In Re: Zte (Usa) Inc. ( 2018 )

United States Court of Appeals
for the Federal Circuit
______________________
In re: ZTE (USA) INC.,
Petitioner
______________________
2018-113
______________________
On Petition for Writ of Mandamus to the United
States District Court for the Eastern District of Texas in
No. 4:17-cv-00620-ALM-KPJ, Judge Amos L. Mazzant,
III.
______________________
CHARLES M. MCMAHON, McDermott Will & Emery
LLP, Chicago, IL, for petitioner. Also represented by
BRIAN ANDREW JONES; MICHAEL S. NADEL, JAY REIZISS,
Washington, DC.
ALISON AUBREY RICHARDS, Global IP Law Group,
Chicago, IL, for respondent American GNC Corporation.
Also represented by DAVID P. BERTEN, ALEXANDER J.
DEBSKI.
______________________
ON PETITION
______________________
Before REYNA, LINN, and HUGHES, Circuit Judges.
LINN, Circuit Judge.
ORDER
2 IN RE: ZTE (USA) INC.
ZTE (USA) Inc. (“ZTE USA”) petitions for a writ of
mandamus directing the United States District Court for
the Eastern District of Texas to dismiss this case for
improper venue under 28 U.S.C. § 1406(a). See Am. GNC
Corp. v. ZTE Corp., No. 4:17-cv-00620-ALM-KPJ (E.D.
Tex. Nov. 7, 2017) (“Denial Order”). American GNC
Corporation (“American GNC”) opposes. Because the
district court incorrectly assigned the burden of proof on
venue and failed to fully consider the factors relevant to
the question of whether the call center in question was
that of ZTE USA, we grant the petition to the extent of
vacating the order denying the motion to dismiss and
remanding the motion for reconsideration consistent with
this order.
I
In February 2017, American GNC filed a complaint
against ZTE USA and ZTE (TX) Inc. 1 in the Marshall
Division of the Eastern District of Texas alleging
infringement of its patents. ZTE USA filed a motion to
dismiss for improper venue under 28 U.S.C. § 1406 and
§ 1400(b) in April 2017. While that motion was pending,
ZTE USA and ZTE (TX) Inc. 2 sought transfer to the
United States District Court for the Northern District of
Texas or the Northern District of California under 28
U.S.C. § 1404(a).
The magistrate judge concluded that venue was
proper in the Eastern District of Texas for purposes of the
§ 1404(a) convenience analysis but did not rule on the
motion to dismiss for improper venue under § 1406(a). In
September 2017, the case was transferred from the
Eastern District of Texas’s Marshall Division to its
1 ZTE Corporation was also named as a defendant
but was dismissed without prejudice in July 2017.
2 ZTE (TX) Inc. did not object to venue in this case.
IN RE: ZTE (USA) INC. 3
Sherman Division, and assigned to a new district court
judge and a new magistrate judge. After supplemental
briefing on the issue of improper venue, the magistrate
judge denied ZTE USA’s motion to dismiss for improper
venue, finding that ZTE USA failed to show it did not
have a regular and established place of business in the
Eastern District of Texas as required under the second
prong of 28 U.S.C. § 1400(b). See Am. GNC Corp. v. ZTE
Corp., No. 4:17-cv-00620, 2017 WL 5163605 (E.D. Tex.
Oct. 4, 2017) (“Magistrate Report”).
The magistrate judge noted that “courts are not
uniform in their views as to which party bears the burden
of proof with respect to venue,” but, citing Fifth Circuit
law, placed the burden on the objecting defendant to show
improper venue. Id. at *2.
The magistrate judge determined that ZTE USA had
contracted with a call center in Plano, Texas, operated by
First Contact LLC (a subsidiary of iQor US Inc.), which
constituted a physical place, and that ZTE USA, through
the call center employees dedicated to ZTE USA calls,
transacted business there. Id. at *3–4. The magistrate
judge explained that “ZTE USA has failed to meet its
burden to show it does not have a regular and established
place of business in the District.” Id. at *3.
In its objections to the magistrate judge’s report, ZTE
USA objected to the finding that the call center in Plano,
Texas, established venue, arguing that it is inconsistent
with In re Cray Inc., 871 F.3d 1355 (Fed. Cir. 2017). ZTE
USA also argued that the magistrate judge erred by
placing the burden of proof on ZTE USA to establish that
venue was not proper. The district court judge disagreed
with both objections and denied ZTE USA’s motion to
dismiss for improper venue. ZTE USA’s petition for
mandamus followed. Am. GNC Corp. v. ZTE Corp., No.
