by Dennis Crouch

In re ZTE (Fed. Cir. May 14, 2018) is an important case establishing that the plaintiff has the burden of proving proper venue in patent cases. 

In May 2018, the Federal Circuit denied HTC’s writ-of-mandamus request on improper-venue grounds — holding that – like most issues – appeal of improper venue decision should ordinarily wait until final judgment.  See, Dennis Crouch, The US Venue Laws Do Not Protect Alien Defendants, Patently-O (May 9, 2018); In re HTC Corp., 2018 U.S. App. LEXIS 12182 (Fed. Cir. 2018). Less than one-week-later, the Federal Circuit has swung the other way — this time granting ZTE’s motion for writ of mandamus on the issue of improper venue.  The ZTE panel (Judges Reyna, Linn, Hughes) did not cite HTC, nor are there any overlapping judges with the HTC panel (Chief Judge Prost, and Judges Wallach and Taranto).  Of course, TC Heartland was an improper venue case that went to the Supreme Court on mandamus.

Here, the panel explained that mandamus makes sense because the decision resolves two “basic and undecided” issues of venue law: (1) What law to apply on the question of burden-of-proof for proper venue; and (2) Which party has the burden of showing proper/improper venue.

Federal Circuit Law: Each region within the US has its own court-of-appeals that guides lower courts in their decision making. Patent lawsuits are filed in these same regional courts, but the Court of Appeals for the Federal Circuit hears those appeals. The courts are all applying the same law, but differences in practice and interpretation have developed (i.e., Circuit Splits). In the patent world, the Federal Circuit has developed a practice of having the lower courts use their regional circuit law and procedure as a baseline, but then apply Federal Circuit law to issues unique to patent law.  See Biodex Corp. v. Loredan Biomed., Inc., 946 F.2d 850 (Fed. Cir. 1991).

In TC Heartland, the Supreme Court ruled that patent-venue is a unique patent law question. Here, the Federal Circuit has extended that general principle to hold that sub-determinations such as burdens-of-proof related to improper venue challenges are also issues of patent law for the Federal Circuit to decide.

Burden of Persuasion in Venue Law: The question of who has the burden of persuasion in venue law is interesting.  On the one hand, it appears to be the plaintiff’s burden to file the case in a proper venue. On the other hand, it is the defendant who files the FRCP 12(b)(3) motion to dismiss for improper venue.  The regional circuit courts do not offer much help because they are divided on the issue with reference to the general venue statute.

In this case the appellate panel found that 1400(b) is a restrictive measure – particularly limiting venue in patent cases — and that intentional narrowness suggests that the plaintiff should have the burden of showing proper venue.  This fits in line with Moore’s Federal Practice explanation.

It makes good sense to require a defendant who seeks dismissal of an action because of this personal privilege to establish the privilege. Placing the burden on the plaintiff is justified only in a case involving an exclusive venue statute, such as in patent infringement cases, in which venue lies in the district where the infringement takes place. Because the plaintiff has the burden of proving patent infringement, it makes sense to shift the burden of proof on the venue issue to the plaintiff, and the courts have so held.

17-110 Moore’s Federal Practice – Civil § 110.01[5][c] (2018).  (Note that when Moore’s state that “courts have so held”, the accompanying footnote only cites one 1981 district court case. Hoffacker v. Bike House, 540 F. Supp. 148, 149–150 (N.D. Ca. 1981)).

Here, the district court had placed the burden on the defendant ZTE of proving improper venue – on remand that burden needs to shift. The appellate panel went on to caution the lower court about finding a “regular and established place of business” in E.D. Texas based upon an “arms-length contract for service” with a call center provider.

Notes:

1. Although the plaintiff has the burden of proving proper venue, it does not appear that the court here changed the usual notion that proper venue need not be alleged in the complaint itself. Rather, the defendant must challenge proper venue. Ordinarily for such a challenge to be recognized must surpass some burden of presentation — i.e., by making a plausible or prima facie case of improper venue.

In re HTC Corp. (Fed. Cir. 2018)

In 2017, 3G Licensing filed its infringement lawsuit in Delaware Federal Court — accusing both HTC Corp. (a Taiwan Corp.) and HTC America (its US Subsidiary based in Washington State) of infringement.  Following TC Heartland, the District Court found that venue was improper for HTC America, but allowed the action to proceed against the foreign company HTC Corp.

