The IP Litigation Team at Fried Frank is continuously tracking the impact of TC Heartland. Every week, we provide a roundup of the courts’ latest orders and opinions concerning venue-related issues in patent infringement cases.
The summaries below are grouped by topic and cover the period July 19 – July 25, 2017.
Meaning of Regular and Established Place of Business
Neonatal Product Group, Inc. v. Shields et al., 2:13-cv-02601 (D. Kan. July 20, 2017) (Memorandum and Order, J. Daniel D. Crabtree, Dkt. 177), is a declaratory judgment action. Three years after the original case was filed, the defendants amended their answer to allege patent infringement by a new counterclaim defendant. That new counterclaim defendant moved to dismiss for improper venue, arguing that it did not have a “regular and established place of business” in the judicial district under the second prong of 28 U.S.C. § 1400(b). The court agreed, finding that the counterclaim defendant had “no employees, offices, real property, bank accounts, phone listings, or post offices within this district…is not organized under Kansas law, and [it] has no Kansas offices.” It also held that this is true for “its sister companies and subsidiaries.” The court therefore severed the counterclaim and granted the motion to transfer.
Waiver of Objection to Venue
In In re Hughes Network Sys., LLC, 17-130 (Fed.Cir. July 24, 2017) (Per Curiam Order, J. Prost, Bryson, and Taranto), a Federal Circuit panel denied Hughes Network Systems, LLC’s petition for a writ of mandamus to transfer a patent infringement case out of the Eastern District of Texas. The panel held that Hughes waived its right to transfer for improper venue because it waited to file a motion until the eve of trial, only after the Supreme Court decided TC Heartland. The decision did not resolve whether TC Heartland was a change of law. The panel noted that it did not “necessarily agree with the district court’s conclusion that the Supreme Court’s decision in TC Heartland did not effect a change in the law.” This seemingly leaves open whether TC Heartland represents intervening law, an exception to waiver. For a full summary and in-depth analysis, please read our post entitled: Federal Circuit Denies Mandamus – Venue Defense Waived.
The defendants in Realtime Data, LLC v. Dish Network Corp. et al., 6:17-cv-00421 (E.D. Tex. July 19, 2017) (Report and Recommendation, Magistrate Judge John D. Love, Dkt. 1), filed a motion to dismiss for improper venue in a newly consolidated patent infringement action that combined an earlier action. That case had been in litigation for years with a newly filed action. However, the defendants never challenged venue as improper in the earlier action, and, actively participated in litigation for the two years prior to the consolidation. As a result, the court held that the defendants waived the defense of improper venue in the earlier action and that by agreeing to consolidate, waived their venue defense as to the consolidated action as a whole including the new case.
In Koninklijke Philips N.V. v. HTC Corp. et al., 1:15-cv-01126 (D. Del. July 19, 2017) (Memorandum, Judge Gregory M. Sleet, Dkt. 162), defendants had withdrawn an earlier motion to dismiss for improper venue following the Federal Circuit’s 2016 TC Heartland decision and actively participated in the litigation including a claim construction hearing. They then filed for dismissal after the Supreme Court’s TC Heartland decision. The district court found that defendants’ earlier conduct demonstrated consent to venue and therefore waiver of the improper venue defense because the Supreme Court’s TC Heartland decision was not an intervening change in venue law and thus does not qualify for an exception to waiver.
In SkyHawke Technologies, LLC v. DECA International Corp., 3:10-cv-00708 (S.D. Miss. July 21, 2017) (Memorandum Opinion and Order, Judge Tom S. Lee, Dkt. 150), the defendant had not objected to venue in any responsive pleading at the outset of the case. After the TC Heartland decision issued, however, defendant moved to dismiss for improper venue, arguing that TC Heartland was an intervening change in the law. Citing to the majority of courts that found no change in the law, the court held that the defendant had waived its objection to improper venue.
In Realtime Data LLC v. Rackspace US, Inc. et al., 6:16-cv-00961 (E.D. Tex. July 21, 2017) (Report and Recommendations, Magistrate Judge John D. Love, Dkt. 209), the defendants admitted that venue was “authorized,” but denied it was “proper” in their answer, while also filing an affirmative defense of improper venue. Soon thereafter defendants moved to transfer to a more convenient venue under 28 U.S.C. § 1404(a), but did not challenge venue as improper. The court denied the motion to transfer and the defendants then actively participated in the litigation. After the Supreme Court TC Heartland decision issued, defendants filed a new motion to dismiss for improper venue. The district court found that defendant’s “continuous and consistent conduct in this action constitutes [ ] a waiver” of the improper venue defense, regardless of defendants’ prior attempts to challenge venue. The Magistrate Judge therefore recommended denying the defendants’ motion to dismiss for improper venue.
In Orthosie Systems, LLC v. Actsoft, Inc., 4:16-cv-00873 (E.D. Tex. July 25, 2017) (Memorandum Opinion and Order, Judge Amos L. Mazzant, III, Dkt. 46), the defendant elected not to challenge venue as improper in three different motions to dismiss filed after plaintiff had amended its complaint. Over a year later, after the TC Heartland decision issued, the defendant filed a motion to dismiss for improper venue arguing that the defense was not previously available and that TC Heartland changed the law such that improper venue defense was not waived. Citing to the majority of courts that found no change in the law, the district court disagreed and held that the defendant waived its improper venue defense.
No Waiver of Objection to Venue
In OptoLum, Inc. v. Cree, Inc., 2:16-cv-03828 (D. Ariz., July 24, 2017) (Order, Judge Douglas L. Rayes, Dkt. 90), the defendant moved to transfer to a more convenient venue under 28 U.S.C. § 1404(a) before filing a response to the plaintiff’s amended complaint. The court denied the motion and the defendant then filed an answer admitting that venue was proper. Less than two months later, after the TC Heartland decision issued, the defendant filed motions to amend its answer to deny that venue is proper and to dismiss or transfer for improper venue. The court granted the motions, finding that the TC Heartland decision “affected a ‘sea change’ in the law of venue for patent cases” and thus qualified as an intervening change of law that qualifies for an exception to waiver of the improper venue defense. Notably, to support its finding, the court reasoned that (1) the Federal Circuit’s VE Holding decision held that Congress intended to “overrule” the Supreme Court’s Fourco decision with its amendments to the § 1391 general venue statute; (2) the Supreme Court’s TC Heartland decision reversed the VE Holding decision and held that Congress had not “overruled” the Fourco decision; and (3) thus, “TC Heartland changed the venue landscape just as VE Holding had done 27 years earlier.” In further support, the court noted that the improper venue defense was not always “available,” because such a defense would require an expensive litigation strategy of appealing to the Federal Circuit and Supreme Court with only “the mere possibility that VE Holding might be overturned.”