Intellectual Property > IP Newsflash > N.D. and E.D. Tex. Courts Find Waiver of Venue Defense Notwithstanding TC Heartland Decision
29 Jun '17

The Supreme Court’s recent holding in TC Heartland settled several points of law: first, 28 U.S.C. § 1400(b) is the “sole and exclusive provision controlling venue in patent infringement actions; second, the broader venue provisions in 28 U.S.C. § 1391(c) are not applicable to patent infringement cases; and third, TC Heartland reversed the Federal Circuit’s decision that reaffirmed VE Holding and held that “the current version of § 1391 does not contain any indication that Congress intended to alter the meaning of § 1400(b) as interpreted in Fourco.” In the aftermath of TC Heartland, there have been inconsistent approaches to the question of waiver and whether the recent Supreme Court decision constitutes new law. Two such decisions are detailed, below.

Elbit Systems v. Hughes Network Systems commenced in 2015 with Elbit suing multiple defendants in the Eastern District of Texas on patents relating to broadband satellite systems. Although the complaint asserted venue under both 28 U.S.C. § 1391 and § 1400(b), the subsequent motions to dismiss on venue grounds contested venue within only § 1391(c)(2). The court denied the motions under then-existing law. On June 3, roughly two weeks after TC Heartland, (and with a trial date set for the end of July), defendants filed motions to transfer under 28 U.S.C. § 1406 for improper venue and to stay pending resolution of venue.

In Judge Payne’s decision denying both motions, he first acknowledged that venue is a defense that, if available, is waived if it is not raised at the outset of the case pursuant to Federal Rules of Civil Procedure 12(h)(1)(A) and 12(g)(2). The court decided, however, that the venue defense always had been available and reasoned that TC Heartland did not change the law; it reaffirmed that the Supreme Court’s 1957 decision in Fourco had been the law all along. The court so held notwithstanding the Federal Circuit’s 27-year old precedent in VE Holding that was binding on all district courts presiding over patent infringement cases. While defendants argued that because of VE Holding it was “well known” that any motion under 1400(b) would have been viewed as “meritless . . . that does not change the harsh reality that Hughes would have ultimately succeeded in convincing the Supreme Court to reaffirm Fourco, just as the petitioner in TC Heartland did.”

Similarly, the court in iLife Technologies, Inc. v. Nintendo of America, Inc. was confronted with a motion to transfer with a fast-approaching trial date. Although in its Answer Nintendo admitted venue was proper under §§ 1391 and 1400(b), it filed a motion to transfer venue under 28 U.S.C. § 1404, which was ultimately denied. Following TC Heartland, Nintendo renewed its motion to transfer or dismiss under 28 U.S.C. § 1406. The plaintiff opposed the motion on two grounds: that TC Heartland did not constitute a “change in law,” and that even if it did, it would not qualify for an exception under Fifth Circuit law.

The court held that TC Heartland did not constitute a change in law, and accordingly did not reach the issue of waiver under Fifth Circuit law.

Both of these decisions were in mature cases with trial dates fast approaching – a factor that likely impacted the ultimate conclusion.

Elbit Systems Land and C4I Ltd. et al v. Hughes Network Systems LLC et al, 2-15-cv-00037 (E. D. Tex, June 20, 2017, Order)

iLife Technologies, Inc. v. Nintendo of America, Inc., 3-13-cv-04987 (N.D. Tex. June 27, 2017, Order) (Lynn, USDJ)