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 26 – August 1, 2017.
Consolidated Oral Argument Concerning TC Heartland Issues – D. Del.
On August 1, 2017, the District of Delaware consolidated oral argument regarding motions to dismiss for improper venue pending in a number of cases. Chief Judge Stark and Magistrate Judge Burke will jointly preside over two separate hearings to be held on August 24, 2017. The first hearing concerns ANDA cases and includes: UCB, Inc. v. Mylan Technologies, Inc. (C.A. No. 17-322), Mallinckrodt IP v. B. Braun Medical Inc. (C.A. No. 17-365; 17-660), and Bristol-Myers Squibb Co. v. Mylan Pharmaceuticals Inc. (C.A. No. 17-379). The second hearing concerns non-ANDA cases and includes: Boston Scientific Corp. v. Cook Group Inc. (C.A. No. 15-980), Blackbird Tech LLC v. Feit Electrical Co., Inc. (C.A. No. 16-1159), Koninklijke KPN N.V. v. Kyocera Corp. (C.A. No. 17-87), and 3G Licensing, S.A. v. HTC Corp. (C.A. No. 17-83). Each side, collectively, will have 45 minutes divided among the parties to present their argument.
Meaning of “Regular and Established Place of Business” – Federal Circuit Briefing
Previously we reported on a Petition for Writ of Mandamus filed by Cray disputing whether it had a “regular and established place of business,” In re Cray, 2017-129 (Fed. Cir. August 1, 2017) [link write up] and an amicus filing in support of the petition [Please see our JULY 19, 2017 - TC HEARTLAND WEEKLY UPDATE]. Raytheon has now urged the Federal Circuit to deny the petition, arguing that the Eastern District of Texas did not abuse its discretion in holding that venue was proper under TC Heartland and Cray’s “permanent and continuous presence” in the district constituted a “regular and established place of business” under 28 U.S.C. § 1400(b). To support its position, Raytheon said that the factual posture of this case is very similar to that in In re Cordis, 769 F.2d 733 (1985): a permanent and continuous presence by employing two salespeople who (1) lived in the district, (2) worked from home, and (3) generated over $345 million in sales revenue in the district. Moreover, Raytheon argued that the plain meaning of “regular and established place of business” does not require a physical presence, but even if it did, the home offices of Cray’s employees are plainly physical locations that satisfy the statute. Notably, Raytheon also urged the Federal Circuit not to address the district court’s four-factor “regular and established place of business” test because it was advisory in nature and the district court did not apply it to the facts of the case.
Gilead Sciences, Inc. and The High Tech Inventors Alliance1 (the “Alliance”) also filed separate amicus curiae briefs in support of Cray, Inc.’s mandamus petition. [Please see our article entitled GILEAD AND ALLIANCE OF TECH COMPANIES PRESS FEDERAL CIRCUIT TO CLARIFY MEANING OF “REGULAR AND ESTABLISHED PLACE OF BUSINESS” for a summary and analysis of the briefs.] Both groups argue that the Eastern District of Texas misinterpreted the Federal Circuit’s ruling in In re Cordis, 769 F.2d 733 (1985) and that the district court’s newly-announced four-factor test2 for determining a “regular and established place of business” is flawed.
Meaning of “Regular and Established Place of Business” – District Court
Gillespie et al v. Prestige Royal Liquors Corp. et al, 4-16-cv-02392 (N.D. Cal. July 31, 2017) (Order, Judge Haywood S. Gilliam, Jr., Dkt. 90) is a declaratory judgment action where the plaintiff challenged the validity of defendants’ patents and also alleged that defendants infringed its design patents. The district court granted the defendants’ motion to dismiss for improper venue because the plaintiff failed to show that defendants had an established place of business in the district. For example, the court held that the plaintiff’s allegations that defendants imported infringing products into the district and directed advertising efforts at the State of California was not sufficient on its own to support venue.
Magistrate Judge Love recommended denying the defendant’s venue motion in Realtime Data LLC d/b/a IXO v. Exinda Inc., 6-17-cv-00124 (E.D. Tex. August 1, 2017) (Report and Recommendation, Magistrate Judge John D. Love, Dkt. 33), because the defendant Exinda failed to adequately establish the lack of a “regular and established place of business” in the district. Holding that it need not wait for Exinda’s reply in support of its motion – where presumably Exinda would have supplemented its initial evidence based upon the arguments in opposition – the court considered a venue objection first put forward in an Amended Answer (filed as of right under Rule 15(a)(1)(A)) and subsequently in Exinda’s motion to dismiss. In support of dismissal, Exinda submitted a declaration stating that it is incorporated in Delaware and “does not directly or indirectly own business, sales, or distribution locations or other physical facilities in the Eastern District of Texas.” The Magistrate Judge indicated that this averment is insufficient to prove improper venue under the “regular and established place of business” test in light of the Federal Circuit In re Cordis statement that “the appropriate inquiry is whether the corporate defendant does its business in that district through a permanent and continuous presence there and not as [defendant] argues, whether it has a fixed physical presence in the sense of a formal office or storefront.” Id. (emphasis in original), quoting 769 F.2d 733, 737 (Fed. Cir. 1985). Having failed to address whether it has a permanent and continuous presence in the district, the Magistrate Judge recommended that Exinda’s motion be denied.
