Patent Litigation in the District of NJ After TC Heartland

New Jersey is a popular venue for filing patent infringement lawsuits. As the “Medicine Chest of the World,” comprising thousands of biopharmaceutical, biotechnology, medical technology, medical device and diagnostic companies, the District of New Jersey (D.N.J.) is the logical forum for many life science patent suits. On May 22, the Supreme Court decided TC Heartland v. Kraft Foods Group Brands, which fundamentally changed the patent venue landscape. 137 S. Ct. 1514 (2017). This article will discuss TC Heartland and its impact on litigation around the country, with a particular focus on the D.N.J.

The patent venue statute, 28 U.S.C. §1400(b), provides that patent infringement suits “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.” A defendant may challenge venue by moving to dismiss for improper venue under Federal Rule of Civil Procedure 12(b)(3), or by moving for a venue transfer in the “interest of justice” under 28 U.S.C. §1404(a) or §1406(a). A venue objection, however, must be “timely and sufficient.” 28 U.S.C. §1406(b).

In TC Heartland, the Supreme Court held that, in determining proper venue with respect to domestic corporations, “residence” in §1400(b) “refers only to the State of incorporation.” 137 S. Ct. at 1516–17. In so holding, the Supreme Court altered the patent venue rule previously established by VE Holding Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574 (Fed. Cir. 1990), that a corporation is deemed to reside anywhere in which it is subject to personal jurisdiction at the time the action is commenced. In VE Holding, the Federal Circuit held that the definition of venue in 28 U.S.C. §1391(c), the general venue statute, also applied to patent cases. 917 F.3d at 1584.

The Supreme Court based TC Heartland on its prior ruling in Fourco Glass Co. v. Transmirra Products Corp. , 335 U.S. 222 (1957), which held that “residence” in §1400(b) “refers only to the State of incorporation,” and on the reasoning that “§1391 [as amended in 2011] does not contain any indication that Congress intended to alter the meaning of §1400(b) as interpreted in Fourco .” 137 S. Ct. at 1520.

Immediately following TC Heartland, practitioners and scholars made numerous predictions, including expectations of a falloff of cases in the Eastern District of Texas and an uptick in the District of Delaware. Few predictions, however, discussed the D.N.J.

Overall, TC Heartland has not substantially changed the inflow or outflow of cases in the D.N.J. Given the state’s concentration of pharmaceutical, medical device and other life science companies, the D.N.J. has remained and should continue to be a popular patent venue. Our review of litigation statistics from Docket Navigatorbears this out: from Jan. 1, 2017, to May 22, 2017, approximately 4 percent of the 1,576 nationwide patent complaints were filed in the D.N.J. And from May 23, 2017, to Aug. 14, 2017, approximately 5 percent of the 831 nationwide patent complaints were filed in the D.N.J. Although the sample size is relatively small, the data, thus far, shows that new case activity since TC Heartland has not changed much in the D.N.J.

Notwithstanding, some parties have successfully moved their cases to the D.N.J. post-TC Heartland.

Kaldren v. PNY Technologies was filed in the Southern District of New York on May 15, 2017. Case No. 1:17-cv-3644-GHW. On May 24, 2017, after noting that the defendant was incorporated in Delaware with its principal place of business in New Jersey, the court entered an order directing the plaintiff to “describ[e] its views on the impact of TC Heartland on the choice of venue.” The plaintiff responded that the case belonged in the District of Delaware or the D.N.J. and filed a stipulation to transfer to the D.N.J., to which the defendant consented. The court transferred the action for convenience under 28 U.S.C. §1404, “declin[ing] to determine whether venue [was] improper.” The court reasoned that the interests of justice favored transferring the case to New Jersey because: (1) the plaintiff requested the transfer; (2) the defendant’s principal office was located in New Jersey; and (3) TC Heartland created uncertainty as to whether venue was proper in the Southern District of New York.

