IP Law Daily Safe harbor provision applied to block venue over patent infringement claims
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Tuesday, June 26, 2018

Safe harbor provision applied to block venue over patent infringement claims

By Pamela C. Maloney, J.D.

The U.S. District Court for the Eastern District of Texas lacked venue over patent infringement claims brought against St. Jude Medical S.C., Inc. and its affiliates because sales of allegedly infringing products in the district had been made solely for the purpose of clinical trials, thus making the safe harbor provision relevant to the question of venue. In granting St. Jude’s motion for summary judgment of improper venue, the federal district court in Tyler, Texas, also ruled that venue was improper because none of the St. Jude defendants were incorporated in the district (Snyders Heart Valve LLC v. St. Jude Medical S.C., Inc., June 25, 2018, Mazzant, A.).

In patent infringement cases, venue is proper only in the district in which the defendant resides or in a district where the defendant committed acts of infringement and had a regular and established place of business. In TC Heartland LLC v. Kraft Foods Group Brands LLC, 137 S. Ct. 1514 (2017), the U.S. Supreme Court ruled that for purposes of the venue statute, a domestic corporation resides only in its state of incorporation. Based on that decision, the magistrate judge initially recommended that although St. Jude did not reside in the eastern district of Texas, its stipulation to the fact that it had sold infringing products in the district was enough to establish venue. The magistrate also recommended that because the safe harbor provision was an affirmative defense raised by St. Jude, Snyders was not required to negate that defense in order to establish jurisdiction. Following the issuance of the magistrate’s report, St. Jude filed a motion for summary judgment of improper venue, arguing that venue was improper based on the safe harbor provision because there had been no acts of infringement committed in the district. Snyders contested the motion, again arguing that the safe harbor provision was irrelevant to venue. However, Snyders did not contest the alleged facts surrounding St. Jude’s venue challenge. Finding that the safe harbor provision was relevant to the venue inquiry, the magistrate recommended granting St. Jude’s summary judgment motion.

Safe harbor provision. According to Snyders, in order to establish venue, it was only required to show that an infringing act occurred in the district and that St. Jude was responsible for that act. As such, the safe harbor provision was irrelevant and Snyders argued that it should not be required to overcome that defense in order to meet its burden of establishing venue. Noting that the safe harbor provision is included in the section defining an act of infringement and that courts have looked to that provision when determining what constitutes an act of infringement, the district court opined that the safe harbor provision was not relevant to the venue inquiry except in the rarest of circumstances.

Keeping that in mind, the district court found that this case presented a unique set of circumstances that made the safe harbor provision relevant to the venue question. Under the safe harbor provision, it was not an act of infringement to make, use, offer to sell, or import into the United States a patented invention for uses related to development. In this case, the parties had agreed to all the facts surrounding the venue challenge, stipulating that 10 sales had taken place in the district and that those 10 sales were made for the purpose of clinical trials.

Having determined that the safe harbor provision was relevant in this case, the court next considered whether the provision was applicable. Snyders had argued that because some of St. Jude’s sales within the district were for commercial purposes, the sales were not "solely" for clinical purposes and thus the provision did not apply. St. Jude had countered that the magistrate’s report had concluded correctly that the safe harbor applied because the 10 sales within the district were all part of a clinical trial and that the products had not been approved for commercial sale by the Food and Drug Administration. In examining each of the 10 sales individually, the district court found that it remained undisputed that each sale had been made solely for clinical trials and, therefore, the safe harbor provision applied to each of the sales. Based on the application of the safe harbor defense, there was no act of infringement that took place within the eastern district of Texas and that venue in that district was not proper.

Residence. The court quickly disposed of Snyders’ objection that the magistrate failed to consider its argument that venue in the eastern district was proper because St. Jude was subject to the personal jurisdiction in the federal courts of Texas and therefore it resided in the district. St. Jude was not incorporated in Texas and therefore, the court said, so venue was improper under the residence prong of the venue statute as construed by the Supreme Court in TC Heartland.

Procedural challenges. Snyders also raised two procedural objections, claiming that St. Jude’s venue arguments had already been ruled on by the court and that the magistrate’s report did not consider Snyders’ timeliness argument. According to Snyders, St. Jude’s venue arguments had been fully heard and had been ruled on by the court. As a result, St. Jude should not be allowed to make the same arguments again. In rejecting this argument, the district court explained that it had not made factual or substantive findings on any of the evidence submitted in support of the venue challenge. Instead, it had adopted the magistrate’s initial recommendation that Snyders did not have to overcome an affirmative defense on a motion to dismiss. That procedural ruling did not address the substantive issues raised by the parties and justice required the court to examine St. Jude’s venue challenge despite previous procedural rulings.

With regard to Snyders’ claim that St. Jude’s venue challenges were not timely, the court recounted St. Jude’s objections to venue and found that while the motion to dismiss might have been technically untimely under the federal rules, St. Jude properly had preserved its objections to venue, and none of its conduct constituted a waiver of those objections.

The case is No. 4:16-cv-00812-ALM-KPJ.

Attorneys: Catherine Susan Bartles (The Stafford Davis Firm, PC) and Christopher Ryan Pinckney (Antonelli, Harrington & Thompson LLP) for Snyders Heart Valve LLC. Alan J. Heinrich (Irell & Manella LLP) and Alexander Schaan Rinn (Carlson Caspers Vandenburgh Lindquist & Schuman PA) for St. Jude Medical S.C., Inc., St. Jude Medical, Cardiology Division, Inc. and St. Jude Medical, LLC.

Companies: Snyders Heart Valve LLC; St. Jude Medical S.C., Inc.; St. Jude Medical, Cardiology Division, Inc.; St. Jude Medical, LLC

MainStory: TopStory Patent TexasNews

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