By Dennis Crouch
In re TC Heartland LLC (on mandamus to the Fed Cir. 2015) (read-it: Heartland Mand)
An interesting mandamus action was recently filed by the Prof John Duffy and Jim Dabney (both now with Hughes Hubbard) raising the following: Whether 28 U.S.C. § 1400(b) precludes the district court from hearing this action.
Section 1400(b) is the jurisdiction statute for patent cases indicates two mechanisms for jurisdiction: (1) the district where the defendant resides or (2) the district where the defendant infringed and has a regular place of business.
Any civil action for patent infringement may be brought in the judicial district where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business.
28 U.S.C. § 1400(b). Section 1391(c) further provides for a broad definition of residency, broadly including both (1) the district of domicile and (2) any district where the defendant is subject to the court’s personal jurisdiction on the issue of the case.
The question ultimately raised by the case is whether the broad residency definition of §1391(c) applies to modify and expand the “resides” language of 1400(b).
The history goes back-and-forth: In Fourco Glass Co. v. Transmirra Products Corp., 353 U.S. 222 (1957), the Supreme Court ruled that “28 U.S.C. § 1400(b) is the sole and exclusive provision controlling venue in patent infringement actions, and that it is not to be supplemented by the provisions of 28 U.S.C. § 1391(c).” Then in 1988, §1391(c) was amended to expand the definition of residency and also to include a statement that its residency definition was “for purposes of venue under this chapter.” Subsequently, the Federal Circuit in VE Holdings held that the 1988 amendment overruled Fourco and that the expanded residency definition §1391(c) now applies in patent cases since §1400 (the patent jurisdiction provision) is in the same chapter as §1391. In 2011, Congress again changed its statute – this time repealing the “for purposes of venue under this chapter” and instead added in that the statute applies in all civil cases “except as otherwise provided by law.”
The petition argues that VM Holdings was wrongly decided in the first place and basically led to the reality known as the Eastern District of Texas. In the alternative, the petition also argues that the 2011 amendment overruled VM Holdings.
VE Holding has produced enormous venue shopping opportunities in patent infringement actions to the point where, in the most recent year, one district (E.D. Tex.) has 50% more patent filings than the next most popular district (D. Del.) and more than four times as many filings as the district with the third most patent case filings. . . . “The abuses engendered by this extensive venue,” Stonite Products Co. v. Melvin Lloyd Co., 315 US 561 (1942), are precisely the sort of abuses that were prevented by the Supreme Court’s decisions on § 1400(b) and that would be prevented once again with a return to those controlling precedents.
What isn’t clear to me is whether a mandamus panel has authority to overrule the prior precedent. Of course, an en banc panel will have that authority and in their petition Duffy & Dabney particularly request en banc consideration.
Personal Jurisdiction: The petitioner here also argues an additional personal jurisdiction question that begins with the standard notion that each act of infringement is a separate act of infringement. Their argument then is that the court only has specific personal jurisdiction with reference to allegedly infringing Delaware sales and not the sales in other jurisdictions. The usual practice in patent cases is that once the court has specific personal jurisdiction based upon one alleged act of infringement directed to the state that the court can then adjudge infringement allegations arising nationwide. Of course, that result contravenes the usual rule that “specific personal jurisdiction is limited to claims that arise from “an ‘activity or an occurrence that takes place in the forum state.'” Walden (2014). In its brief, the petitioner does a fine job of distinguishing Keeton v. Hustler (1984) that allowed for nationwide damages for defamation. The difference from patent law is that the substantive single publication rule for defamation means that the nationwide damages all stemmed from the same tortious act that led to the specific personal jurisdiction in NH; in the patent context sales in one state that might create personal jurisdiction in that state are separate acts of infringement than sales in another state. Thus, the petitioner explains: “The district court here plainly lacks personal jurisdiction to adjudicate the merits of claims arising from non-Delaware transactions or events.”
At first glance, you might think that petitioner’s rule would lead to a patentee having to sue a defendant separately in each state across the nation. That would only be true if there was no location with general jurisdiction over the defendant – nationwide claims would still be available in any state with general jurisdiction over a defendant. In addition, the availability of multi-district litigation would streamline cases where multiple parallel lawsuits are filed.
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The case below is Kraft Foods v. TC Heartland (D.Del.) and alleges infringement of three patents covering the packaging and contents of a flavored liquid beverage concentrate such as Kraft’s MiO water enhancer. U.S. Patent Nos. 8,293,299; 8,511,472; and 8,603,557. TC Heartland makes its competing “Splash” water enhancers from its Carmel, Indiana HQ.
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Additional Docs:
- Magistrate Recommendation Rejecting Heartland’s arguments: 1-14-cv-00028-LPS-59-PRIMARY DOCUMENT
- Judge Stark’s Decision Confirming Magistrate Recommendation: 1-14-cv-00028-LPS-78-PRIMARY DOCUMENT
Doesn’t it end the argument by noting that 1400(b) says “may” be brought not “must” be brought? Or “May only be brought”? Congress knows how to write mandatory venue statutes…
Okay, 1400(b) is venue, not personal jurisdiction. I’ll read what they wrote but I’m having a feeling this is not going to work.