Waiver of Objection to Venue
In Diem LLC v. BigCommerce, Inc., 6-17-cv-00186 (E.D. Tex. July 26, 2017) (Order, Judge Rodney Gilstrap, Dkt. 24), the court adopted the Magistrate Judge’s Report and Recommendation to dismiss the defendant’s motion to dismiss for improper venue. The defendant did not object to venue in its answer and filed a separate motion to dismiss without challenging venue. The Magistrate Judge concluded that the defendant therefore waived its improper venue defense. The court agreed and held that the Supreme Court’s TC Heartland decision was not an intervening change in the law that qualifies as an exception to waiver. The court also noted that even if defendant had not waived its venue defense, it is incorporated in Texas and therefore “resides” in the Eastern District of Texas for venue purposes, even if it has no business presence in the district.
In Mantissa Corp. v. Ondot Systems, Inc. et al., 4:15-cv-01133 (S.D. Tex. July 26, 2017) (Memorandum and Order, Magistrate Judge Dena Hanovice Palermo, Dkt. 113) the defendants moved to dismiss and/or transfer for improper venue for the first time just a few days after the Supreme Court issued its TC Heartland decision. Citing the majority of district courts that have considered the issue, the court reasoned that the defense was always available to defendants because TC Heartland did not change venue law. The court therefore held that the defendants had waived their improper venue defense. The court also noted that defendants expressly waived the defense by their actions and, accordingly, the court did not have to consider whether plaintiff would suffer prejudice from a transfer of venue in the case as part of its analysis.
In In re Nintendo of America, Inc., 17-127 (Fed. Cir. July 26, 2017) (Per Curiam Order, J. Prost, Bryson, and O’Malley), a Federal Circuit panel denied Nintendo’s petition for a writ of mandamus to transfer a patent infringement case out of the Northern District of Texas. The panel held that Nintendo had waived its improper venue defense by conceding in its answer that venue was proper in the Northern District of Texas and participating in litigation for over three years. Moreover, the panel noted that Nintendo filed its motion to dismiss or transfer on the eve of trial only after the Supreme Court issued its TC Heartland decision. Notably, the panel stated that it “need not decide whether the Supreme Court’s decision in TC Heartland effected a change in the law” to deny the writ petition. This is the second time that a Federal Circuit panel has sidestepped determining whether the TC Heartland decision qualifies as an intervening change to the law exception to waiver. For more commentary, please read our post entitled: Federal Circuit Denies Mandamus – Venue Defense Waived.
In Orthosie Systems, LLC v. Synovia Solutions, LLC, 4:16-cv-00995 (E.D. Tex. July 31, 2017) (Memorandum Opinion and Order, J. Amos L. Mazzant, Dkt. 36), the defendant neglected to object to venue in its answer. In a Joint Report of Rule 26(f) Conference, defendant stated that it did not intend to file a motion to transfer but “may reevaluate its position… depending on the anticipated ruling by the Supreme Court” in TC Heartland. Immediately after the decision issued, the defendant moved for leave to file a motion to dismiss or transfer venue. The court found that the defendant’s conduct, acquiescing to proper venue while reserving the right contest venue later, runs contrary to the purposes of the Federal Rules of Civil Procedure. Therefore, the court held that the defendant waived its improper venue defense. The court also noted that 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 of the improper venue defense.
No Waiver of Objection to Venue
In Blue Spike, LLC v. Contixo Inc. et al., 6:16-cv-01220 (E.D. Tex. July 26, 2017) (Order, Magistrate Judge John D. Love, Dkt. 48), the court granted defendant’s motion to dismiss for improper venue. Defendant objected to venue in its answer, which was filed only one month before the TC Heartland decision issued, but did not assert an affirmative defense. The court held that because defendant “denied venue in its answer and timely filed its first Rule 12(b) motion for improper venue before the parties had begun to significantly litigate this case, [defendant] adequately preserved its improper venue defense,” even though defendant did not list improper venue as an affirmative defense.
In CG Tech. Dev., LLC v. FanDuel, Inc. et al., 2:16-cv-00801 (D. Nev. July 27, 2017) (Order, Judge Robert C. Jones, Dkt. 219), the court granted defendants’ motion to transfer, even though they had not initially raised the improper venue defense at the outset of the case. The court found that the defense was not available prior to issuance of the Supreme Court’s TC Heartland decision because the defense effectively did not exist after the Federal Circuit’s VE Holding decision. The court therefore held that the defense had not been waived because most courts of appeal “have held that a defense is not ‘available’ where circuit precedent forecloses it simply because the Supreme Court later issues a ruling to the contrary.”
The defendant in Blue Spike, LLC v. Nook Digital, LLC., 6:16-cv-01361 (E.D. Tex. July 28, 2017) (Order, Magistrate Judge John D. Love, Dkt. 97) explicitly objected to venue in its answer and included an affirmative defense citing to the Supreme Court’s Fourco decision and stating that venue is improper. The defendant moved to dismiss a month after the Supreme Court issued its TC Heartland decision. While the plaintiff argued that the defendant acted in bad faith with the timing of its motion, which was filed the same day the court construed claims of the asserted patents in a co-pending matter, the court held that these implications were unfounded and that the defendant had adequately preserved its venue challenge. Therefore, the Magistrate Judge recommended granting the defendant’s motion to dismiss.