense was not “available” to Micron in August 2016, because 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.  The Federal Circuit said that 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.  The Federal Circuit added that when a defense or objection is
futile in the sense that the law bars the district court from adopting it to dismiss, 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, contrary to Rule 1.

The Federal Circuit said that this case is one in which controlling precedent precluded the district court from adopting an objection to
venue before the Supreme Court decided TC Heartland—specifically, from adopting such an objection in August 2016, when Micron made its first Rule 12 motion. On the patent-specific issue of the proper interpretation of 28 U.S.C. § 1400(b), the district court was bound by Federal Circuit  precedent.  Circuit-court precedent is binding on district courts notwithstanding the mere possibility that the Supreme Court might come to
disapprove that precedent.

The Federal Circuit reasoned that TC Heartland was a change in law because the Supreme Court had never construed §1400(b) under the particular versions of §1391,  That change of law, severing §1400(b) from §1391(c), made available to Micron in this case the objection
that it does not come within the meaning of “resides” for purposes of venue under §1400(b).

The Federal Circuit thus granted the petition for mandamus vacating the Order denying Micron’s Rule 12(b)(3) motion, and remanding the case for further proceedings consistent with its Order.

 

Employee Residence is Not the Defendant’s Regular and Established Place of Business

In re: Cray Inc., 2017-129 (September 21, 2017), the Federal Circuit granted Cray’s Petition for Writ of Mandamus and directed the Eastern District of Texas to transfer a patent infringement action pursuant to 28 U.S.C. §1406(a).  The Federal Circuit found that the district court misinterpreted the scope and effect of its precedent in determining that Cray maintained “a regular and established place of business” in the Eastern District of Texas within the meaning of 28 U.S.C. §1400(b).

Although Cray did not rent or own an office or any property in the Eastern District of Texas, it allowed Harless and Testa to work remotely from their respective homes in the district.  The district court found that activities of Harless working from his home as a “sales executive” made his personal residence Cray’s regular and established place of business in the district.

The Federal Circuit found that although the law was unclear and the error understandable, the district court misunderstood the scope and effect of our decision in Cordis, and its misplaced reliance on that precedent led the court to deny the motion to transfer, which we find to have been an abuse of discretion.

The only question before the court was whether Cray has a “regular and established place of business” in the Eastern District of Texas within the meaning of §1400(b).  The Federal Circuit agreed with the district court that “the regular and established place of business standard requires more than the minimum contacts necessary for establishing personal jurisdiction or for satisfying the doing business standard of the general venue provision.”

The Federal Circuit said that:

The statutory language we need to interpret is “where the defendant . . . has a regular and established place of business.” 28 U.S.C. § 1400(b). The noun in this phrase is “place,” and “regular” and “established” are adjectives modifying the noun “place.” The following words, “of business,” indicate the nature and purpose of the “place,” and the preceding words, “the defendant,” indicate that it must be that of the defendant. Thus, § 1400(b) requires that “a defendant has” a “place of business” that is “regular” and “established.” All of these requirements must be present. The district court’s four-factor test is not sufficiently tethered to this statutory language and thus it fails to inform each of the necessary requirements of the statute.

In deciding whether a defendant has a regular and established place of business in a district, no precise rule has been laid down and each case depends on its own facts.  However, the analysis must be closely tied to the language of the statute.  The first requirement is that there “must be a physical place in the district.” The second requirement for determining venue is that the place “must be a regular and established place of business.”  sporadic activity cannot create venue.  Finally, the third requirement when determining venue is that “the regular and established place of business” must be “the place of the defendant.”  Thus, the defendant must establish or ratify the place of business. It is not enough that the employee does so on his or her own.  Relevant considerations include whether the defend-ant owns or leases the place, or exercises other attributes of possession or control over the place.  In the final analysis, the court must identify a physical place, of business, of the defendant.

The Federal Circuit stressed that no one fact is controlling, but that taken together, the facts cannot support a finding that Cray established a place of business in the Eastern District of Texas. Thus venue cannot exist there under § 1400(b).

Venue for Patent Infringement Cases is Well Established; a Corporate Defendant can be Sued Wherever it Can be Found

In In re TLC Heartland LLC, [2016-0105] (April 29, 2016), the Federal Circuit denied Heartland petition for mandamus directing the District of Delaware to either dismiss or transfer the patent infringement suit brought by Kraft against Heartland in the District of Delaware.

Heartland is a limited liability company organized and existing under Indiana law and headquartered in Indiana.  Heartland was not registered to do business in Delaware, has no local presence in Delaware, has not entered into any supply
contracts in Delaware or called on any accounts there to solicit sales, although it did admit to shipping 44,707 cases of the accused product to the District of Delaware that generated at least $331,000 in revenue.

The Federal Circuit found that Heartland failed to show its right to mandamus was clear and indisputable, rejecting the argument that Heartland did not reside in Delaware for purposes of 28 U.S.C. § 1400(b), and rejecting the argument that the District Court lacked specific personal jurisdiction.

The Federal Circuit rejected Heartland’s contention that amendments to the venue statute statutorily overruled VE Holdings‘ determination 1988 amendments to the venue statute made the definition of corporate residence in the general venue statute, § 1391(c), apply to the patent venue statute, 28 U.S.C. § 1400.

The Federal Circuit also rejected Heartland;s argument that specific jurisdiction only gives the court jurisdiction over those acts occurring in the district.  The Federal Circuit rejected the result that to get jurisdiction over all of the acts of infringement, Kraft would have to sue in each state, or sue defendant where it is incorporated.

Venue continues as it has since VE Holdings — a corporate infringer can be sued wherever it can be found.

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