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Boston Scientific Corp. v. Cook Group Inc.

United States District Court, D. Delaware

September 11, 2017

BOSTON SCIENTIFIC CORPORATION and BOSTON SCIENTIFIC SCIMED, INC., Plaintiffs,
v.
COOK GROUP INCORPORATED and COOK MEDICAL LLC, Defendants.

          Karen L. Pascale and Pilar G. Kraman, YOUNG CONAWAY STARGATT & TAYLOR, Wilmington, DE Matthew M. Wolf, Edward Han, Marc A. Cohn, Amy DeWitt, Nicholas Nyemah, Patrick Reidy, and Tara Williamson, ARNOLD & PORTER KAYE SCHOLER LLP, Washington, DC Assad H. Rajani, ARNOLD & PORTER KAYE SCHOLER LLP, Palo Alto, CA Ryan Nishimoto and Marty Koresawa, ARNOLD & PORTER KAY SCHOLER LLP, Los Angeles, CA Attorneys for Plaintiffs.

          David E. Moore, Bindu A. Palapura, and Stephanie E. O'Byrne, POTTER ANDERSON & CORROON LLP, Wilmington, DE Dominic P. Zanfardino, Bradley G. Lane, Jeff Nichols, Jason W. Schigelone, James M. Oehler, Andrew S. McElligott, David L. Bernard, and Andrea L. Shoffstall, BRINKS GILSON & LIONE, Chicago, IL Attorneys for Defendants.

          OPINION

          STARK U.S. DISTRICT JUDGE

         Presently before the Court is Defendants Cook Group Incorporated ("CGI") and Cook Medical LLC's ("Cook Medical") (collectively, "Defendants" or "Cook") motion to dismiss for improper venue or, alternatively, to transfer venue in light of the Supreme Court's decision in TC Heartland LLC v. Kraft Food Group Brands LLC, 137 S.Ct. 1514 (2017). (D.I. 282)

         It is undisputed that after TC Heartland, which held that a corporate defendant "resides" only in its state of incorporation for purposes of determining where venue is proper in a patent case, see 28 U.S.C. § 1400(b), Defendants, who are not Delaware corporations, can no longer be said to "reside" in Delaware. TC Heartland did not, however, address the second prong of § 1400(b), which makes venue proper in a district "where the defendant has committed acts of infringement and has a regular and established place of business." After reviewing thorough briefing and hearing oral argument, the Court finds that Defendants do not have a "regular and established place of business" in Delaware. Therefore, the Court concludes that venue is improper in Delaware for this action. Accordingly, the Court will grant Defendants' motion and transfer this case to the United States District Court for the Southern District of Indiana, Indianapolis Division.

         I. BACKGROUND

         This is a patent infringement action brought by Plaintiffs Boston Scientific Corporation ("BSC") and Boston Scientific SciMed, Inc. ("BSSI") (collectively, "Plaintiffs" or "Boston Scientific"), alleging that Defendants infringe U.S. Patent Nos. 8, 685, 048; 8, 709, 027; 8, 974, 371; and 9, 271, 731, which generally describe and claim a hemostatic clip apparatus and methods for using such clip, for example, to stop gastrointestinal bleeding. (D.I. 19 at ¶¶ 1, 10)

         BSC is a Delaware corporation with its principal place of business in Marlborough, Massachusetts. (D.I. 19 at ¶ 2) It develops, manufactures, and supplies medical devices, including endoscopic products for the treatment of diseases of the digestive system, such as its Resolution™ Clip. (Id. at ¶¶ 2, 10) BSSI is a Minnesota corporation with its principal place of business in Maple Grove, Minnesota. (Id. at ¶ 3) A wholly-owned subsidiary of BSC, BSSI develops and manufactures endoscopic products, including hemostatic clips distributed by BSC. (Id.) BSSI is the owner by assignment of the patents-in-suit. (Id.)

