The US Court of Appeals for the Federal Circuit concluded venue was improper under the patent venue statute as interpreted by the Supreme Court of the United States, finding that the accused infringer did not waive or forfeit its venue rights. In re: Oath Holdings Inc., fka Yahoo Holdings, Inc., Case No. 18-157 (Fed. Cir. Nov. 14, 2018) (per curiam).
In March 2016, AlmondNet, Datonics and Intent IQ (the respondents) sued Oath in the US District Court for the Eastern District of New York (ED NY). Oath conducts business in the state of New York, is incorporated in Delaware, and does not have “a regular and established place of business” in the ED NY within the meaning of 28 USC § 1400(b), the venue provision for patent cases. In July 2016, Oath filed a motion to dismiss for failure to state a claim, but did not include a venue objection. In January 2017, Oath withdrew its motion to dismiss and filed its answer, admitting that venue was proper but expressly reserving the right to challenge venue based on any change in law, including the then-pending TC Heartland case before the Supreme Court of the United States.
In May 2017, the Supreme Court issued its decision in TC Heartland, holding that “a domestic corporation ‘resides’ only in its State of incorporation for purposes of the patent venue statute” (IP Update, Vol. 20, No. 5). On June 12, 2017, Oath moved to dismiss for improper venue because it did not reside or have a regular and established place of business in the ED NY. The respondents opposed, arguing that Oath waived its venue defense because the defense was available in July 2016 when Oath filed its initial motion to dismiss. The district court agreed, finding that Oath waived its venue challenge, and therefore denied Oath’s motion.
Oath petitioned the Federal Circuit for a writ of mandamus that would direct the district court to grant the motion to dismiss. While the petition was pending, the Federal Circuit ruled in In re: Micron (IP Update, Vol. 20, No. 12) that TC Heartland was a change in law and that TC Heartland’s interpretation of the patent venue statute was not available prior to the Supreme Court decision. The Federal Circuit noted, however, that a venue defense might nevertheless have been forfeited if there was a delay in asserting it. The Court denied Oath’s petition in light of Micron, finding that the proper course was for Oath to move the district court for reconsideration.
Oath moved the district court for reconsideration. The district court denied the motion, finding that TC Heartland did not change the law at the Supreme Court level because it reaffirmed Supreme Court precedent. Oath then filed a second petition for mandamus, asking the Federal Circuit to direct the district court to dismiss the action.
The Federal Circuit found that there was no dispute that in the case at bar, venue in the ED NY was improper under § 1400(b), so the only issue was whether Oath waived or forfeited its venue defense by waiting too long to invoke it. The respondents argued that Micron did not apply because the Federal Circuit decided the case under First Circuit law, while the present case arose under Second Circuit law. The Court rejected this regional circuit argument, finding that the interpretation of the patent venue statute is a matter of Federal Circuit law, and waiver and forfeiture of patent venue rights are therefore governed by Federal Circuit law. On this point, the Court found that Oath did not waive its patent venue rights.
The respondents also argued that Oath forfeited its venue defense because it did not object to venue in its answer and extensively participated in the litigation before the TC Heartland decision came down. The Federal Circuit rejected this argument, finding that Oath could not be faulted for waiting to present a venue objection until after TC Heartland was decided, where (1) the case was in an early stage, (2) the defense could not properly have been adopted by the district court at the time Oath answered, and (3) Oath’s answer expressly put the respondents and the district court on notice that it would assert a venue defense if it became available under TC Heartland. The Court noted that Oath filed its motion to dismiss within 21 days of the Supreme Court’s TC Heartland decision and that the respondents had not shown that judicial economy supported forfeiture of venue rights since the case was nowhere close to trial. The Court thus directed the district court to dismiss or transfer the case to a court having appropriate venue.