On May 14, 2018, the United States Court of Appeals for the Federal Circuit, In re: ZTE (USA) Inc., No. 2018-113, held that Federal circuit law governs the burden of proof for venue challenges under 28 U.S.C. § 1400(b) and that the burden of proof rests on the plaintiff to demonstrate proper venue upon a defendant’s motion to dismiss for lack of venue. Accordingly, the Federal Circuit granted defendant ZTE USA’s petition for mandamus and vacated an order from the United States District Court for the Eastern District of Texas denying ZTE USA’s motion to dismiss for lack of venue.
In a May 10, 2018 ruling, discussed earlier on this blog, Magistrate Judge Payne affirmed the jury’s willfulness finding largely on the ground that TCL did not proffer any evidence that it held a subjective, good faith belief that it did not infringe the patent-in-suit or that the patent was invalid. The fact that TCL filed over a dozen petitions for inter partes review of the asserted patents did not mean, as a matter of law, that TCL held such a subjective, good faith belief. The ruling demonstrates the importance, post-Halo, of alleged infringers performing their own investigation of allegations against them – mere pleadings taking non-infringement or invalidity positions may not suffice to defeat a willfulness allegation. Continue Reading Willfulness Finding in EDTX Ruling in <i>TCL v. Ericsson</i> Illustrates the Risk to Accused Infringers of Failing to Investigate Allegations
On May 10, 2018, Magistrate Judge Payne reconsidered his previous March 2018 order which had vacated a jury award, and granted plaintiff Ericsson’s motion for reconsideration. The May ruling makes clear that the accused infringer bears the burden of production for royalty-stacking and other mitigatory arguments on damages. Whereas the March ruling excluded Ericsson’s damages expert for failing to account properly for the royalty stack on the accused products that his damages theory implied, the May ruling scrutinized the record and found that TCL had failed to submit any evidence into the record that would support even a jury instruction on royalty stacking. The decision underscores the importance of developing an affirmative record in support of each element of a damages theory or counter-theory.
The ruling also stands in stark relief to Judge Selna’s 2017 ruling in the Central District of California case between the parties. There, Judge Selna determined that approximately $20 million would represent a fair, reasonable, and non-discriminatory (FRAND) royalty for TCL’s infringement of Ericsson’s worldwide portfolio of patents declared essential to various telecommunications standards (SEPs) – thousands of patents that, the parties agreed, represented a significant share of the value of the technology in those standards.
On March 20, 2018, the public version of Eastern District of Texas Magistrate Judge Roy Payne’s March 7, 2018 order tossing a $75 million jury verdict obtained by Ericsson against TCL Communication was released. Ericsson Inc., et al, v. TCL Communication Technology Holdings, Ltd., et al, Case No. 2:15-cv-00011-RSP, Doc. No. 460 (redacted memorandum opinion and order) (E.D. Tex. March 7, 2018) (“Order”). Judge Payne’s order sheds important light on the damages analysis for infringement of patents covering features of smartphone technology and potentially provides lessons to future litigants seeking damages for smartphone innovations.
After a jury verdict finding infringement, Ericsson also won a damages verdict of $75M due to TCL’s ongoing and willful infringement of U.S. Patent No. 7,149,510 (“the ’510 patent”). Ericsson contended that the ’510 patent covers smartphone functionality that allows a user to grant or deny access to native phone functionality to a third-party application, which is a standard feature in all Android smartphones. After trial, TCL moved for judgment as a matter of law on infringement and damages, or in the alternative new trials. Judge Payne indicated that he was going to uphold the infringement verdict, but ordered a new trial on damages. Order at 1.
Further to our ongoing coverage of the post-TC Heartland patent litigation landscape, a pair of recent and interesting cases from Texas and Delaware further evolved this important venue-related jurisprudence.
