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District Courts Disagree on Venue-Waiver Issues After TC Heartland

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By David G. Barker

At the end of May this year, the Supreme Court unanimously clarified the law on venue in patent infringement lawsuits (see here). For 27 years, litigants had relied on a Federal Circuit decision, VE Holding Corp. v. Johnson Gas Appliance Co. (1990), that allowed patent owners to file suit virtually anywhere an infringing product was sold. In TC Heartland v. Kraft Foods Group Brands, the Supreme Court limited venue, and district courts are reaching different conclusions about whether litigants have waived venue arguments by not asserting them before TC Heartland.

TC Heartland held that a 1957 Supreme Court decision, Fourco Glass Co. v. Transmirra Products Corp., governed the venue issue, and that Congress has not amended the applicable venue statute since Fourco. Given this decision, some courts have decided that litigants should have anticipated TC Heartland and moved to dismiss or transfer for improper venue based on Fourco. Other courts have decided that TC Heartland was a “sea change” in patent law, and that venue arguments have not been waived by asserting them post-TC Heartland.

For example, in Realtime Data LLC v. Barracuda Networks, Inc. (July 14, 2017), the Eastern District of Texas (a district where many patent infringement suits have been filed) held that Barracuda waived its defense of improper venue by waiting to assert it after TC Heartland. Realtime filed the lawsuit on February 27, 2017. Barracuda answered the complaint on April 24, 2017. TC Heartland was decided on May 22, 2017, and Barracuda filed a motion to dismiss for improper venue on June 2, 2017. The court held Barracuda “waived its venue defense,” because its deadline to amend its answer “as a matter of course” under Fed. R. Civ. P. 15(a)(1)(A) was May 15 — one week before TC Heartland. “[W]ith a Supreme Court decision looming, it is not unreasonable to require a defendant to raise the propriety of venue in accordance with the federal rules.”

Contrast that with a District of Arizona decision earlier this week, in Optolum, Inc. v. Cree, Inc. (July 24, 2017), a case “still in its early stages,” similar to the posture of the Realtime case. But in Optolum the court held TC Heartland “affected a ‘sea change’ in the law of venue for patent cases,” and that Cree had not waived its venue defense. Responding to cases that found waiver, the court reasoned, “these cases fail to explain why, if Fourco remained controlling, courts throughout the country consistently applied VE Holding in patent litigation for nearly 30 years.” The court granted Cree’s motion for leave to amend (to assert a defense of improper venue) and transferred the case to the Middle District of North Carolina.

While we wait for appellate court guidance, the disagreement among district courts gives options and arguments to patent infringement plaintiffs and defendants facing venue issues.