Federal Circuit confirms TC Heartland changed the law
The US Court of Appeals for the Federal Circuit yesterday confirmed that the US Supreme Court’s decision which tightened the rules on patent venue has changed the law and that the ruling applies to existing cases as well as new ones.
In May, the Supreme Court handed down its ruling in TC Heartland v Kraft Foods, holding that 28 USC, section 1400(b) is the sole and exclusive provision governing venue in patent infringement actions, in what was described as a “seismic” decision.
Since then district courts have struggled to come up with a consistent interpretation, with some courts finding that the decision didn’t excuse the defendant’s failure to raise the defence earlier.
According to the Federal Circuit, there has been “widespread disagreement over the change-of-law question” as it relates to a waiver under Federal Rule of Civil Procedure 12(h)(1)(A).
The rule provides for a waiver that prevents a defendant from bringing a motion for improper venue when the defendant had omitted an available venue defence from an initial motion to dismiss.
In the case of In Re: Micron Technology, handed down yesterday, November 15, the Federal Circuit concluded that TC Heartland changed the controlling law, opening the doors for defendants to argue that plaintiffs had chosen the wrong court.
Micron Technology had petitioned the Federal Circuit for a writ of mandamus, to set aside a district court’s denial of Micron’s motion to dismiss patent infringement claims or to transfer the case because of improper venue.
In June last year, Harvard University sued semiconductor company Micron, alleging that its chip manufacturing process infringes technology discovered by the university.
The claim was filed in the US District Court for the District of Massachusetts, while Micron is incorporated in Delaware and has its principle place of business in Idaho.
Two months later, in August 2016, Micron moved under Federal Rule of Civil Procedure 12(b)(6) to dismiss the complaint for failure to state a claim, but it did not include an objection to venue under rule 12(b)(3).
After TC Heartland was decided, Micron filed a motion to dismiss or to transfer the case, but the District of Massachusetts denied the motion.
The court concluded that Micron had waived its venue defence by not objecting to venue in its first motion to dismiss. It also held that TC Heartland was not a change of law that would make the waiver rule inapplicable.
Circuit Judge Richard Taranto, on behalf of the court, said: “We find this case to present special circumstances justifying mandamus review of certain basic, unsettled, recurring legal issues over which there is considerable litigation producing disparate results.”
The Federal Circuit explained that after TC Heartland, defendants in many pending patent cases presented venue objections. In many of those, the timing of the objection presented a question about waiver and whether TC Heartland had made it inapplicable.
“The venue objection was not available until the Supreme Court decided TC Heartland because, before then, it would have been improper, given controlling precedent, for the district court to dismiss or to transfer for lack of venue,” said Taranto.
However, although the court agreed with Micron on the inapplicability of rule 12, it didn’t order dismissal or transfer for lack of venue, or even remand for proceedings limited to consideration of the merits of the venue question.
Taranto explained that the rule is not the sole basis on which a district court might rule that a “defendant can no longer present a venue defence that might have succeeded on the merits”.
John O’Quinn, partner at Kirkland & Ellis, said: “This is an important decision that makes clear that TC Heartland was a watershed moment, and that it is applicable not just to new cases going forward, but to existing cases too.”
Thomas Duston, a partner at law firm Marshall, Gerstein & Borun, said it was not too surprising that the Federal Circuit viewed TC Heartland as a change in the law.
“The alternative would be to admit that it had been ignoring a long-established Supreme Court precedent,” he claimed.
He added: “The Federal Circuit throws district courts a bone by suggesting that they may consider other factors, such as proximity to trial, in still denying such venue motions. However, there’s not really a lot of guidance offered for district courts on what they might consider.”
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