Federal Circuit Holds That Plaintiff Bears the Burden of Proving Venue in Patent Cases

In an order issued May 14, 2018, the Court of Appeals for the Federal Circuit vacated a District Court order that denied a motion to dismiss for improper venue. The court held that, in challenges to venue under 28 U.S.C. § 1406: (i) Federal Circuit law governs the assignment of the burden of proof and (ii) Federal Circuit law assigns this burden to the plaintiff. In re ZTE (USA), No. 2018-113 (Fed. Cir. May, 14, 2018). The order was pursuant to a petition for a writ of mandamus sought by ZTE, the defendant in a patent infringement action, as discussed in a previous post. The court agreed with ZTE's contention that the District Court erred by assigning the burden of proof to the defendant and failing to analyze properly the allegations of venue as directed by the court in In re Cray, Inc., 871 F.3d 1355 (Fed. Cir. 2017).

In its choice of law holding, the court concluded that the procedural rule of burden of persuasion for § 1406 venue challenges is so integrally linked to unique, substantive patent law regarding the venue provision of § 1400(b) that it is more appropriate to apply Federal Circuit law rather than the general rule of deferring to regional circuit law. C.f. Beverly Hills Fan Co. v. Royal Sovereign Corp., 21 F.3d 1558 (Fed. Cir. 1994) (concluding that Federal Circuit law governed the relevant procedural due process issue). The court also noted the existence of disunity among the regional circuits as a significant factor contributing to that decision, citing its "mandate of achieving national uniformity in the field of patent law." Id. at 1564.

In holding that the plaintiff bears the burden on this issue, the court noted both historical support for that formulation as well as the public policy underpinnings. It found particularly persuasive the proposition that § 1400(b) is intended to be a restrictive statute. Burdening the plaintiff to demonstrate the propriety of venue is consistent with the public policy objectives of the statute. The court explicitly rejected the argument that venue objections are essentially affirmative defenses, noting that its approach is consistent with the parallel case of personal jurisdiction, where the plaintiff bears the burden to establish the first two elements of the due process requirement.

The recent In re HTC decision further amplifies the significance of this decision. No. 2018-130 (Fed. Cir. May, 9, 2018). In HTC, the Federal Circuit held that the appropriate vehicle for challenging venue is normally a post-trial appeal, not mandamus. This means that a successful venue challenge could lead to a favorable plaintiff's verdict being vacated on a technicality after the fact. Now that the propriety of venue is the plaintiff's burden to prove, as a matter of diligence it is important to take great care in selecting and asserting venue, and as a matter of strategy intentionally pursuing a questionable venue may constitute an unjustifiable risk.