By Kevin E. Noonan --
Last Friday, the Federal Circuit granted a writ of mandamus to Micron Technology, Inc. involving their motion challenging venue in a patent infringement lawsuit brought by The President and Fellows of Harvard University. In granting the writ, the panel stated that the Federal Circuit intended to "clarify the basic legal framework governing determinations of forfeiture of a venue defense" in patent cases in the wake of the Supreme Court's decision last term in TC Heartland LLC v. Kraft Foods Group Brands LLC, 137 S. Ct. 1514 (2017).
The case arose when Harvard filed suit in the District of Massachusetts against Micron for infringement of U.S. Patent Nos. 6,969,539 and 8,334,016, related to "novel processes and materials for deposition of thin [metallic] films" in components of computers and cell phones. Harvard's basis for its venue choice was 28 U.S.C. §§ 1391(b) and 1400, as those statures had been interpreted by the Federal Circuit. Although Micron moved to dismiss under Fed. R. Civ. P. 12(b)(6) for failure to state a claim, it did not move to change venue under Rule 12(b)(3). After TC Heartland was decided, however, Micron filed motion to dismiss or transfer for improper venue under 28 U.S.C. § 1406(a), asking the District Court to dismiss or in the alternative to transfer the lawsuit to District of Delaware (where Micron is incorporated) or the District of Idaho (Micron's principle place of business). The District Court denied Micron's motion on grounds that objection to venue had been waived, and that the Supreme Court's TC Heartland decision was not a "intervening change in the law" that excused Micron's failure to move earlier. Micron then petitioned the Federal Circuit for a writ of mandamus to require the District Court to transfer venue.
For context, the relevant statutes and Federal Rules of Civil Procedure are:
28 U.S.C. §1406(a):
The district court of a district in which is filed a case laying venue in the wrong division or district shall dismiss, or if it be in the interest of justice, transfer such case to any district or division in which it could have been brought.
Fed R Civ Pro 12(g)(2):
(g) Joining Motions.
. . .
(2) Limitation on Further Motions. Except as provided in Rule 12(h)(2) or (3), a party that makes a motion under this rule must not make another motion under this rule raising a defense or objection that was available to the party but omitted from its earlier motion.
Fed R Civ Pro 12(h)(1)(A):
(h) Waiving and Preserving Certain Defenses.
(1) When Some Are Waived. A party waives any defense listed in Rule 12(b)(2)–(5) by:
(A) omitting it from a motion in the circumstances described in Rule 12(g)(2); or . . .
The Federal Circuit issued the writ, in a form slightly less than Micron requested, in an opinion by Judge Taranto, joined by Judges Chen and Hughes. The opinion notes "widespread disagreement" in the district courts regarding whether the TC Heartland case changed the law sufficiently that venue motions should be considered (either anew or reconsidered if previously proffered) and that this opinion is intended to provide clarity on venue transfer matters in patent cases. Succinctly put:
We conclude that TC Heartland changed the controlling law in the relevant sense: at the time of the initial motion to dismiss, before the Court decided TC Heartland, the venue defense now raised by Micron (and others) based on TC Heartland's interpretation of the venue statute was not "available," thus making the waiver rule of Rule 12(g)(2) and (h)(1)(A) inapplicable.
This conclusion comes with a general caveat (that applies in many instances): a district court retains the right to assess whether the motion is timely and for other reasons, which the opinion characterizes as "[a] less bright-line, more discretionary framework" that applies even where the Federal Rules at issue do not.
As noted in the opinion the standards for having a writ of mandamus granted are high: only "exceptional circumstances" will suffice. The opinion sets out three general requirements for obtaining a writ:
• The Petitioner must have no other "adequate means of obtaining the relief petitioned for (Cheney v. U.S. Dist. Court for Dist. of Columbia, 542 U.S. 367, 380 (2004))
• The Petitioner's right to the writ (and the relief petitioned for) must be "clear and indisputable" (Id., citing Kerr v. U.S. Dist. Court for N. Dist. of Cal., 426 U.S. 394, 403 (1976))
• The Court issuing the writ must be "satisfied that the writ is appropriate under the circumstances."
According to the panel opinion, venue is such a circumstance and appropriate to address the "basic, undecided question" of whether the TC Heartland case has given rise to circumstances where a writ is necessary to provide an answer to the status of venue issues arising in its aftermath. Generally, according to the opinion, writs involving venue transfer cases address important issues outside the immediate case before the Court, which the panel found apply here, there being "certain basic, unsettled, recurring legal issues over which there is considerable litigation producing disparate results." The District Court provided examples of these disparate results; in a representative sample, the court surveyed 17 decisions wherein the majority (12) found that TC Heartland not to have occasioned an intervening change in the law and thus not excusing defendants like Micron for not raising the venue challenge earlier.
