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District Courts Remain Split on TC Heartland and Waiver of Improper Venue Defense

The Supreme Court’s decision five months ago in TC Heartland v. Kraft Food Group Brands was a sea change in the way courts interpret venue for patent infringement cases.  Since the Federal Circuit’s decision in VE Holding Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574 (Fed. Cir. 1990), venue in patent infringement cases has been determined using 28 U.S.C. § 1391(c), which equates a corporate defendant’s residence with personal jurisdiction.  In TC Heartland, the Supreme Court effectively abrogated VE Holding by finding that a corporate defendant “resides” only in its State of incorporation for venue purposes.

In the wake of TC Heartland, district courts have dealt with a flurry of motions to dismiss based on improper venue under 28 U.S.C. § 1400(b).  A major question presented by these motions is whether corporate defendants have waived their venue defense by failing to contest venue under § 1400(b) earlier.  District courts are currently split on the issue.  Some courts have found TC Heartland to be an intervening change in the law, such that an improper venue argument based on § 1400(b) was unavailable before TC Heartland issued and therefore not waived.  Other courts have found that TC Heartland merely reaffirmed the Court’s previous ruling that a domestic corporation “resides” only in its State of incorporation in Fourco Glass Co. v. Transmirra Products Corp. 353 U.S. 222 (1957), that VE Holding did not overrule Fourco and thus that a § 1400(b) venue defense remained available and was therefore waived by failure to move previously.

Recently, Judge Phillips in the Eastern District of Tennessee tackled TC Heartland issues in a motion to dismiss for improper venue.  Maxchief Investments Ltd. v. Plastic Development Group, LLC, No. 3L16-cv-63 (E.D. Ten. Aug. 14, 2017).  The court first addressed the applicability of TC Heartland to unincorporated associations, like limited liability companies.  Though TC Heartland is limited to proper venue for corporations, Judge Phillips explained that unincorporated associations are generally treated like corporations for venue purposes and that the very language of § 1400(b) refers to “defendants,” not just corporations.  The court next addressed whether the defendant had waived venue by failing to assert a § 1400(b) defense previously.  The court found that venue had not been waived, specifically stating “it is difficult to describe TC Heartland as anything other than a significant change in the law on venue.  To do otherwise would ignore the long-standing significance of the VE Holding decision and the reliance upon it for many years.”   Maxchief Investments Ltd. v. Plastic Development Group, LLC, No. 3L16-cv-63, ECF No. 57 at 7 (E.D. Ten. Aug. 14, 2017).  To this end, the court ordered the case be transferred to Eastern District of Michigan.

Undoubtedly, TC Heartland will continue to make waves in patent infringement litigation and the district court split on the issue of waiver will continue to deepen.  Until either the Supreme Court or Federal Circuit steps in to clarify this issue for district courts, patent litigators with pending cases should be mindful of how their chosen venue has been disposing of TC Heartland-based motions to dismiss, and whether the case is susceptible to such a motion.

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Brad M. Scheller is an experienced patent litigator and strategic counselor to start-up ventures and established businesses in the mechanical and electrical arts, with a focus in EV and battery technologies and advising clients on patent portfolio growth, management and enforcement. He represents clients before the United States Patent and Trademark Office and as lead counsel in federal district court and appellate litigation across the country.