         CGI is an Indiana corporation with its principal place of business in Bloomington, Indiana. (Id. at ¶ 4) It is alleged to be a major competitor of Plaintiffs in the endoscopic hemostatic clip market. (Id. at ¶ 15) Cook Medical is an Indiana limited liability company that also has its principal place of business in Bloomington. (Id. at ¶ 5) It, too, is alleged to be a major competitor of Plaintiffs in the endoscopic hemostatic clip market, and it has sold the Instinct™ Endoscopic Hemoclip since at least 2013. (Id. at ¶ 15; D.I. 52 at 4)

         Plaintiffs initiated this action on October 27, 2015, alleging that Defendants infringed three of the patents-in-suit. (D.I. 1) On March 9, 2016, Plaintiffs filed an amended and supplemental complaint for infringement as to all four patents. (D.I. 19) On July 15, 2016, Defendants filed an amended answer and counterclaims seeking declaratory judgment of noninfringement and invalidity of each of the asserted patents. (D.I. 52 at 15-17) Then, on December 19, 2016, Defendants filed a motion to stay pending inter partes reviews ("IPR"). (D.I. 74) That motion was initially denied without prejudice to renew at a time after the United States Patent and Trademark Office's Patent Trial and Appeal Board ("PTAB") decided whether to institute review on the IPR petitions at issue. After the PTAB's institution of IPR proceedings on many of the asserted claims, Defendants renewed their motion to stay on May 22, 2017. (D.I. 254) On August 16, 2017, the Court granted the motion to stay but excluded from the stay, inter alia, any efforts necessary for resolution of the instant motion. (D.I. 304 at 22)

         In the meantime, on April 28, 2017, Defendants filed a motion for leave to file an amended pleading, seeking to add a defense and counterclaim of inequitable conduct. (D.I. 218) After that motion was denied without prejudice on June 2, 2017 (D.I. 268), Defendants filed a renewed motion for leave to file an amended pleading on June 9, 2017 (D.I. 274). In addition to the inequitable conduct defense and counterclaim, this latest proposed amended pleading seeks to plead improper venue in light of the Supreme Court's decision in TC Heartland, which was issued on May 22, 2017. (Id.)[1]

         Defendants filed their improper venue motion on June 22, 2017, seeking dismissal or, in the alternative, transfer of this action to the Southern District of Indiana, pursuant to Federal Rule of Civil Procedure 12(b)(3) and 28 U.S.C. § 1406. (D.I. 282) They contend that venue is not proper under either prong of § 1400(b). (Id.) Briefing on the motion was initially complete as of July 27, 2017 (see D.I. 283, 296, 298), although supplemental submissions have been filed (D.I. 307, 310, 312). The Court heard oral argument on August 24, 2017. (See Transcript ("Tr."))[2]

         II. LEGAL STANDARDS

         Generally, "venue provisions are designed, not to keep suits out of the federal courts, but merely to allocate suits to the most appropriate or convenient federal forum." Brunette Mach. Works, Ltd. v. Kockum Indus., Inc., 406 U.S. 706, 710 (1972). Rule 12(b)(3) authorizes a party to move to dismiss a lawsuit for improper venue. When such a motion is filed, the Court must determine whether venue is proper in accordance with the applicable statutes. See Albright v. W.L. Gore&Assocs., Inc., 2002 WL 1765340, at *3 (D. Del. July 31, 2002). Venue in apatent infringement action is governed solely and exclusively by the patent venue statute, 28 U.S.C. § 1400(b). See TC Heartland, 137 S.Ct. at 1516. The general venue statute, 28 U.S.C. § 1391(c), does not have any application in a patent case. See Id. at 1521.

         If the Court grants a Rule 12(b)(3) motion based on improper venue, the Court "shall dismiss, or if it be in the interest of justice, transfer such case to any district or division in which it could have been brought." 28 U.S.C. § 1406(a).[3]

         Generally, "it is not necessary for the plaintiff to include allegations in his complaint showing that venue is proper." Great W. Mining & Mineral Co. v. ADR Options, Inc., 434 F.App'x 83, 86-87 (3d Cir. 2011). Hence, when confronted with a motion to dismiss for improper venue, the Court may consider both the complaint and evidence outside the complaint. See 14D Wright & Miller, Federal Practice & Procedure § 3826 (4th ed. 2017). The Court will accept any venue-related allegations in the complaint as true, unless those allegations are contradicted by the defendant's affidavits. See Bockman v. First Am. Mktg. Corp., 459 F.App'x 157, 158 n.l (3d Cir. 2012); In re First Solar, Inc. Derivative Litig., 2013 WL 817132, at *2 (D. Del. Mar. 4, 2013). In addition, the Court may consider affidavits submitted by the plaintiff. See Bookman, 459 F.App'x at 161 (affirming District Court's dismissal of complaint "because Defendants satisfied their burden of showing improper venue by offering evidence that the wrongful acts alleged in the Complaint did not occur in Pennsylvania, and Plaintiffs failed to rebut that evidence").

