Affirmation of the Alien Venue Rule

Chief Judge Prost, writing for the Federal Circuit, held that HTC failed to establish that it had no adequate means of relief under the first element of the mandamus test. Id. at 1353. She reasoned that HTC could appeal the denial of the § 1406(a) improper-venue motion after final judgment, giving HTC an adequate remedy because it could win an order vacating the judgment and directing the remand of the action to the appropriate venue. Although this meant that HTC would be forced to litigate the case through final judgment before they could contest venue, that hardship alone was insufficient to justify the “extraordinary” nature of a writ of mandamus. Id.

Because mandamus requires a petitioner to satisfy all three elements, HTC's failure to establish that no adequate remedy existed should have been an independently sufficient basis to deny the petition. However, the Federal Circuit also found that HTC had failed to establish a clear and indisputable right to the issuance of the writ because the patent venue statute did not apply to foreign defendants.

The Federal Circuit noted that this same issue had been previously affirmed by the Supreme Court twice. First in 1894, when it held that the then-existing venue statute did not govern suits by citizens against foreign corporations, who could be sued “in any district in which valid service can be made upon the defendant.” In re Hohorst, 150 U.S. 653, 662 (1893). Then again in 1972, when it reaffirmed Hohorst despite the intervening enactment of 28 U.S.C. §1400(b). The Supreme Court's ruling intentionally avoided the creation of a venue gap for certain defendants, where a federal court has jurisdiction but no proper venue to exercise jurisdiction exists. See, Brunette Machine Works, Ltd. v. Kockum Industries, Inc., 406 U.S. 706, 709-10 (1972).

Using similar reasoning, the Federal Circuit rejected HTC's argument that Congress had abrogated Brunette by amending the venue statutes in 2011. The statute in question, the 2011 Federal Courts Jurisdiction and Venue Clarification Act, did not show a clear legislative intent to alter the established rule that venue laws do not protect foreign defendants. To hold otherwise would result in the creation of the same venue gap the Supreme Court previously warned against. Id. at 1355-57.

Moving under §1404(a) or §1406(a) or Both?

A practical consideration to be made at the district court level is whether to pursue a motion to transfer via 28 U.S.C. §1404(a) and/or §1406(a). The Federal Circuit cautioned defendants not to file petitions for writs of mandamus to redress denials of improper venue motions under §1406(a) because, in most cases, appeal after final judgment is the appropriate remedy. Id. at 1353.

However, the court also contrasted §1404(a) from §1406(a). Because the purpose of §1404(a) is to avoid inconvenience to the parties and witnesses, a post-judgment appeal would not be an adequate remedy for the denial of such a motion as it would necessitate the very inconvenience the statute was designed to avoid. Id. at 1352. Moreover, the denial of a §1404(a) motion itself would not be an adequate basis for appeal, as it would generally be considered a harmless error under 28 U.S.C. §2111 and Federal Rule of Civil Procedure 61. See, id. at 1353.

Here, although HTC moved to transfer under both 28 U.S.C. §1406(a) and §1404(a), once the district court found that venue was improper as to HTC America, but proper as to HTC Corporation, it resolved the motion as to both parties solely under §1406(a). The district court provided HTC Corporation an opportunity to renew its motion to transfer venue pursuant to §1404(a), which HTC filed on Jan. 3, 2018. But rather than wait for a ruling, HTC filed its petition for writ of mandamus during the pendency of this second motion based on the denial of its first motion. Thus, the Federal Circuit analyzed and denied HTC's petition in the context of a §1406(a) motion to transfer for improper venue. Had HTC based its petition on its second motion to transfer, which was decided on §1404(a) grounds, it may have had a better opportunity of satisfying the first element of the mandamus standard by arguing that a post-judgment appeal was not an adequate remedy.

Is It Possible to Successfully Pursue a Writ under §1406(a)?

The Federal Circuit held that mandamus review of improper-venue decisions is “generally inappropriate.” Id. at 1353. However, it did not completely foreclose the possibility of granting a writ on this basis, conceding that “there may be circumstances in which [an appeal] is inadequate.” Id. at 1354. Although In re HTC does not say what circumstances would satisfy an exception to this general rule, the Federal Circuit recently provided clarification in two writs based on denials of improper-venue motions under §1406(a).

