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.
Meaning of “Regular and Established Place of Business”
In BMC Software, Inc. v. Cherwell Software, LLC, 1:17-cv-01074 (E.D. Va. Dec. 21, 2017), the court granted the defendant’s motion to transfer venue, finding that the defendant’s rental and use of a computer server in Virginia was insufficient to show a “regular and established” place of business. The court found that operation of the server did not satisfy the three-factor test for venue set forth in In re Cray, 871 F.3d 1355 (Fed. Cir. 2017) (see here for further discussion on Cray). Specifically, the court held that: (1) the servers were not “real property,” and instead, were “personal property” providing “virtual space”; (2) the servers resided on a “single rented rack in warehouse,” and thus were not sufficiently “regular” and “established”; and (3) the “place” in question was not that of the defendant, but rather was the “third party’s place.” The court also denied the plaintiff’s motion for venue-related discovery where the plaintiff had only offered “conclusory assertions and speculation” that the servers were particularly integral to the defendant’s business. The court found “no indication of fraud or misconduct” in the defendant’s affidavits describing the limited use of the servers. As such, there was “no reason to believe that venue discovery would alter the outcome of the venue analysis.”
In University of South Florida Research Foundation Inc. v. Fujifilm Medical Systems U.S.A., Inc., 8:16-cv-1194 (M.D. Fla. Dec. 28, 2017), the court granted the defendant’s motion to transfer for improper venue. The court first held that, pursuant to In re Micron, No. 2017-138 (Fed. Cir. Nov. 15, 2017), the defendant did not waive its venue objection by failing to raise the objection as required under Fed. R. Civ. P. 12(h). The court next held that the presence of a corporate affiliate in the district was sufficient to establish venue with respect to the defendant. The court explained that “[t]he presence of corporate affiliates in the district will not establish venue ‘except where corporate formalities are ignored and an alter ego relationship exists.’” The court found that the plaintiff failed to plead facts suggesting that the defendant and its affiliate ignored corporate formalities. As such, there was “no reason” to allow the plaintiff additional discovery on the relationship between the entities.
Venue for Foreign Defendants
In Sharp Corp. v. Hisense Electric, Co., 17-cv-05404 (S.D.N.Y. Dec. 22, 2017), the plaintiff brought suit against a Chinese corporation and two of its U.S. subsidiaries. The court first held that venue in New York was improper with respect to the U.S. subsidiaries under TC Heartland and In re Cray because the companies were not incorporated in New York and maintained no regular and established place of business in the state. The court recognized, however, that venue inquiry for the Chinese parent corporation is not controlled by TC Heartland. Rather, venue is proper for a foreign corporation in any judicial district where the corporation is subject to personal jurisdiction. The court, however, declined to engage in a personal jurisdiction/venue analysis. Instead, the court held that the Northern District of Georgia would be a more convenient forum for the case against the Chinese parent. As such, the court transferred the cases against the U.S. subsidiaries under 28 U.S.C. § 1406 (for improper venue) and transferred the case against the foreign parent under 28 U.S.C. § 1404 (convenience transfer). The court’s approach was the opposite of the approach adopted in two recent Delaware cases, where Judge Stark allowed the plaintiffs to voluntarily dismiss claims against improperly-venued U.S. subsidiaries in order to maintain cases against their foreign parents (see our recap of those cases here).
Waiver of Venue Objection
In Intellectual Ventures II LLC v. Fedex Corp., 2:16-cv-00980 (E.D. Tex. Dec. 22, 2017), Judge Gilstrap denied the defendants’ motion to stay their case pending Federal Circuit review of defendants’ mandamus petition. Judge Gilstrap originally denied defendants’ motion to dismiss for improper venue, finding that the defendants had waived their right to challenge venue by actively litigating the case before and after the TC Heartland decision. Defendants filed a petition seeking a writ of mandamus, arguing that the district court erred in both its waiver analysis and its substantive venue analysis. Defendants asked Judge Gilstrap to stay the district court proceedings while the mandamus petition is pending. Judge Gilstrap refused, finding that the defendants are unlikely to succeed on the merits of their petition. Judge Gilstrap also noted more generally that it would be inefficient to stay cases to await resolution of venue issues because there are many “unanswered questions in patent venue law” and “resolving all of these questions will take months or even years.” The court was thus not willing to “stay every case while it await[ed] a perfect refinement of the standards.”
No Waiver of Venue Objection
In SCVNGR, Inc. v. DailyGobble, Inc., 1:16-cv-00134 (D.R.I. Dec. 27, 2017), the court granted the defendant’s motion to transfer for improper venue where the motion was made six months after TC Heartland and one week after In re Micron (see our analysis of Micron here). The court rejected the plaintiff’s argument that the motion was “untimely” because “[t]here was no definitive ruling on whether TC Heartland signified a change in the law” and “there was a decision by a district court in this circuit holding just the opposite.” The court explained that forcing the defendant “to immediately file its change of venue motion after TC Heartland was issued, but prior to the definitive guidance in Micron Technology, when the only law in this circuit at the time held that TC Heartland did not change the law, would be patently unfair to [the defendant].”