“I’m [Trying to be] Leavin’ On a Jet Plane” – Federal Circuit Decisions Influencing Motions to Transfer Venue

by Megan LaDriere

Because a plaintiff is able to select where to file lawsuits, such as patent infringement cases, defendants often find themselves attempting leave and transfer the suit to another venue, or even dismiss the suit for improper venue.  Last year the Supreme Court’s decision in TC Heartland[1] dramatically shifted venue law regarding where patent infringement lawsuits could be filed.  The patent venue statute provides that a plaintiff can file a patent case in any district where the defendant either (1) resides or (2) has committed acts of infringement and has a regular and established place of business.[2]  Specifically in TC Heartland, the Supreme Court held that “residence” in the patent venue statute means only the state in which a company is incorporated.  After this ruling, patent infringement lawsuits could only be filed in districts within states where the allegedly infringing defendant is incorporated, or under the second prong, in districts where there has been an act of infringement and the defendant has a “regular and established place of infringement.”[3]  Many believed that this would lead to the end of our neighboring Eastern District of Texas as being a patent litigation forum, and that most patent litigation would be shifted to Delaware, in which many companies are incorporated.  While there has been a shift in filings, many defendants still find themselves in the Eastern District.  and often file motions to dismiss for improper venue or motions to transfer venue as part of their defensive strategy

Since that groundbreaking decision in TC Heartland, defendants in patent infringement lawsuits in various districts have filed motions to dismiss for improper venue or motions to transfer venue as part of their defensive strategy.  Given the increasing number of motions regarding venue, the district courts and Federal Circuit have needed to clarify many questions left unanswered by TC Heartland.  As an example, the Federal Circuit explained in In re Cray[4] what constitutes a “regular and established place of business” to establish proper venue, and In re Micron[5] clarified whether defendants have or have not waived their venue defense.  Earlier this summer, the Federal Circuit in In re ZTE impacted pending and potential future motions on venue when it addressed which party has the burden in establishing whether venue is proper in a particular case.[6]

While pending in the Eastern District of Texas, defendant ZTE filed a motion to dismiss for improper venue under 28 U.S.C. § 1406 and § 1400(b) and to transfer to the Northern District of Texas or the Northern District of Texas under 28 U.S.C. § 1404(a).  The district court concluded that venue was proper in the Eastern District for purposes of § 1404(a) and ultimately denied the motion to dismiss for improper venue, finding that defendant ZTE failed to show that it did not have a regular and established place of business in the Eastern District, as required under § 1400(b).  Thus, the district court decided that the burden was on the defendant to show that venue was improper.

Because the district court relied on Fifth Circuit law to decide the issue, the Federal Circuit first clarified that whether venue is proper under § 1400(b) is an issue unique to patent law, and thus Federal Circuit law applies.[7]  Next, the Federal Circuit analyzed which party bears the burden.  Although defendants typically file a motion to transfer venue, the Court was deciding who bears the burden on the issue:  whether the plaintiff has the burden to show that venue it selected in filing the lawsuit is proper, or if a defendant has the burden to show that the venue chosen by plaintiff is improper.  Although the Federal Circuit had not previously considered the issue, regional circuits prior to the formation of the Federal Circuit had placed the burden on plaintiff.[8]  In addition, the intent of drafting § 1400(b) was to restrict the venues available to bring patent actions and the “intentional narrowness supports placing the burden of establishing proper venue on the Plaintiff.”[9]  Thus, the Court held that “as a matter of Federal Circuit law, that upon motion by the Defendant challenging venue in a patent case, the Plaintiff bears the burden of establishing proper venue.”[10]

As Defendants continue to file motions on venue issues, In re ZTE may cause a shift in the outcome of such cases, particularly in districts that had previously been placing the burden of proving proper venue on Defendants.  At the very least, Defendants will have little to lose in bringing a motion to dismiss or transfer because of improper venue, so plaintiffs will need to be prepared for such challenges.

[1]  TC Heartland LLC v. Kraft Foods Group Brands LLC, 137 S.Ct. 1514 (2017).

[2] 28 U.S.C. §1400(b) states “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.”

[3] Id.

[4] In re Cray Inc., 871 F.3d 1355, 1361 (Fed. Cir. 2017).

[5] In re Micron Tech. Inc., 875 F.3d 1091 (Fed. Cir. 2017).

[6] In re ZTE (USA) Inc., 890 F.3d 1008, 1010 (Fed. Cir. 2018).

[7] In re ZTE (USA) Inc., 890 F.3d at 1012.  The Federal Circuit concluded “that the patent-specific nature of §1400(b) also implicates the burden for satisfying that statute, and should be analyzed under this court’s law.”  Id.  The Court also cited to its recent decision of In re Cray to support that “whether venue is proper under §1400(b) is an issue unique to patent law and is governed by Federal Circuit law.”  Id.

[8] Id. at 1014.

[9] Id.

[10] Id. at 1013, 1016.

 

Megan LaDriere is a patent attorney at Baker Botts L.L.P. where she focuses primarily on patent litigation and prosecution.  She can be reached at megan.ladriere@bakerbotts.com.

Articles on the DAYL website are provided for informational use only, and are in no way intended to constitute legal advice or the opinions or views of the DAYL.