A week after In re HTC, the Federal Circuit granted a writ of mandamus to a domestic defendant that was denied a §1406(a) motion to dismiss for improper venue. In re ZTE (USA) Inc., 890 F.3d 1008 (Fed. Cir. 2018). In a decision by Judge Linn, the Federal Circuit found that mandamus relief was appropriate to provide guidance on post-TC Heartland issues that were likely to resurface, namely: 1) whether Federal Circuit or regional circuit law governs the burden of proof for determining venue under §1400(b); and 2) whether that burden rests on the plaintiff or defendant.

A day later, the same Federal Circuit panel issued another decision finding that mandamus relief was appropriate to resolve the issue of whether a domestic corporation defendant is deemed to reside in every judicial district within its state of incorporation. In re BigCommerce, Inc., 890 F.3d 978 (Fed. Cir. 2018). Like it held in ZTE, the Federal Circuit found that the legal question in the petition was “basic” and would “inevitably be repeated.” Id. at 981.

Although HTC seemingly discouraged the filing of writs of mandamus to challenge venue determinations, the Federal Circuit quickly changed course and showed that it is still possible for domestic corporations to pursue a writ of mandamus based on the denial of a §1406(a) motion to transfer. The key is to frame the petition as including an unsettled legal question that is likely to repeatedly arise in future cases. Otherwise, as in HTC, a defendant will have to wait until final judgment in order to appeal venue and hope for a vacated judgment and remand to the appropriate venue. As a practical matter, winning an appeal and vacating a district court judgment based on a lack of venue will not send a case back to square one. Discovery will be over, issues will have been narrowed, and many of the preliminary rulings will remain unchanged when the case is assigned to a new judge in a new venue.

What Does HTC Corporation Mean for Domestic Corporations?

In light of ZTE and BigCommerce, there are few lessons domestic corporations can take away from HTC. Despite HTC's prohibitive language against granting §1406(a) writs of mandamus, ZTE and BigCommerce show that §1406(a) writs are still possible. Accordingly, domestic corporations should move to transfer under §1406(a) for improper venue and, in the alternative, under §1404(a) for forum non conveniens. Domestic corporations should also wait to petition for mandamus only after the district court has entered final rulings on both §1404(a) and §1406(a) motions. In HTC, the Federal Circuit only ruled on §1406(a) because HTC Corporation petitioned for writ while a renewed §1404(a) motion was still pending. Thus, by waiting to petition on both §1404(a) and §1406(a) grounds, domestic corporations may have a better chance of obtaining favorable mandamus review.

What Does HTC Corporation Mean for Foreign Corporations?

In re HTC definitively closed the door for foreign defendants trying to take advantage of the venue protections resulting from TC Heartland. Unless Congress specifically addresses application of federal venue law as applied to foreign corporations, it also means that future developments in general and special federal venue case law are unlikely to impact the proper venue analysis for foreign corporations (i.e., the alien venue rule).

Where does this leave foreign corporations? Unfortunately for them, in the wake of HTC, §1406(a) motions to transfer for improper venue are no longer viable for foreign corporations. Instead, foreign corporations may be best served by seeking to transfer under §1404(a) for forum non conveniens.

In cases involving foreign and domestic companies with a parent-subsidiary relationship who both anticipate they will be defendants, it may be advantageous for a potential foreign defendant to initiate litigation where its domestic counterpart is based. Otherwise, the foreign and domestic counterparts may find themselves defending separate suits in different jurisdictions. In HTC, the plaintiffs were able to successfully persuade the underlying district court to allow the case against HTC America to be dismissed without prejudice while permitting litigation against HTC Corporation to continue in the District of Delaware. HTC now faces the unenviable prospect of having to eventually defend against the same patent claims asserted against separate corporate entities in different jurisdictions. Depending on the case, that situation often will be equally unappealing to the plaintiff and the district court judges in separate jurisdictions trying a similar set of issues.

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Brian Kramer is a litigation partner in the Intellectual Property Group at Morrison & Foerster. He serves as the president of the boards of directors for both the Japan Society of San Diego and Tijuana and the Legal Aid Society of San Diego. Kevin T. Kwon is an associate in the Intellectual Property Group at Morrison & Foerster. He has litigated patent, trademark, and copyright infringement cases.