         Courts are not uniform in their views as to which party bears the burden of proof with respect to venue. Some hold that a plaintiff must prove that venue is proper in its chosen district, while others hold instead that a defendant must prove that such district is an improper venue. See 14D Wright & Miller, Federal Practice & Procedure § 3826 (4th ed. 2017) ("There are many cases - predominantly, but not exclusively, from the Third and Fifth Circuits - holding that the burden is on the objecting defendant to establish that venue is improper, because venue rules are for the convenience and benefit of the defendant."). At present, it appears the majority view is that "when the defendant has made a proper objection, the burden is on the plaintiff to establish that the chosen district is a proper venue." Id. Notably, however, the Court of Appeals for the Third Circuit - the Circuit in which this District is located - has expressly held that the moving party has the burden of proving that venue is improper. See Myers v. Am. Dental Ass 'n, 695 F.2d 716, 724 (3d Cir. 1982) ("[O]n a motion for dismissal for improper venue under Rule 12 the movant has the burden of proving the affirmative defense asserted by it."); see also Great W. Mining, 434 F.App'x at 87 ("Because improper venue is an affirmative defense, the burden of proving lack of proper venue remains - at all times - with the defendant.").

         While the parties here are in agreement as to what the Third Circuit has held with respect to the burden on venue motions, they disagree as to whether Third Circuit law governs the pending motion. Plaintiffs contend that Third Circuit law applies, while Defendants insist that, rather, the Court must apply the law of the Court of Appeals for the Federal Circuit. Notably, however, Defendants concede that there is no Federal Circuit precedent as to either (i) whether Federal Circuit law controls a motion to dismiss for improper venue, or (ii) which party bears the burden of proof on such a motion.

         Defendants do cite to Hoover Group, Inc. v. Custom Metalcraft, Inc., 84 F.3d 1408 (Fed. Cir. 1996), which observed that "[v]enue is based on the facts alleged in the well-pleaded complaint, " id. at 1410 (citing Dody v. Brown, 659 F.Supp. 541, 544 n.2 (W.D. Mo. 1987); McGhan v. F.C. Hayer Co., 84 F.Supp. 540, 541 (D. Minn. 1949)). But Hoover does not purport to answer the questions this Court faces now. In Hoover, the Federal Circuit did not make clear whether it was applying Federal Circuit law or regional-circuit law.[4] Nor did Hoover make any statement as to which party bears the burden of proof on venue issues. Thus, there appears to be no binding Federal Circuit decision on these points.

         The Federal Circuit, when reviewing a district court's decision, applies the law of the regional circuit where that district court sits for non-patent issues but applies its own law for issues of substantive patent law. See In re Queen's Univ. at Kingston, 820 F.3d 1287, 1290 (Fed. Cir. 2016). Thus, to determine whether Federal Circuit law controls which party has the burden here, the Court must examine whether the issue is one that is unique to patent law.

         Procedural matters generally are not considered to be unique to patent law. See Versata Software, Inc. v. Callidus Software, Inc., 780 F.3d 1134, 1136 (Fed. Cir. 2015); Bd. of Trs. of Leland Stanford Junior Univ. v. Roche Molecular Sys., Inc., 583 F.3d 832, 840 (Fed. Cir. 2009). Still, "a procedural issue that is not itself a substantive patent law issue is nonetheless governed by Federal Circuit law if the issue pertains to patent law, if it bears an essential relationship to matters committed to [the Federal Circuit's] exclusive control by statute, or if it clearly implicates the jurisprudential responsibilities of [the Federal Circuit] in a field within its exclusive jurisdiction." Midwest Indus., Inc. v. Karavan Trailers, Inc., 175 F.3d 1356, 1359 (Fed. Cir. 1999) (internal citations, alterations, and quotation marks omitted).

         In the Court's view, the issue of which party bears the burden of proof on a venue challenge is a procedural, non-patent issue controlled by the law of the regional circuit. Such a challenge must comply with, and is brought pursuant to, the Federal Rules of Civil Procedure. By operation of the Federal Rules of Civil Procedure, the venue challenge must be brought in a responsive pleading or as a separate motion under Rule 12(b)(3) - and the burden-of-proof allocation is properly viewed as simply another procedural aspect of a venue dispute. A motion for improper venue under Rule 12(b)(3) is akin to other motions authorized by the Federal Rules of Civil Procedure, such as Rule 12(b)(6) motions to dismiss for failure to state a claim and motions for judgment as a matter of law. The procedural aspects of these types of motions are controlled by regional-circuit law. See K-Tech Telecomms., Inc. v. Time Warner Cable, Inc., 714 F.3d 1277, 1282 (Fed. Cir. 2013) ("Because it raises a purely procedural issue, an appeal from an order granting a motion to dismiss for failure to state a claim upon which relief can be granted is reviewed under the applicable law of the regional circuit."); Finjan, Inc. v. Secure Computing Corp., 626 F.3d 1197, 1202 (Fed. Cir. 2010) (reviewing "denial of post-trial motions for JMOL and new trial under regional circuit law").