HTC Corp. then petitioned the Federal Circuit for a writ of mandamus on the issue – that writ has been denied.  Here, in particular, the decision indicates that a venue mandamus will no longer be granted simply “to avoid the inconvenience of litigation by having this issue decided at the outset of its case.”  Mandamus is seen by the courts as an extreme remedy and requires a showing that the petitioner has “no other adequate means to attain the relief desired.”  Here, the court notes denial of an improper venue motion can be appealed following a final judgment — and a successful appeal will render the judgment null.  The decision here contrasts with the court’s precedent regarding mandamus on convenience grounds (1404(a)) that really cannot be appealed post-final judgment.

In what appears to me as dicta, the Federal Circuit went on to explain its position that the Delaware court is a proper venue for the foreign corporation.  Rather, according to the court, TC Heartland did nothing to disturb the “long-established rule that suits against aliens are wholly outside the operation of all the federal venue laws, general and special.” Quoting Brunette Machine Works, Ltd. v. Kockum Industries, Inc., 406 U.S. 706 (1972).  The difficulty for foreign corporations is that many times there will be no proper venue under 28 U.S.C. 1400(b).

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).

As a result of the possibility that a foreign company might not fit within the Venue statute, the Supreme Court in Brunette held that venue is proper for a foreign corporation in any judicial district where accused is subject to personal jurisdiction. In other words “the venue laws do not protect alien defendants.”

by Dennis Crouch

Delaware was already a popular venue for patent cases before the Supreme Court’s 2017 venue decision in TC Heartland. Since 2017, it has moved from popular to hot since so many companies are formally incorporated in the state.  (State of incorporation => proper venue in patent cases).  Delaware particularly been seen as a fair jurisdiction where both plaintiffs and defendants receive a full and fair hearing.  Thus, it is a popular spot for operating companies to sue as plaintiffs, knowing that they may face affirmative counterclaims in the same lawsuit.

The Federal Court in Delaware has four judges, all of whom now have a substantial patent litigation caseload. This includes the most senior, Hon. Leonard P. Stark who was appointed by President Obama back in 2010.  At the time, Joe Biden was Vice President of the United States and I am confident that he had a hand in selecting Judge Stark for that position.   Judge Stark was previously a magistrate judge and an assistant US attorney, all in Federal Court in Delaware.

The White House has announced that it intends to elevate Judge Stark–nominating him to serve as a Circuit Judge on the Court of Appeals for the Federal Circuit.  He will replace Judge Kathleen O’Malley who has indicated her intent to retire in March 2022.  Judge O’Malley is the only current Federal Circuit judge with extensive experience at the trial court level, and Judge Stark brings that same type of background.

The following comes from the White House press release:

Judge Leonard Stark: Nominee for the United States Court of Appeals for the Federal Circuit

Judge Leonard Stark has served as a United States District Court Judge for the District of Delaware since 2010. Judge Stark served as Chief Judge for the District of Delaware from July 2014 to June 2021. Previously, he served as a United States Magistrate Judge for the District of Delaware from 2007 to 2010. From 2002 to 2007, Judge Stark served as an Assistant United States Attorney in the United States Attorney’s Office for the District of Delaware, where he worked in both the criminal and civil divisions. From 1997 to 2001, Judge Stark was an associate in the Wilmington, Delaware office of the law firm Skadden, Arps, Slate, Meagher & Flom LLP. He served as a law clerk for Judge Walter Stapleton on the United States Court of Appeals for the Third Circuit from 1996 to 1997.

Judge Stark received his J.D. from Yale Law School in 1996., a D. Phil. from the University of Oxford as a Rhodes Scholar in 1993, and a B.A., B.S., and M.A., summa cum laude and Phi Beta Kappa, from the University of Delaware in 1991.

Congratulations Judge Stark.

In re Google (Fed. Cir. 2020)

In a mandamus order, the Federal Circuit has ruled that Google cannot be sued in E.D. Texas for patent infringement — holding that the district is an improper venue under TC Heartland LLC v. Kraft Foods Group Brands LLC, 137 S. Ct. 1514 (2017).

For most Federal Causes of action, venue is deemed proper if the court hearing the case has personal jurisdiction over the defendants. However, patent infringement cases are different.  Patent cases fall under a more specific venue statute that limits actions to districts where either (a) the defendant ‘resides’ (i.e., is incorporated) or (b) the defendant has a regular and established place of business and has committed acts of infringement. 28 U.S.C. 1400(b).