[…] new pending mandamus petition of In re TC Heartland (Fed. Cir. 2015) has the potential of even more dramatically shaking-up patent litigation filing […]
Their argument then is that the court only has specific personal jurisdiction with reference to allegedly infringing Delaware sales and not the sales in other jurisdictions.
Many Circuits recognize a doctrine called “pendent personal jurisdiction,” which applies UMW v. Gibbs to personal jurisdiction. If the court has jurisdiction over one claim, and a second claim shares a “common nucleus of operative facts,” then the court can assert personal jurisdiction over the second claim. Eight Circuits recognize this doctrine, including the Federal Circuit in Inamed Corp. v. Kuzmak, 249 F.3d 1356, 1362 (Fed. Cir. 2001).
That seems to apply here readily to sales in other fora — you have the same patent(s) asserted against the same accused device(s), the only difference being that the other sales were to other states.
Have the outlier Circuits distinguished UMW v. Gibbs and repudiated “pendent personal jurisdiction”, or have they just not yet positively applied the doctrine?
I think they just have not gotten around to passing on the issue. I got the number 8 from a recent district court case that collected the cases in a string cite, but it could be that since then there are more. I know of no case that rejects it, and Wright and Miller discusses it without any indication that anyone rejects it.
Usually pendent personal jurisdiction only applies when a federal long arm statute provides nationwide service of process and there are tag along state law claims that can’t take advantage of the federal long arm.
That is the most common situation when it is applied, but not always. In Hargrave v. Oki Nursery, Inc., 646 F.2d 716, 719 (2d Cir. 1980), the Second Circuit applied to stretch personal jurisdiciton from a fraud claim to breach of contract claims.
Inamed Corp. v. Kuzmak, 249 F.3d 1356, 1362 (Fed. Cir. 2001) applied it to stretch personal jurisdiction on a patent misuse claim to another claim for declaratory judgment of non-infringement of a patent.
Hmmmm… I think that that asserting personal jurisdiction over a state law claim without a federal claim to pend it to would be held unconstitutional — there’s a great case called ESAB versus someone that explores the constitutional boundaries of pendent PJ.
I believe there was diversity jurisdiction over both claims in the 2d Cir. case. But personal jurisdiction was only over the fraud claim, not the breach of contract claim. (This had something to do with NY statutes. NY, unlike most states, does not grant its courts jurisdiction to the limits of due process.)
In the Inamed case, both claims were federal, but not those with nationwide jurisdiction. Again, there was personal jd. on one but not the other, but because they had overlapping facts, all were triable in one court under pendent personal jd.
What would be the Constitutional problem of applying pendent personal jd. in patent cases for out-of-state sales?
The basis for pendent PJ is that because the Fifth Amendment is the limitation on federal power (not the 14th), the “forum” that minimum contacts is measured from is the US as a whole, not a state.
So in the usual case, there’s a longer federal long arm statute and the courts sort of massage the issue and say the state law claims (or federal claims without a nationwide long arm statute), reason this way: there’s federal power over the federal claim because of the federal long arm and minimum contacts with the US. Because the state law/other federal law claims arise out of the same set of facts, they’re part of the same case or controversy as the long-arm federal claim, and so due process is not offended.
Here, you’re talking about a state asserting its power past its borders without minimun contacts over the claim. That’s unconstitutional.
There very very different modes of analysis if there’s not a nationwide service of process statute for the federal claim.) (Plus, a lot of times the related claims wouldn’t be within the state long arm statute, in scenarios I could easily imagine.)
I teach this stuff too often, so hope that made sense. The ESAB case does a good job of going over it….
There are several good arguments why the Federal Circuit decision in VE Holding on patent suit venue was wrongly decided, so it is strange it was not challenged before. The specific patent litigation venue statue, 28 U.S.C. §1400(b), was NOT overruled by Congress, Congress left it on the books! Yet it was rendered completely moot, meaningless and inoperative solely by the 1990 Federal Circuit decision in VE Holding, 917 F.2d. 1574, after Congress had amended the general venue statue, 28 U.S.C. §1391(c), in 1988.
In my opinion, that CAFC decision violated normal rules of statutory construction that: (a) a specific statutory provision controls over a general provision; (b) statutes left on the books are not normally to be considered meaningless; and (c) it should be assumed that Congress left 28 U.S.C. §1400(b) on the books intentionally, without overruling it, absent an indication of intent by Congress to do so. There is not the slightest indication in the Congressional record that Congress ever intended to overrule and render meaningless, much less remove, 28 U.S.C. §1400(b). [Perhaps the Fed. Cir. thought they were doing themselves and everyone else a desirable favor by avoiding the delays for resolving patent venue disputes that the Courts used have back in those days?]
It is surprising that the subject challenge came out of the Delaware D.C. when by far the largest problem the Fed. Cir. created with VE Holding is the remote highly locally lucrative patent suit Valhalla of E.D.TX, into which nearly half of all current patent suit defendants are dragged long distances from elsewhere?
Paul, it was challenged, but cert. denied
VE Holding Corp. v. Johnson Gas Appliance Co., 499 U.S. 922, 111 S. Ct. 1315, 113 L. Ed. 2d 248 (Supreme Court 1991).
