IP Law Daily Calling TC Heartland a ‘sea change,’ court transfers case to North Carolina
Tuesday, July 25, 2017

Calling TC Heartland a ‘sea change,’ court transfers case to North Carolina

By Thomas Long, J.D.

A patent infringement suit between competing manufacturers and sellers of LED lights has been transferred from an Arizona federal district court to a North Carolina federal district court on the request of the defendant company, which is located in the latter state. According to the federal district court in Phoenix, the defendant did not waive the defense of improper venue by omitting the defense from its answer and initial motion to dismiss because the U.S. Supreme Court’s decision in TC Heartland LLC v. Kraft Foods Group Brands, LLC constituted a "sea change" in the law of venue for patent cases and qualified as an exception to the waiver doctrine. TC Heartland made it clear that a corporation "resided" only in its state of incorporation for purposes of the venue statute. The district court’s decision was contrary to a number of recent decisions in other courts, which concluded that TC Heartland did not provide an exception to the waiver doctrine (OptoLum, Inc. v. Cree, Inc., July 24, 2017, Rayes, D.).

The technology at issue was used inside LED lightbulbs to give them the look and feel of incandescent bulbs while retaining the energy efficiency, long life, and low cost of LED bulbs. Plaintiff OptoLum, Inc., claimed to have invented the technology and accused defendant Cree, Inc., of infringing its patents. Cree moved to transfer the case to North Carolina, where Cree’s headquarters are located, for the convenience of the parties and witnesses. Cree also moved to dismiss false advertising and unjust enrichment claims under Rule 12(b)(6). In March 2017, the court initially denied the transfer request, but granted the Rule 12(b)(6) motion. Cree filed an answer to the complaint, in which it admitted that venue was proper. The Supreme Court then decided TC Heartland, and after that decision was issued, Cree filed a motion to dismiss for improper venue under Rule 12(b)(3). Cree also sought leave to amend its answer to deny that venue was proper. OptoLum argued that Cree had waived its venue defense by failing to raise it earlier.

To the extent that Cree’s improper venue defense was available when it filed its initial motion to dismiss and its answer, Cree waived it, the court noted. However, in the court’s view, the defense was not available to Cree until the Court issued TC Heartland. The court noted that a "host" of district court cases had rejected the contention that TC Heartland was an intervening change of law that qualified as an exception to the waiver doctrine, but the court stated that it did not agree with those decisions. TC Heartland, in the court’s view, affected a "sea change" in the law of venue for patent cases. That decision reversed longstanding Federal Circuit precedent on the issue and clarified that the patent venue statute, 28 U.S.C. §1400(b), not the general venue statute, 28 U.S.C. § 1391(c), defined where a domestic corporation "resides" for purposes of patent infringement litigation.

In TC Heartland, the Supreme Court affirmed its 1957 decision in Fourco Glass Co. v. Transmirra Products Corp., 353 U.S. 222, 226 (1957)—in which it held that Section 1400(b) was the sole and exclusive provision controlling venue in patent infringement actions, and that it was not to be supplemented by the general venue provisions of Section 1391(c). The Court reversed the Federal Circuit’s 1990 decision in VE Holding Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574 (1990), in which the Federal Circuit had held that 1988 amendments to Section 1391(c)—which provide that "[f]or purposes of venue under this chapter," a defendant corporation shall be deemed "to reside in any judicial district in which it is subject to personal jurisdiction at the time the action is commenced"—applied to Section 1400(b) and redefined the term "resides" for that section.

In the present case, the court noted that district courts finding waiver had premised their rulings on the notion that circuit courts lacked authority to "override" the Supreme Court, and that Fourco had therefore always governed venue in patent cases. However, the court said, this reasoning did not explain why courts throughout the country had consistently applied VE Holding in patent litigation for nearly 30 years. In addition, VE Holding did not override Fourco, in the court’s opinion; rather, it sought to interpret Congressional intent in the wake of a recent statutory amendment.TC Heartland "changed the venue landscape," the court said. For the first time in 27 years, a defendant in a patent infringement suit may argue credibly that venue was improper in a district where it was subject to personal jurisdiction but where it was not incorporated and had no regular and established place of business. Therefore, the court decided, Cree did not waive the defense of improper venue by omitting the defense from its initial pleading and motion to dismiss.

Having found that Cree did not waive the defense, the court next decided to grant Cree’s motion for leave to amend its answer, and it exercised its discretion to transfer the case to the Middle District of North Carolina.

The case is No. 2:16-cv-03828-DLR.

Attorneys: Keith Toms (McCarter & English LLP) for OptoLum Inc. Lynne A. Borchers (Sage Patent Group PLLC) for Cree Inc.

Companies: OptoLum Inc.; Cree Inc.

MainStory: TopStory Patent ArizonaNews

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