IP Law Daily Waiver rule not applicable to patent venue challenge, but timeliness is relevant
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Wednesday, November 15, 2017

Waiver rule not applicable to patent venue challenge, but timeliness is relevant

By Thomas Long, J.D.

Ruling on a petition for a writ of mandamus, the U.S. Court of Appeals for the Federal Circuit has vacated a decision of the federal district court in Boston, holding that Micron Technology, Inc., waived its ability to challenge venue in a patent infringement suit brought by the President and Fellows of Harvard College. The appellate court determined that the U.S. Supreme Court’s decision in TC Heartland LLC v. Kraft Foods Group Brands LLC changed the controlling law regarding patent venue. Therefore, the waiver rule of Federal Rule of Civil Procedure 12(g)(2) and (h)(1)(A) was inapplicable because Micron’s venue defense was not "available" prior to the issuance of TC Heartland. However, the court explained that the waiver rule was not the only basis on which a district court could reject a venue defense. For example, a venue challenge could be rejected on the basis that it was not timely presented. The court held that a less bright-line, more discretionary framework applied when the waiver rule did not, and it remanded the case for consideration of whether Micron forfeited its right to challenge venue under that framework (In re Micron Technology, Inc., November 15, 2017, Taranto, R.).

Harvard filed suit against Micron in June 2016 in the District of Massachusetts. Harvard alleged that venue was proper there under 28 U.S.C. §§1391(b) and 1400. On August 15, 2016, Micron moved under Rule 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). In December 2016, the High Court granted review in TC Heartland and issued its opinion in May 2017, holding that, under Section 1400(b), "a domestic corporation ‘resides’ only in its State of incorporation for purposes of the patent venue statute." The Court reversed a Federal Circuit decision holding that that 1988 amendments to Section 1391(c) applied to Section 1400(b), redefining the term "resides" for that section so that patent venue was proper in any judicial district in which a defendant was subject to personal jurisdiction.

After TC Heartland was issued, Micron moved under Rule 12(b)(3) and 28 U.S.C. §1406(a) to dismiss or transfer the case on the ground that the District of Massachusetts was not a proper venue for the case. The district court denied the motion, concluding that under Rule 12(g)(2) and (h)(1)(A), Micron had waived its venue defense by not objecting to venue in its first motion to dismiss filed in August 2016. The court rejected Micron’s contention that TC Heartland was an intervening change of law that made the waiver rule inapplicable.

Micron petitioned the Federal Circuit for a writ of mandamus, asking the court to reverse the district court’s order and direct that the case either be dismissed for improper venue or transferred to the District of Delaware or the District of Idaho. Harvard asked the court to deny the petition or, in the alternative, to vacate the district court’s order and to remand for consideration of the portion of Section 1400(b) that allows venue "where the defendant has committed acts of infringement and has a regular and established place of business."

Mandamus. As a threshold matter, the Federal Circuit decided that the case presented special circumstances justifying mandamus review. The case presented basic, unsettled, recurring legal issues over which there was considerable litigation producing disparate results. The Federal Circuit noted that various district courts had disagreed as to whether the waiver rule applied—particularly with respect to the question of whether TC Heartland effected a change of controlling law such that the waiver rule was inapplicable, or whether the decision merely reflected a restatement of existing Supreme Court precedent.

Waiver rule. Turning to the question of waiver, the court explained that Rule 12(h)(1)(A) provided that a venue defense under Rule 12(b)(3) was waived if it was omitted from a motion under circumstances described in Rule 12(g)(2)—that is, when a defendant filed a Rule 12(b) motion to dismiss but did not include a venue objection under Rule 12(b)(3) that was "available" to the defendant when the initial 12(b) motion was filed. The Federal Circuit held that, as a matter of law, the venue defense was not "available" to Micron in August 2016, when it filed its initial motion to dismiss. The venue objection was not available until the Supreme Court decided TC Heartland. According to the Federal Circuit, before then it would have been improper, given controlling precedent, for the district court to dismiss or to transfer for lack of venue. If Micron had filed a venue challenge in August 2016, the district court would have been required to reject the challenge under Federal Circuit precedent in place at that time. Availability was determined with respect to the state of the law when the 12(b) motion was not, not with respect to some future possibility of relief on appeal. The Supreme Court changed the law when it issued TC Heartland by severing Section 1400(b) from Section 1391(c), thereby making available to Micron the objection that it did not come within the meaning of "resides" for purposes of venue under Section 1400(b). Accordingly, the waiver rule was not applicable in this case, the court decided.

Venue. Although the waiver rule did not apply, the court disagreed with Micron’s contention that it should order dismissal or transfer for lack of venue, or even remand for proceedings limited to consideration of the merits of the venue question. Waiver under Rule 12(h)(1) was not the sole basis on which a district court might rule that a defendant can no longer present a venue defense that might have succeeded on the merits. The court clarified the framework governing forfeiture even when Rule 12(h)(1) did not apply, explaining that the court had inherent powers to manage and dispose of cases, within limitations. The Supreme Court had held that a court’s exercise of its inherent power must be a reasonable response to a specific problem, and the power cannot contradict any express rule or statute. With these principles in mind, the Federal Circuit further explained that Section 1406(b) provided, "Nothing in this chapter shall impair the jurisdiction of a district court of any matter involving a party who does not interpose timely and sufficient objection to the venue." It was clear, the court said, that district courts had authority to find forfeiture of a venue objection, apart from Rule 12(g)(2) and (h)(1)(A). While this authority must be exercised with caution, it certainly could rest on sound determinations of untimeliness or consent. However, the court left to future cases "the task of elaborating on when such determinations may soundly be reached and what other considerations, if any, might be relevant." The court also declined to decide whether the Federal Circuit’s law or the law or the relevant regional circuit governed forfeiture standards not tied to the patent-specific venue statute.

"As to timeliness," the court said, "whereas the waiver rule of Rule 12(g)(2) and (h)(1)(A) requires a focus on the time the TC Heartland venue objection was "available" for the district court to adopt (i.e., on or after May 22, 2017), the non-Rule authority’s general concern with timeliness is not necessarily so limited." The court did not provide a precedential answer to the question of whether the timeliness determination could be based on factors other than the sheer time from when the defense became available to when it was asserted, including factors such as how close it was to the date of trial. The court noted, however, that it had denied mandamus in several cases involving venue objections based on TC Heartland in cases that were presented shortly before trial was scheduled, finding no clear abuse of discretion.

Accordingly, the Federal Circuit remanded for the district court to consider any properly raised non-Rule 12(h)(1)(A) arguments that Micron had forfeited its venue defense and, if there were no such sound arguments, to consider the merits of venue under Section 1400(b).

The case is No. 2017-138.

Attorneys: Jared Bobrow (Weil, Gotshal & Manges LLP) for Micron Technology, Inc. William D. Belanger (Pepper Hamilton LLP) for President and Fellows of Harvard College.

Companies: Micron Technology, Inc.

MainStory: TopStory Patent FedCirNews

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