On November 22, 2017, in Intellectual Ventures II LLC v. FedEx Corp. et al., Case Number 2:16-cv-00980 (E.D. TX Nov. 22, 2017), Judge Rodney Gilstrap denied defendants’ motion to dismiss for improper venue due to their conduct in view of the Federal Circuit’s recent decision in In re Micron, which determined that TC Heartland was a change in the law, potentially reviving venue-based transfer motions previously waived. (We previously covered the In re Micron case here.) Defendants sought to dismiss the case for improper venue a few days after the denial of their IPR petitions. After they participated actively in litigation for months, the court did not take kindly to defendants’ motion. Citing In re Micron, the court reasoned that “defendants who take a ‘tactical wait-and-see’ approach in objecting to venue present ‘an obvious starting point for a claim of forfeiture.’” Further, the court noted that prior to the TC Heartland decision, defendants sought to transfer the case to the Western District of Tennessee under § 1404 rather than § 1406. Judge Gilstrap noted that this reliance on § 1404 was important because that statute “is premised on venue being proper in the transferor court whereas a motion under § 1406 reflects an objection to the current venue as being proper.” Accordingly, the court concluded that defendants’ waived their venue objection based on their own conduct, the judicial resources already expended, and the prejudice to plaintiff in reopening a dormant venue dispute “simply because it has become convenient for Defendants to litigate the issue now.” Continue Reading Lower Courts Continue to Grapple with Venue in the Wake of In re Micron and In re Cray
The United States Supreme Court decided earlier this year that a 1957 opinion is still valid and still limits venue choices for patent infringement actions under 28 U.S.C. § 1400. See TC Heartland LLC v. Kraft Foods Group Brands LLC, 581 U.S. ___ (2017) (citing Fourco Glass Co. v. Transmirra Products Corp., 353 U.S. 222, 226 (1957)). In its extensively-covered TC Heartland decision issued in May, the Court held that “[a]s applied to domestic corporations, ‘reside[nce]’ in § 1400(b) refers only to the State of incorporation,” where the accused infringer has a “regular and established place of business” in the venue. While framed as merely confirmation of precedent from the 1950s, many practitioners and commentators viewed this decision as a dramatic change in the patent litigation landscape.
Since TC Heartland came down, lower courts have applied the new paradigm in differing ways. As trends have developed in recent months, we thought it useful to provide a sampling of the various approaches to venue issues post-TC Heartland. These issues include, for example, whether defendants who did not contest venue prior to the TC Heartland decision waived the defense of improper venue because the case was—or was not—an “intervening change” in the law, and how to assess whether a defendant has regular and established place of business in a particular venue.
In a move that could drastically change the patent law landscape, the United States Supreme Court recently granted certiorari in Oil States Energy Services LLC v. Greene’s Energy Group LLC, No. 16-712, to answer the question whether the inter partes review (IPR) process violates the U.S. Constitution by “extinguishing private property rights through a non-Article III forum without a jury.”
In 2001, Oil States Energy Services LLC (“Oil States”) was granted U.S. Patent No. 6,179,053 for a lockdown mechanism to ensure a mandrel is locked in an operative position during fracking. Oil States sued Greene’s Energy Group LLC (“Greene’s Energy”) in the Eastern District of Texas in 2012 for infringing this patent, and in turn, Greene’s Energy petitioned the United States Patent and Trademark Office (USPTO) to institute an IPR on the patent. This petition was granted. After the proceedings, the Patent Trial and Appeal Board (PTAB), the administrative body of the USPTO that handles IPRs, concluded the challenged patent claims were invalid. Oil States appealed to the Federal Circuit, which affirmed the decision, and Oil States then petitioned the Supreme Court for certiorari.
The U.S. Supreme Court announced its ruling in TC Heartland v. Kraft Foods Group Brands LLC on May 22, 2017, a patent infringement case that has garnered national attention for its implications on venue. This case originated with a motion to transfer an action filed in the District of Delaware to the Southern District of Indiana, where the Defendant accused of patent infringement is headquartered. However, the national attention has focused on the possibility that a significant amount of other patent litigation may now shift to the District of Delaware. The U.S. Supreme Court granted certiorari at the end of last year and heard oral arguments in March to address the question of “where proper venue lies for a patent infringement lawsuit brought against a domestic corporation.” The Court has now provided a response to this key question, although a few issues still remain.
On Monday, March 27, 2017, the U.S. Supreme Court heard oral argument in TC Heartland v. Kraft Foods Group Brands LLC, a case that could have a profound impact on where patent infringement cases may be litigated.
Although this case has focused a lot of attention on the Eastern District of Texas – a hotbed of patent litigation – it wasn’t even filed in that district. TC Heartland moved to transfer a patent infringement action that Kraft Foods filed in the District of Delaware (a distant second to the Eastern District of Texas in terms of the volume of patent litigation) to the Southern District of Indiana, where TC Heartland is headquartered. After that motion was denied, TC Heartland appealed to the Federal Circuit, arguing that the patent venue statute (28 U.S.C. §1400(b)), not the general venue statute (§1391(c)), sets forth the requirements for venue in patent cases, a position that would limit the venues available to plaintiffs in most infringement actions. In denying TC Heartland’s petition, the Federal Circuit reaffirmed its long-standing view that patent suits may be filed in any judicial district in which the defendant sells an allegedly infringing product. But the U.S. Supreme Court granted certiorari on the appeal, perhaps signaling the Court’s willingness to overturn almost 30 years of practice.
The New Year brings excitement and anticipation of changes for the best. Some of the pending patent cases provide us with ample opportunity to expect something new and, if not always very desirable to everybody, at least different. In this post, we highlight several cases that present interesting issues and that we anticipate may provide for new and important developments in the patent law this year.