IP Law Daily Patent venue disputes in states with multiple judicial districts sorted in wake of TC Heartland
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Tuesday, May 15, 2018

Patent venue disputes in states with multiple judicial districts sorted in wake of TC Heartland

By Peter Reap, J.D., LL.M.

Following the U.S. Supreme Court’s 2017 decision in TC Heartland, for purposes of determining venue under the patent-specific venue statute, § 1400(b), in a state having multiple judicial districts, a corporate defendant shall be considered to "reside" only in the single judicial district within that state where it maintains a principal place of business, or, failing that, the judicial district in which its registered office is located, the U.S. Court of Appeals for the Federal Circuit has decided. Therefore, petitions for writs of mandamus filed by a company (BigCommerce) that had been sued for patent infringement in the Eastern District of Texas, with the Supreme Court issuance of TC Heartland during the discovery phase of both cases, were granted. The district court erred in refusing to dismiss (or transfer) the cases, because BigCommerce does not "reside" in the Eastern District (In re BigCommerce, Inc., May 15, 2018, Linn, R.).

Diem LLC and Express Mobile (together, the Respondents), each filed patent infringement suits against BigCommerce in the District Court for the Eastern District of Texas. BigCommerce is incorporated in the State of Texas and lists its registered office as being situated in Austin, Texas, where it is also headquartered. Austin lies in the Western District of Texas. It was also undisputed that BigCommerce has no place of business in the Eastern District of Texas, the court noted.

During discovery of the two suits, TC Heartland reaffirmed that a domestic defendant corporation "resides" under § 1400(b) only in its state of incorporation. Soon thereafter, BigCommerce moved to dismiss Diem’s case and transfer Express Mobile’s case, arguing that under the Supreme Court’s decisions in TC Heartland and Stonite Products Co. v. Melvin Lloyd Co., 315 U.S. 561 (1942), it resides only in the Western District of Texas.

In Diem’s case, the district court adopted the magistrate judge’s recommendation that BigCommerce’s motion be dismissed because the objection to jurisdiction had been waived, but additionally concluded that even if the defense had not been waived, venue in the Eastern District of Texas would still be proper. In doing so, it explained that "a domestic corporation resides in the state of its incorporation and if that state contains more than one judicial district, the corporate defendant resides in each such judicial district for venue purposes," ("Diem Order").

In Express Mobile’s case, the magistrate judge denied BigCommerce’s motion to transfer, stating that the district court had "already considered and rejected" BigCommerce’s arguments in the Diem Order and "Defendant has articulated no reason to distinguish this case from that earlier ruling." BigCommerce then petitioned for a writ of mandamus in both cases.

Initial matters. These petitions presented an issue appropriate for mandamus, according to the appellate court. There was no doubt after the decisions in TC Heartland and Fourco Glass Co. v. Transmirra Products Corp., 353 U.S. 222 (1957), that a domestic corporation defendant is deemed to reside only in its state of incorporation. But different district courts have come to different conclusions about whether a corporation "resides" under § 1400(b) in every judicial district within its state of incorporation when the state has more than one judicial district, the Federal Circuit explained.

In addition, review was not precluded by the district court’s waiver determination. Nor was BigCommerce required to have asked the district court in Express Mobile’s case for reconsideration of the magistrate judge’s decision as a predicate to seeking mandamus. Given the district court’s conclusions in the Diem case, it likely would have been futile for BigCommerce in Express Mobile’s case to have sought reconsideration, according to the appellate court.

Venue in state with multiple judicial districts. The court turned to whether a domestic corporation incorporated in a state having multiple judicial districts "resides" for purposes of the patent-specific venue statute, 28 U.S.C. § 1400(b), in each and every judicial district in that state. The Federal Circuit held that it does not. That conclusion had clear support in the statute’s language, history, purpose, and precedent, the court said.

Section 1400(b) (emphases added) states "[a]ny 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." A plain reading of "the judicial district" speaks to venue in only one particular judicial district in the state. This language is simply inconsistent with the understanding that a defendant resides in all districts in the state. The district court’s contrary interpretation had no textual support in the statute, the court said.

The history of § 1400(b) also bore this out. Section 1400(b)’s predecessor statute provided that jurisdiction could only be established "in the district of which the defendant is an inhabitant, or in any district in which the defendant, whether a person, partnership, or corporation, shall have committed acts of infringement and have a regular and established place of business." It was also evident from the general venue rules at the time that when Congress wanted venue to potentially lie in multiple judicial districts, it said so clearly.

The Respondents made three arguments in support of the district court’s contrary interpretation. First, the Respondents contended that the definition of "resides" or "inhabits" as previously understood in cases like ShawGalveston, and Stonite is in tension or inconsistent with the Supreme Court’s post-1948 cases, in particular Fourco. The appellate court was not persuaded. Fourco said that the words "inhabitant" and "residence" are synonymous and "in respect of corporations, mean the state of incorporation only." See Fourco, 353 U.S. at 226. That Fourco said "state of incorporation only" and not "district within the state of incorporation only" did not imply that venue is thereby proper in every district within the state of incorporation. The better reading of Fourco is that the Court simply did not address the corporate venue at the district level of granularity, and set a necessary but not necessarily sufficient condition for corporate residence for venue under § 1400(b).

Second, the Respondents urged that more flexibility should be allowed given the realities of modern business. This argument was without merit, the court said. The requirements of the statute could not be ignored by the court merely because different requirements may be more suitable for a more modern business environment. Such policy-based arguments were best directed to Congress.

Finally, the Respondents contended that this narrow interpretation of § 1400(b) may make the statutory provision more difficult to apply in states having multiple judicial districts. They raised the question: "Which single judicial district in a multi-district state is the proper judicial district for purposes of venue under § 1400(b) in an infringement suit against a corporate defendant?"

The answer depended on whether the corporate defendant maintains a principal place of business in the state, the court reasoned. If so, the judicial district where the principal place of business is located would be the proper venue under the statute. If the corporation does not maintain its principal place of business within the state in which it is incorporated—yet for purposes of venue is considered to be a resident of the state in which it is incorporated, TC Heartland, 137 S. Ct. at 1521—then the natural default is to deem it to reside in the district in which its registered office, as recorded in its corporate filings, is located. In the absence of an actual principal place of business as noted above, the public is entitled to rely on the designation of the registered office, as set forth in publicly available corporate filings, as the place where the corporation resides.

Therefore, the petitions were granted, the order denying the motion to dismiss in Diem’s case and the order denying the motion to transfer in Express Mobile’s case were vacated, and the cases remanded.

This case is Nos. 2018-120 and 2018-122.

Attorneys: Mark A. Lemley (Durie Tangri LLP) for BigCommerce, Inc. Brett Rismiller (Husky Finch LLP) for Diem LLC. Timothy Devlin (Devlin Law Firm LLC) for Express Mobile, Inc.

Companies: BigCommerce, Inc.; Diem LLC; Express Mobile, Inc.

MainStory: TopStory Patent FedCirNews

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