by Dennis Crouch
In re OATH HOLDINGS, INC. (Formerly Known as Yahoo Holdings, Inc.) (Fed. Cir. 2018)
The outcome of this case is simple: Oath doesn’t have to defend a patent infringement lawsuit in E.D.N.Y. because that location is an “improper venue.”
Under TC Heartland (2017), patent owners in patent cases now have a fairly limited set of options for filing infringement actions. In particular, a lawsuit against a domestic defendant must be filed either:
- Where the defendant resides (i.e., its state of incorporation)
- Where the defendant has a regular and established place of business (i.e., physical building).
TC Heartland falls directly in line with the prior supreme court decision in Fourco Glass (1957). However, during the interim, the Federal Circuit had expanded its definition of proper venue to include any court that has personal jurisdiction over the defendant. Thus, for someone who studies only Supreme Court law, TC Heartland was a continuation of an unchanged law. On the other hand, the case was a major shift for those of us whose gaze is directed to the Federal Circuit (and practical district court litigation). The Federal Circuit has identified the latter frame of reference as appropriate — holding that TC Heartland was a change in the law. In re Micron Technology, Inc., 875 F.3d 1091 (Fed. Cir. 2017). The Micron decision was important because it prompted district courts to revisit the venue question even if the issue was seemingly waived.
In its decision here, the Federal Circuit holds that Oath/Yahoo should not be considered to have waived the venue issue because it promptly raised the issue immediately following TC Heartland.
There is no dispute that venue in the Eastern District of New York in this case is contrary to § 1400(b). The only question is whether Oath waived or forfeited the right to have the case dismissed on that basis by waiting too long to invoke it. The district court answered yes to that question. The district court’s principal ground for doing so, however, rests on its failure to follow our directly controlling Micron precedent addressing the issue of waiver under Rule 12(g)(2) and (h)(1) as applied to TC Heartland’s rejection of this court’s earlier, longstanding VE Holding precedent. . . .
Micron answers the entire question of waiver under Rule 12(g)(2) and (h)(1) for purposes of this case: there was no such waiver. In what is nearly the only basis for the district court’s denial of Oath’s venue motion, the district court clearly erred in not following the Micron precedent giving that answer. That error warrants mandamus relief.
On remand, the district court is ordered to either dismiss the case or transfer it to a proper venue.
= = = =
One tricky aspect of this decision involves the question of “binding precedent.” The Federal Circuit’s patent law precedent is binding on all of the district courts with regard to patent law questions. However, the Federal Circuit relies upon the law of the various regional circuit courts of appeals when deciding non-patent issues such as general civil procedure. Here, although the question of proper venue is a “patent law” question, the patentee argued that the waiver analysis of Micron was an interpretation of First Circuit law and didn’t bind the E.D.N.Y. judge sitting in the Second Circuit. On appeal, the Federal Circuit rejected that analysis holding that “issues of waiver or forfeiture of patent-venue rights under § 1400(b) and § 1406(a) are likewise governed by our [Federal Circuit] law.” Thus, Micron controls all the district courts.
It is, in fact, “i.e.,” or is it “e.g.”? In other words, is venue only correct where there is a physical building and state of incorporation, or can venue be proper where there is no building but somehow still a regular and established place of business (somehow)?
I meant to write it the way that I did. Certainly state of incorporation is the meaning for where the corporation resides based upon the Supreme Court’s statements in TC Heartland. The court has held that neither a ‘virtual’ presence nor a home office are sufficient for a regular and established place of business.
Thanks. I do not know much about venue, so I was genuinely unsure as to whether the case law so limited venue.
It seems odd that a corporations’s “residence” does not include its headquarters. Even though the principal place of business is, by statute, its citizenship (along with state of incorporation) for diversity jurisdiction under 28 USC 1332.
“regular and established place of business” also must be “where the defendant has committed acts of infringement.” That might not include the headquarters.
Let’s say that a company (Wal-mart) is incorporated in Delaware, has its headquarters in Arkansas, and sold (allegedly) infringing products in California. It could be sued for patent infringement in Delaware and California but not Arkansas. An odd result.
Let’s face it: what’s really “odd” is that a person — oops, I meant a “company” — can be “incorporated” in a State where it doesn’t have any “headquarters” and where it doesn’t do any business.
Lacking a Federal basis of control, we are left with a state by state “discretion” as to how each state wants to entice those juristic persons into their domain.
Is this something that you think the Feds should displace and control?
When a company incorporates in a given state it is agreeing to get sued in that state.
Walmart has a lot more than just a headquarters office in Arkansas.
But his hypo posits only the presence of a headquarters, and that “only” would not be enough to merit being sued there.
Your answer, while perhaps accurate with the given example, is not directed to the point being presented.
If it helps, use a fictious company and apply only the conditions given.
Is “headquarters” a technical term?
I do not think that whether or not “headquarters” being a technical term matters to the hypo presented.