4:17-cv-00620, 2017 WL 5157700 (E.D. Tex. Nov. 7, 2017).
4 IN RE: ZTE (USA) INC.
II
A
A party seeking a writ of mandamus bears the heavy
burden of demonstrating to the court that it has no
“adequate alternative” means to obtain the desired relief,
Mallard v. U.S. Dist. Court for the S. Dist. of Iowa, 490
U.S. 296, 309 (1989), and that “the right to issuance of the
writ is clear and indisputable,” Bankers Life & Cas. Co. v.
Holland, 346 U.S. 379, 384 (1953) (internal quotation
marks omitted). Further, even if these two prerequisites
have been met, a court issuing a writ must, in its
discretion, “be satisfied that the writ is appropriate under
the circumstances.” Cheney v. U.S. Dist. Court for D.C.,
542 U.S. 367, 380 (2004). Moreover, mandamus review of
an improper venue decision under § 1406(a) is rarely
granted in the absence of exceptional circumstances.
Banker’s Life, 346 U.S. at 382–84; Cheney, 542 U.S. at
380; In re Cray, Inc., 871 F.3d at 1358 (“Mandamus is
reserved for exceptional circumstances.”); see also Comfort
Equip. Co v. Steckler, 212 F.2d 371, 374–75 (7th Cir.
1954) (denying mandamus review of a denied improper-
venue motion); Gulf Research & Dev. Co. v. Leahy, 193
F.2d 302, 304–06 (3d Cir. 1951) (similar).
This court found exceptional circumstances to exist in
§ 1406(a) mandamus petitions in Cray, 871 F.3d 1355 and
In re Micron Technology, Inc., 875 F.3d 1091 (Fed. Cir.
2017), because those decisions were necessary to address
the effect of the Supreme Court’s decision in TC
Heartland, which was yet another § 1406(a) mandamus
case. 137 S. Ct. 1514, 1517 (2017), rev’g and remanding
In re TC Heartland, LLC., 821 F.3d 1338 (Fed. Cir. 2016).
Moreover, the Supreme Court and this court have
confirmed that mandamus relief may be appropriate in
certain circumstances to decide “basic” and “undecided”
questions, Schlagenhauf v. Holder, 379 U.S. 104, 110
(1964), and “to further supervisory or instructional goals
IN RE: ZTE (USA) INC. 5
where issues are unsettled and important,” In re Queen’s
Univ. at Kingston, 820 F.3d 1287, 1291 (Fed. Cir. 2016)
(citation omitted); see also Micron, 875 F.3d at 1095–96;
Cray, 871 F.3d at 1358–59; In re BP Lubricants USA Inc.,
637 F.3d 1307, 1313 (Fed. Cir. 2011).
This case presents two such “basic” and “undecided”
issues relating to proper judicial administration in the
wake of TC Heartland; namely, whether Federal Circuit
or regional circuit law governs the burden of proof for
determining the propriety of venue under § 1400(b), and
on which party that burden rests. These issues are likely
to be repeated and present sufficiently exceptional
circumstances as to be amenable to resolution via
mandamus.
B
We generally defer to regional circuit procedural law
on questions “not unique to patent law,” but apply our
own law to issues “‘related’ to ‘substantive matters unique
to the Federal Circuit,’ and thus committed to our law.”
Biodex Corp. v. Loredan Biomed., Inc., 946 F.2d 850, 856
(Fed. Cir. 1991) (citations omitted); see also Panduit Corp.
v. All States Plastic Mfg. Co., 744 F.2d 1564, 1574–75
(Fed. Cir. 1984) (per curiam) (establishing general rule).
Whether venue is proper under § 1400(b) is an issue
unique to patent law and is governed by Federal Circuit
law. Cray, 871 F.3d at 1360. Which party bears the
burden of persuasion in establishing proper or improper
venue under § 1400(b) is intimately related to this
substantive determination. Indeed, who has the burden
of persuasion on the elements of a legal rule is treated
across many contexts as a substantive aspect of the legal
rule. See, e.g., Medtronic, Inc. v. Mirowski Family
Ventures, LLC, 134 S. Ct. 843, 849 (2014); Raleigh v. Ill.