Tristar Products v. Novel Brands was filed in the District of Rhode Island on Feb. 1, 2017, by a plaintiff headquartered in New Jersey against a defendant also headquartered in New Jersey. Case No. 17-043-M-LDA. The defendant moved to dismiss for improper venue or, alternatively, for transfer to New Jersey. The court did not decide whether venue was improper, but granted the motion to transfer for convenience under §1404. Without mentioning TC Heartland (briefing on the motion concluded before TC Heartland, although the court’s opinion was issued after), the court found that the convenience of the parties and the interests of justice favored transferring the case to New Jersey because both parties were headquartered in New Jersey, and the acts leading to the action likely occurred in New Jersey.

While some parties have successfully transferred patent infringement actions to the D.N.J., others have failed.

Aralez v. Teva was filed in the Eastern District of Texas on Jan. 23, 2017. Case No. 2:17-CV-00071-JRG-RSP. On May 8, the defendant moved to transfer the action to New Jersey under §1404(a). On May 15, the defendant filed an answer and counterclaim, stating it did not contest venue. Then, in the wake of TC Heartland, on June 2, the defendant filed an amended answer, denying the venue allegations in the amended complaint and a motion to dismiss for improper venue under §1400(b). The magistrate judge’s report and recommendation (which was adopted by the district judge) noted that the improper venue defense had been waived because the defendant’s first answer did not include a §1404(b) venue objection. In so holding, the court reinforced its view that TC Heartland did not constitute a change of law excusing what would otherwise be considered waiver. But, see Westech Aerosol Corp. v. 3M Co., No. 17-5067 (W.D. Wash. June 21, 2017) (“TC Heartland abrogated approximately 27 years of patent law precedent.”).

Tinnus v. Telebrands Corp. was filed in the Eastern District of Texas on Jan. 26, 2016. Case No.6:16-CV-00033-RWS.On April 28—after the court issued a preliminary injunction, a claim construction opinion and a summary judgment opinion—the defendants filed an answer to the second amended complaint denying, for the first time, that venue was proper. On June 2, the defendants filed a motion to dismiss for improper venue or, alternatively, to transfer the case to the D.N.J. The magistrate judge recommended denying the motion, reasoning that “TC Heartland is not an intervening change of law” and venue defense had “been available … since 1957” under Fourco. The magistrate judge concluded that the defendants waived the improper venue defense through pleadings and conduct, noting that the case was 18 months old and three months from trial. The district judge has not yet ruled on the defendants’ objections to the magistrate judge’s findings.

As predicted, the District of Delaware and the Eastern District of Texas have been the districts most affected by TC Heartland. Before TC Heartland, the Eastern District of Texas was the preferred venue for patent lawsuits. That is no longer the case. Litigation statistics from Docket Navigator show that, from Jan. 1, 2017, to May 22, 2017, approximately 34 percent of patent complaints nationwide were filed in the Eastern District of Texas and 14 percent were filed in the District of Delaware. From May 23, 2017, to Aug. 14, 2017, approximately 15 percent of patent complaints were filed in the Eastern District of Texas, and 28 percent were filed in the District of Delaware. Id.; see also Figure 1 (summarizing statistics).

In reversing VE Holding, the Supreme Court changed the patent venue rule with wide-reaching implications. Parties must consider TC Heartland in determining where to file suit, whether to move to dismiss for improper venue, or whether to move to transfer venues. Because New Jersey is home to thousands of life science companies and federal judges with experience dealing with complicated life science matters, the D.N.J. is a logical forum for life science patent litigation and will continue to be one, even in a post-TC Heartland world.

The inflow of patent cases to Delaware is a development to watch. More U.S. corporations are incorporated in Delaware than in any other state, so it is easier to find venue proper under §1400(b) in Delaware after TC Heartland. This is the likely reason for the recent rise in patent suits in Delaware. Ultimately, TC Heartland is only a few months old, so its effects have yet to fully materialize. Only time will tell the extent to which TC Heartland changed the patent litigation landscape.

---

Reprinted with permission from the September 18, 2017 issue of the New Jersey Law Journal. © 2017 ALM Media Properties, LLC. Further duplication without permission is prohibited. All rights reserved. For information, contact 877-257-3382 or reprints@alm.com or visit www.almreprints.com.