It would be interesting to see the petition, the response and any arguments by the Solicitor and other amici.
Paul, it arose in Delaware because that is the corporate home of the patentee. This fact was a principal reason the motion to transfer to district where the accused infringer was incorporated was denied.
Ned: it arose in Delaware because that is the corporate home of the patentee
Right. But Texas is typically “the corporate home” of the tr0lls who file in ED Texas. I think Paul’s point was that, statistically speaking, one would have expected this challenge to have presented itself there first (and possibly earlier).
In any event, it’s an interesting development.
MM, I think it is self-evident why a challenge did not arise earlier.
I have been asking the same question about challenges to reexaminations after Judge Nies’s dissent in Lockwood en banc that said that Lockwood necessarily overruled Patlex. Where were the horde of renewed constitutional challenges? Where?
Instead we say a mad scramble to get Lockwood to drop its jury trial demand to moot that case. Who was behind that?
Is it the same type of people behind the “Tr011” scare?
Who (again) coined that term, and perhaps more importantly, why?
And speaking about scares and such (can you say Witch?), where exactly is the Executive’s response to the Ron Katznelson March 30 petition?
Bueller?
.
Bueller?
Ned – in light of the transfer out of the 4th Circuit, has Cooper’s challenge been comingled with yours?
On p. 59, J. Nies wrote: “In fact it was in England at the time the Seventh Amendment. A separate nullification action . . . could be brought before the English Equity court. In England, prior to 1791, anyone could challenge a patent’s validity by a scire facias writ in equity.”
On p. 55, J. Nies also wrote: “[per the classification as a public right], Congress could place the issue of validity entirely in the hands of an Article I trial court with particular expertise if it chose to do so.”
What a stunning, stunning debacle this is.
David, I have heard nothing.
Why don’t you take a quick look on PACER to see what case number Cooper’s appeals are. I think he is also appealing from an IPR.
We can then check them for orders and briefing schedule.
David,
IPR appeals 15-1942; 15-1943 and 15-1925 are consolidated under the 15-1925 docket.
Appeal from the District Court of the Eastern District of Virginia 15-1483 was stayed pending the outcome in the 4th circuit. 15-1483 has now been designated the lead docket. The transfer from the 4th circuit is docket 16-1071.
On October 16, Lee (Justice department) filed a recommendation to stay Cooper’s appeal in 14-1483 pending MCM Portfolio LLC v. HP, 15-1091, and, alternatively, to order new briefing.
Well, Cooper has no obligation to wait for the CAFC on a question of this variety. Perhaps he is looking ahead to the SCOTUS.
Can’t tell what Cooper is doing from PACER.
In Case 15-1483, Dkt. 17, Oct. 16, 2015, W. Havemann on the behalf of the DOJ writes:
“The government respectfully requests that this Court stay the proceedings in this appeal pending the outcome of MCM Portfolio. In this Court in MCM Portfolio concludes that the inter partes review process does not violate Article III or the Seventh Amendment, that decision would foreclose Cooper’s constitutional claim on the merits. Even if the panel in MCM Portfolio concludes otherwise, the decision in that case would be relevant to the disposition of Cooper’s challenge.”
No response from Cooper.
A three-judge mandamus panel may not overrule Federal Circuit precedent. Internal Operating Procedure 13(1) (“En banc consideration is required to overrule a prior holding of this or a predecessor court expressed in an opinion having precedential status.”).
But as Ned mentions, it can hold that intervening authority supersedes the precedent. That could be a legislative or regulatory change, or subsequent Supreme Court or Federal Circuit en banc decision. It could also be subsequent case law in a regional circuit with regard to an issue where the Federal Circuit applies regional circuit law.
I think it’s best to limit the use of “overrule” to where a court partly or completely eliminates the precedential force of an earlier case (its own precedent or that of a lower court). Statutory and regulatory changes do not really overrule case law, but they might change the law in a way that renders the precedent superseded and inapplicable.
I agree that the language VE Holdings found to be “unambiguous,” “under this chapter,” is gone to be replaced by “Except as otherwise provided by law…” The Supreme Court observed in ATLANTIC MARINE CONST. v. US Dist. Court, 134 S. Ct. 568, 571 U.S., 187 L. Ed. 2d 487 (2013) that 28 USC 1391 provides “that “[e]xcept as otherwise provided by law … this section shall govern the venue of all civil actions brought in district courts of the United States.” A footnote, number 2, reads, ” Section 1391 governs “venue generally,” that is, in cases where a more specific venue provision does not apply. Cf., e.g., § 1400 (identifying proper venue for copyright and patent suits).”
There is only one way to read Atlantic Marine — 1391 does NOT apply to 28 USC 1400.
But, this is only judicial dicta, not a holding. But it does indicate that the Supreme Court continues to recognize Fourco as good law. Since that is the case, Fourco, in view of Altantic Marine, would overrule VE Holdings.
Now, can a panel recognize that one of its prior cases has been overruled by subsequent controlling authority. Yes it can, Troy v. Samson. It is a wonder the petition did not cite that case.
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