Dep’t of Revenue, 530 U.S. 15, 20–21 (2000); Dir., Off. Of
Workers’ Compensation Progs., Dep’t of Labor v.
Greenwich Collieries, 512 U.S. 267, 271 (1994); Garret v.
6 IN RE: ZTE (USA) INC.
Moore-McCormack Co., 317 U.S. 239, 248–49
(1942). Therefore the burden of persuasion question is a
substantive aspect of § 1400(b), whose interpretation is
governed by our law, not of § 1406, the general improper-
venue statute. Furthermore, because all appeals in cases
in which § 1400(b) is implicated will come to this court,
adopting a uniform law on the burden obviates any
uncertainty at the district court as to whether to apply
regional circuit or Federal Circuit law. See Biodex, 946
F.2d at 859 (considering whether the application of
Federal Circuit law would require the district court to
“serve[] two masters”).
The Supreme Court in TC Heartland stated that
“[Congress] ‘placed patent infringement cases in a class
by themselves, outside the scope of general venue
legislation.’” 137 S. Ct. at 1518 (citing Brunette Machine
Works, Ltd. v. Kockum Indus., Inc., 406 U.S. 706, 713
(1972)). We conclude that the patent-specific nature of
§ 1400(b) also implicates the burden for satisfying that
statute, and should be analyzed under this court’s law.
See 17 Moore’s Federal Practice—Civil § 110.01[5][c] (3d
ed. 2017) (noting that the burden may be different under
§ 1400(b) than under the general patent venue statute).
The choice of law issue here is similar to one we
resolved in Beverly Hills Fan Co. v. Royal Sovereign
Corp., 21 F.3d 1558 (Fed. Cir. 1994). We concluded there
that Federal Circuit law governs whether due process or
Virginia’s long-arm statute preclude the exercise of
personal jurisdiction over a foreign defendant whose only
contact with the forum was indirect shipment of goods
through the stream of commerce. Id. at 1564. We noted
that the due process issue was procedural, but that “it is a
critical determinant of whether and in what forum a
patentee can seek redress for infringement of its rights.”
Id. We also noted that applying regional circuit law
would run contrary to this court’s “mandate of achieving
national uniformity in the field of patent law” due to the
IN RE: ZTE (USA) INC. 7
lack of uniformity among our sister circuits and within
the regional circuit from which the case arose. Id. The
same circumstances apply here.
The placement of the burden of persuasion on the
propriety of venue is critical to determining in what forum
a patentee can seek redress for infringement of its patent
rights. Also, the burden for establishing the propriety of
venue is not uniform among the Circuits, see 15 Charles
A. Wright & Arthur R. Miller, Federal Practice and
Procedure § 3826 (4th ed. 2017) (stating that “[t]he courts
are divided on which party bears the burden of proof on a
motion to dismiss for improper venue” and citing cases),
and even varies within the Fifth Circuit, compare, e.g.,
Williamson-Dickie Mfg. Co. v. M/V HEINRICH J, 762 F.
Supp. 2d 1023, 1026 (S.D. Tex. 2011) (placing burden of
establishing proper venue on Plaintiff), with, e.g., Tex.
Marine & Brokerage, Inc. v. Euton, 120 F. Supp. 2d 611,
612 (E.D. Tex. 2000) (placing the burden of showing
improper venue on Defendant); see also Payne v. Grayco
Cable Servs., No. 1:11-CV-487, 2011 WL 13076902, at *2
(E.D. Tex. 2011) (recognizing inconsistency within Fifth
Circuit). In this context, it is appropriate for us to adopt a
uniform national rule to address the propriety of patent-
specific venue. See Biodex, 946 F.2d at 856 (explaining
that we have deferred to regional circuit law more readily
“when there is existing and expressed uniformity among
the circuits”).
In opposing the petition, American GNC tries to draw
a parallel between the Federal Rule of Civil Procedure
12(b)(3) vehicle being used here and the traditional
burdens applied under Rule 12(b)(6) and summary
judgment for infringement and invalidity—the procedural
aspects of which are governed by regional circuit law. See
Boston Sci. Corp. v. Cook Grp. Inc., 269 F. Supp. 3d 229,
236–37 (D. Del. 2017) (adopting this reasoning to conclude
that regional circuit law governs the question of burden
on improper venue). This is a false parallel. There is no
8 IN RE: ZTE (USA) INC.
equivalent in that context to the patent-specific venue
provisions of § 1400(b), nor is there a similar lack of
uniformity between the circuits and within the Fifth
Circuit.
