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
Venue for Foreign Defendants
The District of Delaware issued two opinions this week addressing venue in cases brought against foreign parent corporations and their U.S. subsidiaries. In both cases, the court held that venue was proper with respect to the foreign parents, but not their U.S. affiliates.
In 3G Licensing, S.A. v. HTC Corp. and HTC America Inc., No. 17-cv-0083 (D. Del. Dec. 18, 2017), the court denied the defendants’ motion to transfer or dismiss for improper venue. The plaintiff, 3G Licensing, sued HTC Corp., a Taiwanese corporation, and its U.S. subsidiary, HTC America Inc. Judge Stark held that venue was improper with respect to HTC America Inc. because the company is not incorporated in Delaware and does not maintain a regular and established place of business in the state. By contrast, the court held that that venue was proper with respect to HTC Corp. The court noted that under Brunette Machine Works, Ltd. v. Kockum Industries, Inc., 406 U.S. 706, 706-07 (1972), venue for a foreign corporation is determined under the general venue provision in 28 U.S.C. § 1391, not the patentspecific venue provisions in § 1400. Under the general provision, a foreign corporation may be sued in any judicial district. See 28 U.S.C. § 1391(c)(3). Judge Stark held that Brunette remains good law because the Supreme Court explicitly declined to “express any opinion” on Brunette in its TC Heartland decision. Given that venue was proper with respect to HTC Corp., Judge Stark declined to transfer the case. Rather, he granted the plaintiff leave to voluntarily dismiss the claims against HTC America Inc. and proceed against HTC Corp.
In Koninklijke KPN N.V., v. Kyocera Corp. and Kyocera International, Inc., No. 17-cv-0087 (D. Del. Dec. 18, 2017), Judge Stark also denied the motion to transfer or dismiss for improper venue. Again, the case named a foreign parent – Kyocera Corp. – and its U.S. subsidiary – Kyocera International, Inc. – as defendants. The court held that venue was improper with respect to Kyocera International because the California corporation did not have a regular and established place of business in Delaware. As in 3G Licensing, however, Judge Stark held that venue was proper for Kyocera Corp. because it is a foreign corporation and therefore subject to venue in any judicial district. Judge Stark again declined to transfer the case and allowed the plaintiff to voluntarily dismiss its claims against the U.S. subsidiary.
Meaning of Regular and Established Place of Business
In GeoDynamics, Incorporated v. DynaEnergetics US, Inc., No. 17-cv-00371 (E.D. Tex. Dec. 18, 2017), the court denied the motion to dismiss for improper venue, finding that the defendant, DynaEnergetics, has a regular and established place of business in the Eastern District of Texas. The defendant argued that it no longer had any physical location in the district because its distribution facility in Tyler, Texas was closed in 2015, two years before GeoDynamics had filed its lawsuit. In March 2017, however, the defendant’s President, Ian Grieves, testified in a different case that the company was “moving a distribution center across to Marshall,” which is also within the Eastern District of Texas. Given this testimony, Judge Payne held that DynaEnergetics could not now deny that it has a presence in the district.
In Mallinckrodt IP, et al. v. B. Braun Medical Inc., No. 17-cv-0365 (D. Del. Dec. 14, 2017), Judge Stark again allowed venue-related discovery to determine the relationship between the defendant and its affiliated companies with operations in Delaware. As we noted in our earlier analysis of Javelin Pharmaceuticals, Judge Stark has held that a defendant can, at least theoretically, be subject to venue in Delaware based on the operations of “intimately connected” corporations in Delaware. Judge Stark noted that the recent decision in In re Cray, 871 F.3d 1355 (Fed. Cir. 2017) supports his view because Cray recognizes that, under certain circumstances, venue can be based on property belonging to another. While Judge Stark allowed discovery in Mallinckrodt, he also clarified that certain connections to Delaware will not be sufficient for venue. For example, appointing an agent for service of process in Delaware is insufficient to create a physical place in the district. Moreover, contrary to his prior decision in Bristol-Myers Squibb Co. v. Mylan Pharmaceuticals Inc., 17-cv-0379 (D. Del. Sept. 11, 2017) (discussed here), Judge Stark held that visits to Delaware to participate in litigation are not of sufficient for venue because the federal courthouse is not a “place of the defendant.”
In University of South Florida Research Foundation v BRIT Systems, No. 16-cv-3109 (M.D. Fla. Dec. 18, 2017), the court held that venue was improper because Brit Systems did not have a regular and established place of business in Florida. The court noted that the burden of demonstrating proper venue is on a plaintiff. In this case, the plaintiff provided no evidence to support its assertion that venue was proper. At the same time, BRIT submitted an affidavit stating that its principal place of business is in Texas. The affidavit also noted that Brit has no employees, offices, or operations in Florida and is not registered to do business in the district.