In Super Interconnect Techs. LLC v. Google LLC, No. 2:18-CV-00463-JRG, 2019 U.S. Dist. LEXIS 132005 (E.D. Tex. Aug. 7, 2019), Super Interconnect sued Google for infringing, but Google responded a motion for dismissal for improper venue.

Google is not a Texas company and so does not reside in E.D. Texas. Google is accused of infringing in TX, but Google argues that the company does not have a “regular and established place of business” in the district.

• Yes, Google does have many millions of customers and dollars in revenues from the district.
• Yes, Google does market its goods and services directly to consumers in the district.
• Yes, Google has AI services that provide immediate access to information and activities to millions within the district.
• Yes, Google ha[d] very large servers located within the district particularly designed to serve customers within the district. (Note (1) these servers were operated by local ISPs rather than Google itself; and (2) after the filing of this lawsuit, Google removed its servers from the District in order to avoid being sued in E.D. Tex.).

But:

• No, Google does not have a regular and established place of business in the district.

In its decision, the Federal Circuit repeated its prior holding in Cray that a regular-and-established-place-of-business must be a physical place located within the district.  While the servers qualify for the physicality requirement, they are not a “place of business.” According to the court, a “place of business” must have an “employee or agent” conducting business in the location — Google’s AI is not sufficient.

We conclude that a “regular and established place of business” requires the regular, physical presence of an employee or other agent of the defendant conducting the defendant’s business at the alleged “place of business.”

In making this “employee or agent” requirement, the court looked to the patent-law service-of-process statute 28 U.S.C. 1694 that indicates service may be made upon a defendants “agent or agents conducting such business” at the regular and establish place of business. The court explains:

The service statute plainly assumes that the defendant will have a “regular and established place of business” within the meaning of the venue statute only if the defendant also has an “agent . . . engaged in conducting such business.” Likewise, the provision that “service . . . may be made by service upon the agent” and the “regular and established” character of the business assumes the regular, physical presence of an agent at the place of business. In the absence of a contrary indication, these assumptions must govern the venue statute as well. . . .

Slip Op.

Judge Wallach joined the opinion, but also penned a concurrence questioning Google’s business model (hmm, seems that the company is doing pretty well for itself…). Judge Wallach explains:

I join with the majority’s order, but I write separately to raise questions about Google’s business model. During oral argument, Google did not answer, when asked, the question of what its main source of business is in the Eastern District of Texas. Google simply explained that it does not “actively do[] anything. In other words, there’s no evidence of any employee or agent . . . being present in the district.” Oral Arg. at 51:55–52:15.

When asked again, “what do you do in the Eastern District?,” Google responded  what “what Google does in the District will depend on what the subject of that verb is,” and “when you look at the service statute the subject of that verb has to be ‘employees’ or ‘agents’ in the District.” Id. at 52:30–52:53. Finally, Google was asked “when you gather information, from customers, which is part of your business, you agree. How does that get passed back to Google? It goes through the server?” Id. at 58:59–59:10.
Google’s counsel responded stating: “I am not aware.

There’s nothing in the record that I’m aware of on that point, your Honor.” Id. at 59:11–59:14. Given the absence from the record of information sufficient to understand Google’s business model, the question remains for the District Courts to determine whether Google’s end users become agents of Google in furtherance of its business by virtue of voluntarily or involuntarily sharing information generated on Google’s servers. If, for example, by entering searches and selecting results a Google consumer is continuously providing data which Google monetizes as the core aspect of its business model, it may be that under the analysis in which I today join, Google is indeed doing business at the computer of each of its users/customers. Because this is a question I believe should be entertained by District Courts, I concur.

Columbia Sportswear v. Seirus Innovative Accessories (Fed. Cir. 2019)

It is a bit chilly here in Missouri and so I wore my Seirus gloves that I purchased after the last-time I wrote about this case.

Note here that my gloves are the cheap liners, the lawsuit focuses more on the expensive gloves and clothing that have the heat-reflective material on the inner liner. My gloves also show a different pattern than the original accused HeatWave product.

In the case, Columbia asserted both a design patent (US.D657093) and a utility patent (US.8453270) and the case resulted in a partial victory for Columbia — Jury award of $3 million in damages for design patent infringement but a determined that the asserted utility patent were invalid.

The ‘093 design patent is directed to a “heat reflective material” as shown in the drawing above.  Columbia won its design patent case on summary judgment and then a jury awarded $3 million in damages.  On appeal, the Federal Circuit has vacated the summary judgment — holding that the district court improperly decided disputed issues of material fact reserved for a jury.