I am pretty sure that the definition of “headquarters” is relevant to the hypothetical (which isn’t that interesting, frankly, without the definition).
“Technical term” and “definition” are two different things.
Everything has a definition. Not everything is a technical term.
Maybe say something on point….
There are cases that use that term and my memory says there is some multi-part test.
I think, when Dennis wrote “home office”, he didn’t mean HQ but meant an office based in a room in one’s home (which might be the case for a person who acts as a local representative for several out-of-state companies, none of which wish to rent office space in that state).
I think in most instances, a company’s de facto headquarters would count as having a regular and established place of business.
“I think in most instances, a company’s de facto headquarters would count as having a regular and established place of business.”
That’s the conclusion to be proven, not assumed.
True. But the statute also requires that the “regular and established place of business” must be “where the defendant has committed acts of infringement.”
That might not be the headquarters, as my example shows.
BL, I think that we agree, and are just approaching that agreement from different angles…
Dennis,
According to the SDNY, sometimes a home office qualifies. See REGENLAB USA LLC v. ESTAR TECHNOLOGIES LTD. et al., S.D. New York (August 15, 2018) at section II, distinguishing In re Cray, 871 F.3d. at 1365.
Thanks Troubled! I have not read that case yet.
Troubled, is there discussion on distinguishing from tax-basis treatment?
For taxes, there is a definite (objective?) mechanism for determining “presence.” Does such match up with the “presence” required for patent venue? If not, why not?
One law firm analysis of that REGENLAB USA LLC v. ESTAR TECHNOLOGIES LTD. et al., S.D. New York (August 15, 2018) is that “The crux of the court’s [venue] reasoning seems to turn on the court’s recognition that because “ALL Eclipse employees work from home, [and presumably sell from home] home offices constitute a primary physical location for Eclipse’s business.” [emphasis supplied].
One other point. In Daimler AG v. Bauman (2014), the Supreme Court held that to assert general jurisdiction (for personal jurisdiction), it must be the state in which the corporation is “at home” — which it defined to mean either (a) the state of incorporation or (b) the state where the principal place of business is.
So a corporation is “at home” where its headquarters are for the purposes of jurisdiction, but it is not its “residence” for venue.
Bored Lawyer,
Not to put too fine a point on it, but your “(a)” and “(b)” are NOT necessarily the same as a location of headquarters.
It comes down to a nuance of “principal place of business” being where the “business” that interacts with infringers is, and that may not be at the location of the headquarters of a business.
What’s the legal definition of “headquarters”?
Why don’t you expend a little effort and contribute that piece of information?
Make sure that it does not vary from state to state though, as I am not aware of any Federal overarching and controlling law that may provide a legal definition that may constrain any such state-to-state variability.
I am not aware of any Federal overarching and controlling law that may provide a legal definition that may constrain any such state-to-state variability
Either am I. Which is why I thought the hypothetical wasn’t very interesting (nothing “odd” about “headquarters” having an effect or not on jurisdiction when the term has no relevant fixed meaning).
Is that the point that you were trying to make?
(serious question — that you want to dismiss the hypo based on some lack of “established legal definition” (or as a term of art), while not paying attention to the impact of the point itself?
As I noted, ALL terms have definitions, and this not being a term of art does not drop it out of having meaning and impact as a point being presented.
Quite in fact, of the term DOES vary from state to state, that makes the hypo even more interesting.
Of course, it may no longer fit within the confines of your script, but there is more (much more) than those confines.
Indeed. A corporate “headquarters” in some cases may be only the offices of a few top executive and financial officers and their staff in an office building in or near a major city [not designing, making or selling anything] while thousands of their employees making or selling the infringing product may be in a big principal place of business facility in a very different location, including the engineers or designers of the infringing product.
So…
The CAFC is stressing that the Supreme Court changed (that is, re-wrote) the patent law as opposed to merely correcting an interpretation thereof.
Did Congress explicitly share the (sole-sourced) power to write patent law in this particular instance (much like Congress did explicitly share power in 35 USC 283) – or does separation of powers concerns not matter much to the judicial branch?
In the case of patent venue, it was the Fed. Cir. that had held that the Specific patent venue statute, left on the books by Congress with no indication of any intent to overrule it, had been, in their opinion [contrary to normal statutory interpretation] overruled by a change in the General venue statute. The only thing unusual about the Sup. Ct. opinion was that it took them so many years to overrule that Fed. Cir. opinion – only after the unintended consequence of almost half of all patent cases ending up in rural D.C. district in which neither party had any regular or established business or witnesses.
I get what you are saying Paul, but the CAFC here is still saying something different.
The CAFC is taking the recent SC case as changing the law and not as you indicate, merely resetting the correct interpretation.
That’s a critical difference.
Indeed. The holding of the CAFC, before TC Heartland, was the traditional long arm analysis (non-patent) to determine venue. This sounds like the discretionary power of forum non conveniens has been stopped for the lower courts.
No, it is alive and well.
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