         That venue motions are procedural - and therefore governed by the law of the regional circuit - is true even though the substantive questions at issue may be controlled exclusively by Federal Circuit law. See, e.g., In re TLICommc 'ns LLC Patent Litig., 823 F.3d 607, 610 (Fed. Cir. 2016) (applying "regional circuit law to the review of motions to dismiss for failure to state a claim under Rule 12(b)(6)" on issue of whether Rule 12's plausibility standard had been met, even where motion to dismiss was based on purported failure of patentee to claim patent-eligible subject matter under 35 U.S.C. § 101). Hence, while the substance of a venue challenge in a patent case will turn on § 1400(b), subject matter that is controlled by Federal Circuit law, the Federal Rules - as opposed to a patent-unique statute - provide the procedural vehicle for such a challenge.[5] Cf. Atlas IP, LLC v. Medtronic, Inc., 809 F.3d 599, 6.04-05 (Fed. Cir. 2015) (applying Federal Circuit law to issues of finality because applicable statute, 28 U.S.C. § 1295(a)(1), is unique to patent law).

         Accordingly, the Court will apply Third Circuit law to the procedural aspects of Defendants' improper venue motion, which places the burden on Defendants to prove improper venue. See, e.g., Koninklijke Philips N. V. v. ASUSTeK Comput. Inc., 2017 WL 3055517, at *2 (D. Del. July 19, 2017); Graphics Props. Holdings Inc. v. Asus Comput. Int'l, Inc., 964 F.Supp.2d 320, 324 (D. Del. 2013). However, all issues of interpretation of § 1400(b), a patent-specific statute, are controlled by Federal Circuit law. See Midwest Indus., 175 F.3d at 1359; see also Tr. at 16 (Defendants agreeing on this point); Tr. at 61 (Plaintiffs agreeing on this point).[6] Therefore, the Court will look to Federal Circuit precedent to understand and apply the provisions of § 1400(b). See In re Cordis Corp., 769 F.2d 733, 737 (Fed. Cir. 1985).

         III. DISCUSSION

         The patent venue statute, 28 U.S.C. § 1400(b), provides:

Any civil action for patent infringement may be brought in the judicial district [1] where the defendant resides, or [2] [(a)] where the defendant has committed acts of infringement and [(b)] has a regular and established place of business.

         It is undisputed that under the Supreme Court's decision in TC Heartland, venue in this case is not proper in Delaware under the "resides" portion of the statute, as Defendants are incorporated in Indiana. Defendants, therefore, each "reside" in Indiana, not Delaware.

         The parties' disputes are, instead, threefold. First, they disagree as to whether Defendants have waived their opportunity to challenge whether Delaware is a proper venue. Second, assuming Defendants are permitted to press the improper venue issue, the parties disagree over whether Defendants have a "regular and established place of business" in Delaware, which is part of § 1400(b)'s second basis on which venue may be proper. Finally, the parties also dispute whether, should the Court be uncertain as to whether Defendants have a "regular and established place of business" here, the Court should or should not order "venue-related discovery." The Court will address each of these issues in turn.

         A. Waiver

         1. Analysis

         Plaintiffs' main argument in opposition to the instant motion is that Defendants waived any challenge to venue by failing to object to venue in any of their pleadings and failing to otherwise assert improper venue for nearly two years after this case was filed, all while actively participating in the litigation (including through discovery, claim construction, and significant motions practice). (See D.I. 296 at 7-8) Defendants do not contest the relevant facts underlying Plaintiffs' argument, but instead argue that waiver is inapplicable here in light of the Supreme Court's recent decision in TCHeartland. (See D.I. 283 at 7-11; D.I. 298 at 3-8) In assessing the parties' competing positions, it is useful to first describe the history of the underlying legal issues driving the Court's analysis.

         As noted above, in a patent infringement action, venue is proper "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." 28 U.S.C. § 1400(b). In 1957, the Supreme Court held that § 1400(b) was "not to be supplemented by the provisions of 28 U.S.C. § 1391(c), " the general venue statute. Fourco Glass Co. v. Transmirra Prods. Corp.,353 U.S. 222, 229 (1957). As such, Fourco held that ...


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