EDTX & NDTX Monthly Wrap-Up — November 2017

This post summarizes some of the significant developments in the Eastern District of Texas and the Northern District of Texas for the month of November 2017. This post will focus on how the Eastern District of Texas continues to shape venue law in patent cases post-TC Heartland. There were two significant venue-related decisions issued by the Eastern District of Texas in November 2017, in which the Court addressed issues like what constitutes waiver of a venue defense and which party bears the burden on venue issues.

Nichia Corp. v. TCL Multimedia Tech. Holdings Ltd.: What constitutes waiver of the improper venue defense?

In Nichia Corp. v. TCL Multimedia Tech. Holdings Ltd., Case No. 2:16-cv-1452 (E.D. Tex.), Judge Gilstrap addressed the defendants' motions to dismiss based on lack of personal jurisdiction and improper venue, along with their alternative motion to transfer based on convenience. (Dkt. No. 145.) Nichia, the plaintiff, had originally filed suit against the defendants TTE and TMT in August 2016 in the Eastern District of Texas. (Id. at 2.) In the answer to that complaint, TTE and TMT admitted that venue was proper but attempted to reserve their ability to challenge venue if TC Heartland changed the courts' interpretation of venue law: "For purposes of this action only, Defendants admit that venue is proper in the Eastern District of Texas. Defendants respond, however, that if interpretation of venue under 28 U.S.C. §§ 1391(c) and/or 1400(b) is altered, by the Supreme Court or otherwise, Defendants reserve their rights to contest whether venue is proper." (Id.) The defendants also admitted that they were subject to personal jurisdiction in the Eastern District of Texas with respect to the subject matter alleged in this first complaint. (Id.) The defendants then, jointly with other defendants, moved to stay the case pending the resolution of a Federal Circuit appeal as to the validity of the asserted patent, and the Court granted that motion. (Id. at 3.)

A month later, Nichia filed a second lawsuit against the defendants TTE and TMT, alleging infringement of a different patent. (Id.) The defendants filed a motion to consolidate this second case with the first-filed case, and the Court granted that motion. (Id.) Shortly afterward, and before the defendants answered in the second case, the Supreme Court issued its opinion in TC Heartland. (Id.) The defendants then filed their motion to dismiss, alleging lack of proper venue and personal jurisdiction, or, in the alternative, requesting a transfer based on convenience. (Id.)

The Court denied the defendants' motion as to lack of proper venue. With respect to the first case, the Court found the defendants' reservation language to be inappropriate because, having admitted that venue was proper for purposes of this action, the defendants were bound by what they stated in their pleadings and had waived the defense of improper venue. (Id. at 5.) The Court also found that the defendants had waived their defense in the second-filed case because, by moving to consolidate the cases, the defendants had sought affirmative relief in the Eastern District of Texas they could no longer contest venue after having done that, along with several other affirmative actions they took in the second case. (Id. at 7-8.) The Court therefore denied the defendants' motion as to improper venue in both cases. (Id. at 8.)

The Court also denied as moot the defendants' motion to dismiss for lack of personal jurisdiction because their answer failed to admit, deny, or allege a lack of sufficient knowledge to answer Nichia's personal jurisdiction allegations—it merely stated that those allegations were legal conclusions that did not require an answer. (Id. at 3-4.) The Court also denied the defendants' motion to transfer for convenience because they had failed to address the threshold inquiry of whether venue would be proper in the transferee district. (Id. at 9-10.)

Intellectual Ventures II LLC v. FedEx Corp.: Which party bears the burden on issues of venue in patent cases?

In Intellectual Ventures II LLC v. FedEx Corp., Case No. 2:16-cv-980 (E.D. Tex.), Judge Gilstrap denied the defendant FedEx entities' motion to dismiss for lack of proper venue, this time due to both waiver and an analysis of whether venue was nonetheless proper in the Eastern District of Texas. (Dkt. No. 161.) Intellectual Ventures sued various FedEx entities for infringement of five patents generally relating to shipping and transportation technology. (Id. at 2.) The parties litigated for a year, at which time the Patent Trial and Appeal Board denied FedEx's petitions for inter partes review. (Id. at 4.) Two months later, FedEx filed the motion to dismiss. (Id.)

The Court found FedEx had waived its venue defense because of its conduct in the litigation. FedEx had served subpoenas, propounded interrogatories, filed responsive briefing, sought favorable constructions of the asserted patents, sought a transfer based on convenience (not on improper venue), attended hearings before the Court, and engaged in extensive discovery, including document and source code production. (Id. at 5-7.) The Court found that all of these actions, taken together, amounted to conduct that gave every indication to Intellectual Ventures and the Court that FedEx intended to litigate the case on the merits in the Eastern District of Texas. (Id. at 8.) It appeared to the Court that FedEx filed the motion only after the PTAB denied institution of their IPR petitions and only then because it was convenient for FedEx to try to get the case dismissed. (Id.) The Court therefore found that FedEx had waived its venue defense.[1]

The Court nonetheless continued to the analysis of whether venue was proper in the Eastern District of Texas. Importantly, the Court first addressed the question of which party bears the burdens of persuasion and proof on issues of venue. (Id. at 9.) After surveying decisions from courts around the country, including contradictory cases within the Eastern District of Texas, Judge Gilstrap concluded that "a defendant is better positioned to explain why [venue] benefits are lacking with respect to a particular forum" and that therefore "placing the burden on the defendant represent[s] the better view." (Id. at 11.) The Court then analyzed the situation with respect to each FedEx entity and found venue proper for all of them, either because they were incorporated in Texas and had a principal place of business within the district, or because they carried out their business from physical, geographical locations in the district and were alleged to have committed acts of infringement within the district. (Id. at 14-15.) The Court therefore denied FedEx's motion. (Id. at 20.)

[1] FedEx has since filed a petition for writ of mandamus to the Federal Circuit. See Petition for Writ of Mandamus, In re FedEx Corp., et al. (Dec. 5, 2017). The Federal Circuit sua sponte directed Intellectual Ventures to respond to the petition by December 12 and noted a reply could be filed by December 15.