By Kevin E. Noonan --
The proper application of the patent venue statute, 28 U.S.C. § 1400(b) in the wake of the Supreme Court's decision in TC Heartland LLC v. Kraft Foods Group Brands LLC (2017), under recent Federal Circuit precedent (see In re Cray, Inc.) continues to be explicated in the district courts. The most recent episode in this continuing saga is a mandamus order handed down by the Federal Circuit today in In re BigCommerce, Inc. Specifically, the Court held:
[W]e hold that for purposes of determining venue under § 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.
This is a considerable restriction on the already limited venue options open to plaintiffs, which limited proper venue to states where the defendant resides (its state of incorporation) or "where the defendant has committed acts of infringement and has a regular and established place of business."
The case arose in the Eastern District of Texas, Marshall Division, where respondents Diem LLC and Express Mobile Inc. individually filed patent infringement suits against BigCommerce. BigCommerce filed a motion to dismiss for improper venue in the Diem case, and a motion to transfer in the Express Mobile case; each of these motions was denied by the District Court. As noted in the Federal Circuit's Order, "[i]t is undisputed that BigCommerce has no place of business in the Eastern District of Texas" (rather, its registered office and headquarters is in Austin, which is in the Western District of Texas). Nevertheless, the Diem court ruled 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" and the Express Mobile court found nothing in plaintiff's argument that distinguished this reasoning.
The Federal Circuit issued a mandamus order overturning these decisions, despite the acknowledged "heavy burden" placed on a petitioner for obtaining one, by Judge Linn joined by Judges Reyna and Hughes. The Court found "exceptional circumstances" here, specifically that "basic" and "undecided" questions were involved as required by the Supreme Court in Schlagenhauf v. Holder, 379 U.S. 104, 110 (1964). The order states there is "no doubt" that venue is proper for a domestic corporation only in its state of incorporation, but that there is inconsistent precedent regarding whether venue is limited in states having more than one judicial district. The Court also recognized that this issue had not been addressed in its Cray decision and thus "will inevitably be repeated," further justifying issuing the writ in this case. In this regard the order also notes that the magistrate's decision in the Diem case, that BigCommerce had waived its venue objections, was "clearly incorrect as a matter of law" under the Court's In re Micron Tech., Inc., 875 F.3d 1091 (Fed. Cir. 2017) precedent.
The Court's substantive decision, that "a domestic corporation incorporated in a state having multiple judicial districts [does not] 'reside' for purposes of the patent-specific venue statute, § 1400(b), in each and every judicial district in that state" was based, according to the order, on "the statute's language, history, purpose, and precedent." The plain language of the statute recites "judicial district" in the singular which has been held in other contexts as meaning a single place according to the panel, citing Hertz Corp. v. Friend, 559 U.S. 77, 93 (2010); NLRB v. Canning, 134 S. Ct. 2550, 2561 (2014); and Rumsfeld v. Padilla, 542 U.S. 426, 434 (2004). The order finds that the history of § 1400(b) is consistent with this construction, citing language in the 1897 predecessor to the current statute and that Congress did not intend to change the scope of the statute in its revisions in 1948, citing the Supreme Court's decision in Fourco Glass Co. v. Transmirra Products Corp., 353 U.S. 222 (1957). The panel also considered this reading consistent with the broader venue provisions of 28 U.S.C. § 1391(c) (1952), and that Congress had evinced an intent that venue in patent cases should be more limited than in general civil litigation contexts, citing Brunette Mach. Works, Ltd. v. Kockum Indus., Inc., 406 U.S. 706, 713 (1972) for this proposition.
The panel also found that the term "resides" was "a term of art that had a settled meaning in the law" consistent with limiting venue to the judicial district where a patent infringement defendant resides. The order cites Federal Practice treatise as well as Supreme Court precedent, including Galveston, H. & S.A. Ry. Co. v. Gonzales, 151 U.S. 496, 504 (1894), and Stonite Products Co. v. Melvin Lloyd Co., 315 U.S. 561 (1942), as well as Fourco in support of the "well-established" status of the meaning of "resides," with Stonite being particularly relevant; there, two corporate defendants were "both incorporated in the state of Pennsylvania but maintained principal places of business in different judicial districts (like here, there being Eastern and Western judicial districts in Pennsylvania).
The Court's Order also reviewed and rejected three arguments from respondents. The first was that the use of "resides" in earlier Supreme Court cases (including Stonite) is in tension with later Supreme Court cases (including Fourco). The Federal Circuit rejected this argument almost out of hand, saying that the Court did not address the issue in Fourco at the judicial district level of granularity, "and set a necessary but not necessarily sufficient condition for corporate residence for venue under § 1400(b)" (emphasis in order). The second argument, that modern business circumstances counseled a "more flexib[le]" approach was "a non-starter," the panel stating that "'[t]he requirement of venue is specific and unambiguous; it is not one of those vague principles which, in the interest of some overriding policy, is to be given a 'liberal' construction," quoting Olberding v. Ill. Cent. R.R. Co., 346 U.S. 338, 340 (1953), as cited in Schnell v. Peter Eckrich & Sons, Inc., 365 U.S. 260, 264 (1961), and saying that "[s]uch policy-based arguments are best directed to Congress." Finally, the order addresses the question generally regarding how venue should be properly decided in multi-judicial district states. First, the proper district for venue would be the district in which the defendant has a principal place of business (if there is such a place in the state), citing Galveston, H. & S.A. Ry. Co. v. Gonzales, 151 U.S. 496, 504 (1894). And the Court noted that a "principal place of business" is not the same as "a regular and established place of business" as required by other aspects of the statute, the order citing Hertz Corp. v. Friend, 559 U.S. 77, 93 (2010). In the absence of a "principal place of business" in a state in which a defendant is incorporated, the "default' should be the judicial district in which the corporation has its registered office or agent, calling this a "universally recognized foundational requirement of corporate formation."
Thus, the contraction of proper venue for suing patent infringement defendants continues, with this current decision limiting venue to those districts having the closest ties with the accused infringer. It would not be incorrect to count this decision as another judicial encroachment on the ability of patentees to assert their patents.
In re BigCommerce, Inc. (Fed. Cir. 2018)
Panel: Circuit Judges Reyna, Linn, and Hughes
Order by Circuit Judge Linn