In Re ZTE

On May 14, 2018, the United States Court of Appeals for the Federal Circuit (“Federal Circuit”) issued its opinion in regard to the mandamus petition filed by ZTE.  The Federal Circuit held that Federal Circuit law determines the propriety of venue under 28 U.S.C. §1400(b) and that when a motion challenging venue is filed by the Defendant in a patent case, the Plaintiff bears the burden of establishing proper venue.

In February 2017, American GNC (“GNC”) filed a complaint against ZTE (USA) Inc. (“ZTE”) in the U.S. District Court for the Eastern District of Texas (“district court”) alleging infringement of its patents.  ZTE filed a motion to dismiss for improper venue under 28 U.S.C §1406 and §1400(b). Venue was transferred to the Sherman Division of the district court, where the new magistrate judge denied ZTE”™s motion to dismiss for improper venue.  The magistrate judge concluded that ZTE failed to satisfy the burden of proof.  ZTE then filed a mandamus petition in the Federal Circuit.

The Federal Circuit first determined whether granting the mandamus petition was appropriate.  A party seeking a writ of mandamus bears the burden of demonstrating to the court that is has no adequate alternative means to obtain the desired relief and that the right to issuance of the writ is clear and undisputable.  However, a court has complete discretion when granting a mandamus petition and may grant a petition to decide basic and undecided questions. The Federal Circuit stated ZTE presented such basic and undecided issues relating to venue under §1400(b), created in the wake of TC Heartland, and granted the mandamus petition.

First, the Federal Circuit determined whether Federal Circuit or regional circuit law governs the burden of persuasion on the propriety of venue under §1400(b).  While the Federal Circuit generally differs from regional circuit procedural law, Federal Circuit law applies to issues related to substantive matters that are unique to the Federal Circuit.  The Federal Circuit echoed the Supreme Court”™s finding in TC Heartland that “[Congress] ”˜placed patent infringement cases in a class by themselves, outside the scope of general venue legislation.”™”  The Federal Circuit stated that the issue of venue under §1400(b) is an issue unique to patent law, and therefore, is governed by Federal Circuit law.  Additionally, the Federal Circuit noted that because all patent infringement appeals implicating §1400(b) would be brought before the Federal Circuit, adopting Federal Circuit law would help promote the Federal Circuit”™s “mandate to achieve national uniformity in the field of patent law.”  Therefore, the Federal Circuit concluded that Federal Circuit law governs the burden of persuasion on the propriety of venue under §1400(b).

The Federal Circuit next determined which party bears the burden of establishing proper venue.  However, the Federal Circuit, in its 37-year history, had not previously considered the issue.  Consequentially, looking to regional circuit court precedent as persuasive authority, the Federal Circuit found the regional circuit”™s history of uniformly placing the burden to show proper venue in a patent case on the Plaintiff following a motion by the Defendant challenging venue as being appropriate.  In further agreement with regional circuit court precedent, the Federal Circuit found restricting venue by placing the burden of establishing proper venue on the Plaintiff supported the intended purpose of §1400(b).  Ultimately, the Federal Circuit held that, upon a Defendant”™s motion challenging venue in a patent case, the Plaintiff bears the burden of establishing proper venue

Subsequently, the Federal Circuit, in accordance with its analysis of §1400(b), determined whether the district court properly denied ZTE”™s motion to dismiss. Although the Federal Circuit determined the magistrate judge properly concluded that ZTE failed to meet its burden of proving improper venue, ZTE improperly carried the burden of proof.  The Federal Circuit vacated the order to dismiss ZTE”™s motion to dismiss for improper venue and remanded the case to the district court to reconsider ZTE”™s complaint of improper venue with the burden of proof placed on GNC.