In Soverain IP, LLC v. AT&T Inc., et al., No. 17-cv-00293 (E.D. Tex. Dec. 18, 2017), Judge Schroeder adopted Judge Payne’s report and recommendation to dismiss the claims against AT&T Inc. due to improper venue. Soverain IP argued that the physical place of business of a corporate affiliate in the district should be imputed to AT&T Inc. under a theory of agency. Judge Schroeder disagreed, finding that a subsidiary’s presence can only be imputed to its parent if the “corporations disregard their separateness and act as a single enterprise.” See Cannon Manufacturing Co. v. Cudahy Packing Co., 267 U.S. 333 (1925). Interestingly, the standard that Judge Schroder articulated for when it is permissible to rely on the activities of a corporate affiliate for the purposes of venue seems to be stricter than the standard that Judge Stark alluded to in granting discovery in Mallinckrodt IP (see above). The standard that Judge Schroder articulated appears to be similar to the analysis applied by Judge Linn in Galderma Laboratories, LP v. Teva Pharmaceuticals USA, Inc., No. 17-cv-1076 (N.D. Tex. Nov. 17, 2017) (see our analysis here).
Waiver of Objection to Venue
In Kaist IP US v. Samsung Electronics Co. Ltd., et al., No. 16-cv-01314 (E.D. Tex. Dec. 18, 2017), Judge Payne recommended denying defendants motion to dismiss for improper venue because defendants waited too long to raise their objections to venue. While Judge Payne acknowledged that TC Heartland was a change in the law of venue excusing waiver, he admonished defendants for waiting more than four months after TC Heartland before filing their motions. The defendants noted that the delay was due to their attempts to negotiate a change of venue with plaintiffs. The court, however, held that defendants must nonetheless bear the consequences of the delay because granting relief at this point would “disrupt the efficiency of the judicial system.”
In Omega Patents LLC v. Enfora, Inc., No. 17-cv-2769 (N.D. Ga. Dec. 18, 2017), the court denied the defendant’s motion to dismiss or transfer, finding that the defendant had consented to venue under a prior settlement agreement. The parties – Omega and Enfora – were previously engaged in litigation in the Southern District of Florida and the Northern District of Georgia. In 2013, the parties agreed to dismiss the Florida action with prejudice and the Georgia action without prejudice. The parties further agreed to a thirty-month “standstill,” during which Omega would not refile any patent infringement litigation. The parties agreed, however, that damages would continue to accrue during the standstill. On July 21, 2017, following the expiration of the standstill, Omega filed a new case in the Northern District of Georgia alleging infringement of three patents, two of which were the subject of the earlier lawsuits. Enfora moved to dismiss due to improper venue. The court noted that venue would not be proper under TC Heartland because Enfora is not incorporated in Georgia and does not have a regular and established place of business in the district. The court, however, noted that the parties’ settlement agreement contained a provision stating that “[a]ll disputes under this Agreement shall be resolved by litigation in the courts of the State of Georgia or Texas” and waiving “any jurisdictional or venue defenses otherwise available to” the parties. While the new infringement case was not precisely a dispute arising under the settlement agreement, the court noted that the case closely related to the settlement. The court also noted that Eleventh Circuit precedent supports broadly construing venue waivers to apply to such closely related disputes. As such, the court found that Enfora had waived its objection to venue in the Northern District of Georgia.
No Waiver of Objection to Venue
In Autumn Cloud LLC v. TripAdvisor, Inc., et al., No. 16-cv-0853 (E.D. Tex. Dec. 19, 2017), Judge Payne recommended dismissing the cases against several defendants due to improper venue. The court acknowledged that TC Heartland was an intervening change in the law of venue. As a result, the court noted that the defendants had not waived their venue objections by failing to press those objections immediately under Rule 12 of the Federal Rules of Civil Procedure.
In BASF Corp. v. SNF Holding Company, et al., No. 14-cv-2733 (S.D. Tex. Dec. 19, 2017), the court granted defendants’ motion for reconsideration and ordered the case transferred to the Southern District of Georgia. The court had denied defendants’ prior venue motion, finding that the defendants had waived their venue objections. Defendants requested reconsideration based on In re Micron, 875 F.3d 1091 (Fed. Cir. 2017), in which the Federal Circuit held that TC Heartland was an intervening change in the law that excuses the waiver of venue objections under Rule 12. The court granted defendants’ motion and transferred the case.