Patent Venue: The Federal Circuit Resolves Widespread Disagreement Among District Courts
In Micron Technology, the Federal Circuit resolved widespread disagreement about TC Heartland and motions to transfer venue in patent cases. The Federal Circuit held that TC Heartland changed controlling law and, thus, that the defendant had not waived an improper venue defense. Nonetheless, district courts have the inherent authority to manage cases and deny motions to transfer venue in cases brought before TC Heartland.
Micron Technology Further Shapes Impact of Landmark TC Heartland Decision
On November 15, 2017, the Federal Circuit issued Micron Technology. This decision will further shape the impact of the Supreme Court’s landmark TC Heartland decision about proper venue in patent cases. Micron Technology held that TC Heartland was an intervening change in the law that excuses the failure to previously raise an improper venue defense. Micron Technology also held that federal district courts have the inherent authority to deny a motion to transfer, depending on the particular circumstances of a case.
The requirements for proper venue in patent lawsuits are prescribed by statute: "Any civil action for patent infringement may be brought in the judicial district where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business." 28 U.S.C. § 1400(b). In 1990, 27 years before TC Heartland, the Federal Circuit held in VE Holdings Corp. that a defendant in a patent case "resides" in any federal judicial district where the defendant was subject to personal jurisdiction. Since that time, district courts followed that standard.
Then, on May 22, 2017, in TC Heartland v. Kraft Foods, the Supreme Court decided that a domestic corporation "resides" only in its state of corporation for purposes of 28 U.S.C. § 1400(b). Thus, TC Heartland greatly limited the venue choices for plaintiffs in patent cases brought after TC Heartland. As a result, the distribution of new patent cases across the country in the last several months has markedly changed.
As for patent cases brought before TC Heartland, many defendants filed motions to transfer for improper venue pursuant to 28 U.S.C. § 1406(a) following the TC Heartland decision last May. District courts ruled on many of these motions in one of two ways in accordance with Rules 12(g)(2) and 12(h)(1)(A) of the Federal Rules of Civil Procedures: (1) district courts granted motions to transfer, concluding that the defense of improper venue had not been waived from the failure to previously raise the defense because of a change in the law; and (2) district courts denied motions to transfer, concluding that the defense of improper venue had been waived from the failure to previously raise the defense. Micron Technology decided that the former conclusion is correct and the latter conclusion is incorrect. In particular, Micron Technology decided, as a matter of law, that the defense of improper venue was not previously available because the "Supreme Court changed the controlling law when it decided TC Heartland in May 2017." Thus, the Federal Circuit decided that a motion to transfer for improper venue in a case brought before TC Heartland is not waived based on a defendant’s failure to raise this issue before TC Heartland.
Despite the Federal Circuit’s conclusion on waiver, however, the Federal Circuit emphasized that a motion to transfer for improper venue could nonetheless fail for other reasons: "Rule 12(h)(1) is not the sole basis on which a district court might, in various circumstances, rule that a defendant can no longer present a venue defense that might have succeeded on the merits." The Federal Circuit explained that the Federal Rules' proscription of waiver in certain situations does not preclude other bases for a finding of waiver. The Federal Circuit cited the Supreme Court’s recent description of Rule 1 of the Federal Rules in Dietz v. Bouldin as the "paramount command": "the just, speedy, and inexpensive resolution of disputes." The Federal Circuit also cited Dietz's explanation of the inherent authority of federal courts to manage cases and concluded that there is no reason that the "Dietz framework is inapplicable to venue objections." Thus, the Federal Circuit held that, even "apart from Rule 12(g)(2) and (h)(1)(A), district courts have authority to find forfeiture of a venue objection." The Federal Circuit remanded the case in Micron Technology rather than ordering dismissal or transfer for improper venue.
Finally, the Federal Circuit suggested possible factors that might be considered, including the proximity of trial, and explicitly mentioned that the court has "denied mandamus, finding no clear abuse of discretion, in several cases involving venue objections based on TC Heartland that were presented close to trial." Accordingly, depending on the particulars of a case brought before TC Heartland, Micron Technology leaves patent plaintiffs with multiple grounds to oppose a motion to transfer for improper venue.