TC Heartland and improper venue waiver in patent infringement lawsuits
The dust has settled on the Supreme Court’s May 2017 TC Heartland decision that a domestic corporation “resides” only in the state of incorporation under the patent venue statute—28 U.S.C. § 1400(b). Yet despite this clarity, a new issue has emerged: If a defendant failed to raise the defense of improper venue in district court because it was not available before TC Heartland, did they inadvertently waive it?
Abrogating the Federal Circuit’s intervening decision in VE Holding Corp. v. Johnson Gas Appliance Co., the Court confirmed that the decision in Fourco Glass Co. v. Transmirra Prod. Corp unambiguously defined the term sixty years earlier and that Congress’s subsequent amendments to the general venue statute, 28 U.S.C. § 1391, did not alter that meaning or ratify the Federal Circuit’s interpretation.
So, if a defendant failed to raise the defense of improper venue in district court because it was not available before TC Heartland, did they inadvertently waive it? Under Federal Rules of Civil Procedure 12(h)(1) and (g)(2), a party waives a defense that it failed to timely raise unless that defense was not previously “available” to that party. Because understandings of “available” differ, a defendant may find itself in the curious position of having unknowingly waived a venue defense.
A number of district courts have addressed this issue and arrived at opposite outcomes. Some have deemed such a failure to result in waiver—finding that the Supreme Court never overruled the Fourco decision. For these courts, TC Heartland did not amount to an intervening change in the law, and the defendants waived the improper venue defense by not raising it. Other courts have acknowledged that, for nearly three decades, practice conformed to the Federal Circuit’s broader interpretation in VE Holding, such that “resides” was defined by the general venue statute and was proper where there was personal jurisdiction. For these courts, TC Heartland was an intervening change in the law and the defense to improper venue was not available until TC Heartland.
Until recently, the U.S. District Court for the District of Minnesota had yet to decide between these two understandings. On August 4, 2017, the district court of Minnesota opted for the latter understanding—that TC Heartland was indeed an intervening change in the law—in its Cutsforth and Valspar decisions. Cutsforth, Inc. v. LEMM Liquidating Co., LLC, No. 12-CV-1200 (SRN/LIB), 2017 WL 3381816 (D. Minn. Aug. 4, 2017); Valspar Corp. v. PPG Indus., Inc., No. 16-CV-1429 (SRN/SER), 2017 WL 3382063 (D. Minn. Aug. 4, 2017). In both cases, the district court noted that, if defendants had attempted to raise the defense of improper venue before TC Heartland and argued that VE Holding was not binding, they would not have been successful. The court said: “It is illogical and unfair to argue that [defendant] erred by not making an argument that both this Court and the parties knew would have been rejected—just as it had consistently been rejected around the country for a quarter of a century.” At least in the district court for the district of Minnesota, defendants under similar circumstances have two cases standing against waiver of the improper venue defense. Whether a change of venue will be granted on that basis, however, is still within the discretion of the district court.