Design patent infringement is a question of fact. . . . The “ordinary observer” test is the sole test for determining whether a design patent has been infringed. Egyptian Goddess (Fed. Cir. 2008) (en banc). The test originates from the Supreme Court’s Gorham decision, which provides that “if, in the eye of an ordinary observer, giving such attention as a purchaser usually gives, two designs are substantially the same, if the resemblance is such as to deceive such an observer, inducing him to purchase one supposing it to be the other, the first one patented is infringed by the other.” Gorham Co. v. White, 81 U.S. 511, 528 (1871)). . . . The ordinary observer is considered to be familiar with prior art designs, and “[w]hen the differences between the claimed and accused designs are viewed in light of the prior art, the attention of the hypothetical ordinary observer may be drawn to those aspects of the claimed design that differ from the prior art.” Crocs (Fed. Cir. 2010).

Seirus’ key argument here is that the location of its logo, coupled with differences in line thicknesses and uniformity raise questions of fact sufficient to get the case to the jury — so that a reasonable juror could find no infringement.  The district court disagreed with that argument — finding that  “even the most discerning customer would be hard pressed to notice the differences between Seirus’s HeatWave design and Columbia’s patented design.”

On appeal, the Federal Circuit has sided with the adjudged infringer holding that the logo should be considered as part of the non-infringement analysis. In L.A. Gear, Inc. v. Thom McAn Shoe Co., 988 F.2d 1117, 1125 (Fed.Cir.1993), the Federal Circuit wrote that “[d]esign patent infringement … does not … allow of avoidance of infringement by labelling.” That decision led the district court here to come to the conclusion that it is “well-settled that a defendant cannot avoid infringement by merely affixing its logo to an otherwise infringing design.”

On appeal, the Federal Circuit instead distinguished L.A. Gear.

In evaluating infringement there, we explained [In L.A. Gear] that design infringement is not avoided “by labelling.” A would-be infringer should not escape liability for design patent infringement if a design is copied but labeled with its name. But L.A. Gear does not prohibit the fact finder from considering an ornamental logo, its placement, and its appearance as one among other potential differences between
a patented design and an accused one. Indeed, the fact finder is tasked with determining whether an ordinary observer would find the “effect of the whole design substantially the same.”

Slip Op.

Regarding wave thickness, the district court held that thickness was not claimed in the patent. Obviously wrong because everything in the drawing is claimed.

[T]he claim of the ’093 patent is drawn to the “ornamental design of a heat reflective material as shown and described,” and Columbia’s design has uniform line thickness in every figure in the patent.

Slip Op. Note here that the district court cited to several decisions holding finding that design patents were not limited to “any particular size” and thus, for instance could simultaneously cover both a motorcycle for humans and one for Ralph the Mouse. 

Those precedents didn’t fit here because we’re not talking about the overall sizing but rather relative sizing and uniformity.

Finally, the district court also noted several other differences between the patent and the accused product, but found them each minor. On appeal, the Federal Circuit found the approach improperly piecemeal and did not properly consider overall visual impression.

[T]he district court’s piecemeal approach, considering only if design elements independently affect the overall visual impression that the designs are similar, is at odds with our case law requiring the factfinder to analyze the design as a whole. See Amini Innovation Corp. v. Anthony Cal., Inc., 439 F.3d 1365, 1372 (Fed. Cir. 2006). An ordinary observer is deceived by an infringing design as a result of “similarities in the overall design, not of similarities in ornamental features considered in isolation.” Id.

Slip Op.  Thus, the case is remanded and will now likely go to a jury trial.

In the appeal, the defendant also argued that profit disgorgement under 25 U.S.C. § 289 should be determined by a judge rather than a jury.  The Federal Circuit noted that to be an important question, but did not reach it on appeal after having already vacated the infringement findings.

Note here that the ornamental design is directed to a heat reflective material -getting close to a design in the abstract. See Curver Luxembourg, SARL v. Home Expressions Inc. (Fed. Cir. 2019).

