Updates In The Federal Circuit Following TC Heartland

by Husch Blackwell LLP
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This week, the Federal Circuit resolved three issues left in TC Heartland’s wake. TC Heartland held that 28 U.S.C. § 1400(b) uniquely governs venue in patent cases and is not coterminous with the scope of § 1391. The first prong of § 1400(b) creates venue in the judicial district where the defendant resides, which the Supreme Court held to be the state of incorporation for a domestic corporation. But, this begs the question: what about when the state has multiple judicial districts? Also, whose law governs burden under § 1400(b), and where does that burden lie? In the year after TC Heartland, district courts across the country split on these issues. In re ZTE (USA), No. 2018-113, addressed burden issues. In granting a writ of mandamus to the Eastern District of Texas to dismiss a case for improper venue, the court held that Federal Circuit law – not regional circuit law – governs which party bears the burden of persuasion in establishing proper venue under § 1400(b). ZTE further held that under Federal Circuit law, Plaintiffs bear the burden of establishing that venue is proper under § 1400(b).

Next, In re Bigcommerce, No. 2018-120, another mandamus case from the Eastern District of Texas, addressed the territorial bounds mapped by the phrase “judicial district” in the first prong § 1400(b). Unlike ZTE, the case was not remanded and the Court held that venue was clearly improper. In so finding, the Federal Circuit held that a domestic corporation incorporated in a state having multiple judicial districts “resides…only in the single judicial district within that state where it maintains a principal place of business, or failing that, the judicial district in which its registered office is located.” This meant that Bigcommerce, a Texas corporation headquartered in Austin, in the Western District of Texas, resides only in the Western District of Texas, where its principal place of business (headquarters) was located. If its headquarters had been out-of-state, venue would still lie in the Western District of Texas because Austin was also where Bigcommerce lists its registered office, as recorded in its corporate filings.

Bigcommerce does not impact Delaware corporations because Delaware is a one-district state, but entities incorporated in many other states will be impacted. ZTE results in the need for a Plaintiff to develop the record as early and as thoroughly as possible in support of venue and plead detailed facts to support its venue choice. Plaintiffs must be prepared to make their case for proper venue once challenged. Defendants seeking to avoid litigating in certain districts should assess their relationships with entities operating in that district. For example, a parent corporation is unlikely to be hauled into court in a district where a subsidiary operates, as long as the parent observes strict corporate formalities, doesn’t control representatives working there, and itself does not possess, rent, or own space or equipment there. Defendants should be aware that having signage at the business related to the defendant is also a consideration.

A prior TMT Industry Insider post also discussed implications following TC Heartland.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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