The opinion set forth its own further justifications for its decision:
Answering the fundamental change-of-law question regarding the applicability of Rule 12(g)(2) and (h)(1)(A)—as well as the equally fundamental question whether those provisions provide the only basis for finding that a defendant can no longer make a venue objection—is important to proper judicial administration. Doing so would reduce the widespread disparities in rulings on the fundamental legal standards, while leaving the exercise of such discretion as is available in applying those standards subject to case-by-case review.
With regard to waiver, the opinion states that "one crucial condition" imposed on the application of Rule 12(h)(1)(A) is that the venue defense had to be available to a defendant when the defendant made its original motion to dismiss under Rule 12. Here, Micron's Rule 12(b)(6) motion to dismiss was undisputedly made prior to the Supreme Court's TC Heartland decision. Under these facts the Federal Circuit decided as a matter of law that the defense was not available prior to the Supreme Court's decision and thus Micron could not be held to have waived.
The panel characterized this as a "common sense" application of the waiver rule -- after all, had Micron made the motion with its Rule 12(b)(6) motion, the District Court would have been required to deny it, based on how the Federal Circuit had interpreted 35 U.S.C. § 1400(b) (the opinion characterizes such a motion as "futile" at that time). This interpretation is also consistent with Supreme Court precedent on the impact of intervening law the opinion citing Blonder-Tongue Labs., Inc. v. Univ. of Ill. Found., 402 U.S. 313, 350 (1971), and copious other Supreme Court and Circuit Court precedent in support of its decision. And because § 1400(b) is specific for patent cases the opinion notes that the District Court was bound by that (now erroneous) precedent, particularly V.E. Holding Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574, 1575 (Fed. Cir. 1990).
The Federal Circuit explains its decision to vacate and remand, rather than order venue transfer, based on its appreciation that "Rule 12(h)(1) is not the sole basis on which a district court might, in various circumstances, rule that a defendant can no longer present a venue defense that might have succeeded on the merits." And the basis for that understanding is that Rule 12(h)(1) is not exhaustive of the reasons that a District Court might deny a venue transfer motion. Examples set forth by the opinion include "timely and adequate preservation [of the venue issue]" in a case of an intervening change in the law. The panel also finds solace in this view, that there are other considerations that a District Court can take into account than just the Federal Rules of Civil Procedure, based on similar sentiments from the Supreme Court in Dietz v. Bouldin, Inc., 136 S.Ct. 1885, 1891 (2016):
"[A] district court possesses inherent powers that are 'governed not by rule or statute but by the control necessarily vested in courts to manage their own affairs so as to achieve the orderly and expeditious disposition of cases,' citing Link v. Wabash R. Co., 370 U.S. 626, 630–631 (1962); see also United States v. Hudson, 7 Cranch 32, 34 (1812).
But even these considerations have standards the Supreme Court finds compelling:
First, the exercise of an inherent power must be a "reasonable response to the problems and needs" confronting the court's fair administration of justice. Degen v. United States, 517 U.S. 820, 823– 824 (1996). Second, the exercise of an inherent power cannot be contrary to any express grant of or limitation on the district court's power contained in a rule or statute. See id., at 823; Fed. Rule Civ. Proc. 83(b) (districts courts can "regulate [their] practice in any manner consistent with federal law"); see, e.g., Bank of Nova Scotia v. United States, 487 U.S. 250, 254 (1988) (holding that a district court cannot invoke its inherent power to circumvent the harmless-error inquiry prescribed by Federal Rule of Criminal Procedure 52(a)).
The opinion distills these principles into two: that the inherent power of a district court must be "a reasonable response to a specific problem" and that the exercise of judicial power cannot be contrary to "an express rule or statute." Timeliness (or lack of it) and consent are the bases for losing a venue challenge most readily accommodated in the Court's exemplars, there being numerous examples cited in the opinion where lack of one or the presence of the other precluded a venue challenge. While "leav[ing] to future cases the task of elaborating on when such determinations may soundly be reached and what other considerations, if any, might be relevant within the Dietz framework," the opinion did observe that the Federal Circuit has denied writs of mandamus on venue transfers where the motion to transfer was presented "close to trial," citing cases where the motion was filed from two weeks to three months before trial was set to commence. The panel also noted instances (not exemplified) where a defendant used (or attempted to use) venue challenges strategically, but here the panel did not set forth any exemplary analysis of how courts should judge such behavior.
The panel granted Micron's mandamus petition, vacating the District Court's order denying Micron's transfer motion, and remanded to the District Court for a determination whether there were any other factors that needed to be considered.
In re Micron Technology, Inc. (Fed. Cir. 2017)
Panel: Circuit Judges Taranto, Chen, and Hughes
Opinion by Circuit Judge Taranto