Federal Circuit Rejects Patenting Designs “in the Abstract”

Utility patent — the jury found asserted utility patent claims invalid as both anticipated and obvious. On appeal, Columbia argued that the obviousness evidence lacked “competent expert testimony” that the Federal Circuit has previously required in complex cases to explain the prior art to a jury. On appeal, the court ruled that the invention here was simple enough so that expert explanations were not required:

[W]e are not persuaded that the legal determination of obviousness in this case requires such evidence. The technology here—coated materials for cold weather and outdoor products—is “easily understandable without the need for expert explanatory testimony.”  Quoting Perfect Web Techs., Inc. v. InfoUSA, Inc., 587 F.3d 1324 (Fed. Cir. 2009) and Centricut, LLC v. Esab Grp., Inc., 390 F.3d 1361 (Fed. Cir. 2004)). . . . There is no discussion of thermodynamics or the mechanism that yields the claimed material’s heat retentive properties in the patent. Thus, given the patent and references’ general, easily understood language, this is not a case that requires expert explanation.

Slip Op.

Venue: The venue setup for this case was interesting.  It was originally filed in Oregon and then was transferred to California following T.C. Heartland.  Since the case was already far-along in the litigation process (post summary judgment), Judge Hernandez who handled the case in Oregon also got himself temporarily assigned to the case in California and ran the trial from there.  On appeal, Columbia argued that the transfer was improper because Seirus had waived its venue argument. However, the Federal Circuit found no problem — holding that the district court did not abuse its discretion in excusing Seirus’s waiver of its venue defense.

First Post-Samsung Design Patent Damages Verdict

by Dennis Crouch

In re Fought (Fed. Cir. 2019)

This is a nice short USPTO claim construction case. Heartland RV (Thor Indus.) filed its patent application back in 2012 claiming a movable-wall-structure for a travel trailer.  In the example given in the patent, the wall might divide the back “garage portion” of the trailer from the front “living quarters.”  The wall can then be adjusted according to the size of your ride.

Two pending claims:

1. A travel trailer having a first and second compartment therein separated by a wall assembly which is movable so as to alter the relative dimensions of the first and second compartments without altering the exterior appearance of the travel trailer.

2. A travel trailer having a front wall, rear wall, and two side walls with a first and a second compartment therein, those compartments being separated by a wall assembly, the wall assembly having a forward wall and at least one side member, the side member being located adjacent to and movable in parallel with respect to a side wall of the trailer, and the wall assembly being moved along the longitudinal length of the trailer by drive means positioned between the side member and the side wall.

The examiner rejected issued initial and final rejections in 2014 and 2015 respectively.  The PTAB then sided with the examiner in its 2018 decision — holding that the claims were anticipated by two old prior art references.  Claim 1 by U.S. Patent No. 4,049,311 (Dietrich); and Claim 2 by U.S. Patent No. 2,752,864 (McDougal).

The problem, is that neither prior art reference is directed to a “travel trailer” but rather to more conventional shipping compartments as shown below.

Although the are directed to a modified “travel trailer,” the PTAB gave no weight to that preamble term — finding that the broadest reasonable interpretation of the claims left that term as a mere non-limiting intended use.

On appeal, the Federal Circuit has reversed and remanded — holding that the preamble term is limiting because it serves as an antecedent basis for terms found in the claims.  The Federal Circuit also noted that a “travel trailer” is known in the industry as a particular type of towable RV — not simply an intended use of a trailer.

Probably the single most-popular class of towable RV is the Travel Trailer. Spanning 13 to 35 feet long, travel trailers are designed to be towed by cars, vans, and pickup trucks with only the addition of a frame or bumper mounted hitch. Single axles are common, but dual and even triple axles may be found on larger units to carry the load.

Quote from Woodall’s RV Buyer’s Guide.

On remand, the Board will now have to decide whether to move forward with an obviousness rejection sua sponte or send the case back to the examiner for review.

= = = =

The court noted two other claim construction tidbits:

PHOSITA: Claims are construed from the frame of reference of a person of ordinary skill in the art. As per its usual approach, the Board did not articulare the level of skill in the art that should be applied in this case.  On appeal, the Federal Circuit found no error with that approach. “Unless the patentee places the level of ordinary skill in the art in dispute and explains with particularity how the dispute would alter the outcome, neither the Board nor the examiner need articulate the level of ordinary skill in the art.”

PREAMBLE: Note the claim above is not written in the traditional form: [Preamble] comprising [Body].  Here, the applicant argued that the claim does not include a preamble at all because there is no transition phrase.  On appeal, the Federal Circuit quickly rejected that suggestion. “Though this claim does not use the typical claim language (comprising) which denotes the transition between the preamble and the body, the word “having” performs the same role here.”