U.S. Court Of Appeals For The Federal Circuit Clarifies Venue Law For Pre-Heartland Patent Cases
 

On November 15, 2017, the United States Court of Appeals for the Federal Circuit issued two opinions explaining how district courts should determine whether, in cases filed prior to the recent Supreme Court TC Heartland venue decision, a defendant waived the defense of improper venue.  In the first opinion, In re Micron Techs., No. 2017-138, the Court issued a writ of mandamus and ordered the District Court to reconsider its decision that the defendant had waived the defense; in the second opinion, In re Cutsforth, Inc., No. 2017-135, the Court issued a writ of mandamus and ordered the District Court to reconsider its decision that the defendant had not waived the defense.

In 1957, the Supreme Court ruled that for the purpose of the patent venue statute, 28 U.S.C. § 1400(b), a defendant corporation “resides” only in its state of incorporation.  In 1990, however, the newly created U.S. Court of Appeals for the Federal Circuit ruled that intervening amendments to other portions of the Code had changed the meaning of the word “resides” as it is used in § 1400(b), and ruled that for the purpose of the patent venue statute, a defendant corporation “resides” in any state in which it is subject to personal jurisdiction.  The result was that most patent cases could properly be brought in almost any district court.

Then, earlier this year, the Supreme Court re-affirmed its holding that, for patent-venue purposes, a defendant corporation “resides” only in its state of incorporation.  TC Heartland LLC v. Kraft Foods, 581 U.S. ___  (2017).  This holding greatly restricted patent venue for future cases.  However, it was not clear what effect the TC Heartland opinion would have on cases that were already pending when it was issued.

The Micron case was filed in 2016.  Micron responded to the complaint in that case with a motion to dismiss, but did not include a venue defense in its motion, presumably because it understood venue to be proper under the Federal Circuit’s precedent.  Later, after the Heartland decision, Micron filed a motion to dismiss or transfer for improper venue.  The District Court denied the motion, ruling that pursuant to Fed. R. Civ. P. 12(h), Micron had waived the venue defense by not including it in its initial motion to dismiss.  Micron sought a writ of mandamus, arguing that there was no waiver because the venue defense was not “available” to it until the Heartland decision.  See Fed. R. Civ. P. 12(g)(2).

The Federal Circuit agreed with Micron, holding that the May 2017 Heartland decision “changed the controlling law” and that failure to include venue in a pre-Heartland answer or motion would not, by itself, be a waiver of a venue defense that arose out of the narrower Heartland venue standard.  However, the Federal Circuit went on to explain that while the Federal Rules did not mandate a finding of waiver, the District Court still has inherent power to declare Micron to have waived the defense based on factors other than Rule 12.  The Federal Circuit therefore vacated the District Court order denying Micron’s motion, but remanded the case to the District Court for further consideration of the waiver issue pursuant to the District Court’s inherent authority.

Unlike Micron, the Cutsforth case, issued the same day and decided by the same panel, had been pending for years when Heartland was decided; it was filed in 2012.  As in Micron, the Cutsforth defendants had not included a venue defense in their initial pleadings, but nevertheless filed a post-Heartland venue motion.  The District Court ruled that, despite the judicial resources it had invested in the case, and despite the delay that the plaintiff would suffer as a result, in view of the change in law there was no waiver pursuant to Rule 12 and therefore it had no choice but to grant the venue motion and transfer the case.  The plaintiff requested the Federal Circuit to issue a writ of mandamus reversing the transfer.

The Federal Circuit granted the request and vacated the transfer order.  Following its Micron decision, the Court found that the District Court was correct that there was no waiver pursuant to Rule 12.  However, the Court found that the District Court “clearly erred in not considering non-Rule 12 bases for waiver raised by Cutsforth.”  The Court thus instructed the District Court to reconsider the motion in light of the Micron opinion and determine whether other factors, e.g., judicial economy, justified denying the venue motion.

In light of these two decisions, defendants who found themselves with a new venue defense after Heartland now have some guidance on whether they can raise that new defense, and the district courts have guidance on how to treat the resulting motions.  There will be no automatic waiver per Rule 12, but defendants will need to move quickly to assert the defense, now that it is available.  And no matter how quickly such motions were filed, the district courts may still deny them, regardless of their merits, if other factors militate against dismissal or transfer.