Mark Lemley. Photo: Jason Doiy/ALM

Next week marks the one-year anniversary of the U.S. Supreme Court's TC Heartland v. Kraft Foods Group Brands decision on venue in patent infringement cases, and the U.S. Court of Appeals for the Federal Circuit has been working overtime to further flesh out the rules.

Although Chief Judge Sharon Prost warned last week that the court would prefer to decide venue issues after trial, the court's motions panel issued two precedential decisions granting mandamus petitions. In re ZTE, decided Monday, held that plaintiffs bear the burden of establishing that venue is proper. In In re BigCommerce, the court said companies may be sued only in the judicial district in which they're incorporated, not any judicial district within the state.

Both opinions were written by Judge Richard Linn, with Judges Jimmie Reyna and Todd Hughes concurring.

The Supreme Court ruled in TC Heartland that patent owners can sue for infringement only where the accused infringer is incorporated—or in any judicial district where it maintains a regular and established place of business. The decision overruled a Federal Circuit framework that had permitted venue virtually anywhere in the country. That resulted in some 40 percent of all patent cases being filed in the Eastern District of Texas, which is perceived as a plaintiff-friendly venue.

Patent owner American GNC Corp. argued that even under TC Heartland, it could bring its suit over GPS-related patents in the Eastern District because smartphone maker ZTE maintains a customer support center there. ZTE argued it merely contracted with a third party to provide support, and the call center was therefore not a “regular and established place of business.” U.S. Magistrate Judge Kimberly Priest Johnson found that ZTE had not met its burden or prove that venue was improper.

The Federal Circuit asked for supplemental briefing on who bears that burden. Alison Aubry Richards of Global IP Law Group argued for American GNC that the Federal Circuit should look to regional circuit law, as it does on motions to transfer. Most Fifth Circuit opinions have placed the burden on the party bringing such motions, she argued.

But Linn agreed with ZTE and its attorneys at McDermott Will & Emery that Federal Circuit law should govern because of the patent-specific statute for determining venue. Not that there was much Federal Circuit law to rely on.

“We have found no case in this court's 37-year history dealing with this question,” Linn noted. But he concluded that the burden should lie with the patent owner. “Such a holding best aligns with the weight of historical authority among the circuits and best furthers public policy,” Linn wrote.

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Under that new test, American GNC had not established that the call center is a regular and established place of business. “The magistrate judge did not consider whether ZTE USA itself possesses, owns, leases, or rents the office space for the call center or owns any of the equipment located there,” Linn wrote, remanding the case for further proceedings.

Charles McMahon, the partner who led McDermott's team, said in a written statement that ZTE is “a significant ruling that provides uniformity for venue disputes in all future U.S. patent cases and will assist companies sued in an improper venue to protect their rights.” McDermott's team included partners Michael Nadel, Jay Reiziss and Natalie Bennett, associate Brian Jones and paralegal Jodi Baker.

BigCommerce, meanwhile, turned on the part of the venue statute that deals with incorporation. BigCommerce is a software company incorporated in Austin, which is in the Western District of Texas. Patent owners Diem and Express Mobile sued in the Eastern District of Texas. U.S. District Judge Rodney Gilstrap OK'd the suits, pointing to language in TC Heartland that a company resides “in its state of incorporation for purposes of the patent venue statute.” That means the entire state, Gilstrap concluded.

Durie Tangri partner Mark Lemley argued that that issue wasn't before the court in TC Heartland because the case arose from Delaware, which spans a single judicial district.

Linn agreed with Lemley. Section 1400(b) says patent infringement suits “may be brought in the judicial district where the defendant resides,” the judge noted.

“A plain reading of 'the judicial district' speaks to venue in only one particular judicial district in the state,” Linn wrote. “This language is simply inconsistent with the understanding that a defendant resides in all districts in the state.”

Lemley said Tuesday he expects the ruling to have the biggest impact in Texas, where many companies are being targeted in districts where they're not incorporated. “It will also matter in California,” he said, “not because we will all end up in Sacramento, but because plaintiffs won't get the choice to sue in CD-Cal or SD-Cal if the company is up here [in Silicon Valley], and vice versa.”

Jonathan Stroud, chief IP counsel at Unified Patents, said the decision is especially important for small companies that haven't yet established places of business around the country. “Plenty of businesses are registered or have locations in west or central Texas or other parts of California or New York,” he said, and BigCommerce will limit where they can be sued.

Durie Tangri's Clement Roberts and Timothy Saulsbury assisted Lemley on the BigCommerce petition.