Nor does the application of regional circuit law to 28
U.S.C. § 1404(a), see Winner Int’l Royalty Corp. v. Wang,
202 F.3d 1340, 1352 (Fed. Cir. 2000), require applying
regional circuit law to § 1406. Section 1406(a) requires a
showing that venue is improper under the patent-specific
venue statute § 1400(b). The same is not true of
§ 1404(a), which concerns the convenience of the parties
and the interests of justice, which are not patent-specific
considerations. Moreover, when § 1404(a) is implicated,
the movant “is seeking to disturb a plaintiff’s choice to file
in a proper venue in compliance with applicable statutes
and rules,” Personal Audio, LLC v. Google, Inc., 280
F. Supp. 3d 922, 929 (E.D. Tex. 2017), a consideration not
applicable to § 1406(a) challenges.
For the above-stated reasons, we hold that Federal
Circuit law governs the placement of the burden of
persuasion on the propriety of venue under § 1400(b).
C
We next address the question of who bears the burden
on venue and hold as a matter of Federal Circuit law that,
upon motion by the Defendant challenging venue in a
patent case, the Plaintiff bears the burden of establishing
proper venue. Such a holding best aligns with the weight
of historical authority among the circuits and best
furthers public policy.
This court has not heretofore considered which party
bears the burden with respect to § 1400(b) as
distinguished from § 1391. We have found no case in this
court’s 37–year history dealing with this question. Prior
to the formation of the Federal Circuit, regional circuits
uniformly placed the burden to show proper venue in
IN RE: ZTE (USA) INC. 9
patent cases on the Plaintiff following a motion by the
Defendant challenging venue. See Cordis Corp. v.
Cardiac Pacemakers, 599 F.2d 1085, 1086 (1st Cir. 1979);
Grantham v. Challenge-Cook Bros., Inc., 420 F.2d 1182,
1184 (7th Cir. 1969); Phillips v. Baker, 121 F.2d 752, 754–
55 (9th Cir. 1941) (applying earlier version of patent
venue statute); see also Personal Audio, 280 F. Supp. 3d
at 927–28 (“This court has not found any Circuit Court
case holding that in a § 1400(b) motion to dismiss based
on improper venue, the burden of proof is on the movant,
so long as the motion was timely filed.”). This is
persuasive authority. Abbott Labs. v. Cordis Corp., 710
F.3d 1318, 1325 (Fed. Cir. 2013) (“While patent law
decisions of the regional circuits do not bind us, we may
consider them as persuasive authority.” (citation
omitted)).
Section 1400(b), like its predecessor statutes, is
intended to be restrictive of venue in patent cases
compared with the broad general venue provision. See
Stonite Prods. Co. v. Melvin Lloyd Co., 315 U.S. 561, 566-
67 (1942) (“[T]he Act of 1897 [a predecessor to § 1400(b)]
was a restrictive measure, limiting a prior, broader venue
[statute].”); Cray, 871 F.3d at 1361 (“[Section 1400(b)]
clearly narrows jurisdiction relative to the courts that
previously allowed patent suits wherever the defendant
could be served.”); Grantham, 420 F.2d at 1184 (“[T]he
patent venue statute should not be liberally construed in
favor of venue” (citing Schnell v. Peter Eckrich & Sons,
Inc., 365 U.S. 260, 264 (1961))). Section 1400(b)’s
intentional narrowness supports placing the burden of
establishing proper venue on the Plaintiff. See 17 Moore’s
Federal Practice—Civil § 110.01[5][c] (2018) (explaining
that, although by default the burden should be on the
movant, “in a case involving an exclusive venue statute,
such as in patent infringement cases,” the burden should
shift to plaintiff).
10 IN RE: ZTE (USA) INC.
American GNC argues that the burden should be on
the movant/defendant because venue is properly
considered an affirmative defense, see Dillon v. Rogers,
596 F.3d 260, 272 (5th Cir. 2010) (“Exhaustion resembles
personal jurisdiction and venue in that it is an affirmative
defense.”), and the defendant generally bears the burden
to establish an affirmative defense. The statement in
Dillon on which American GNC relies is dictum—the
issue there was whether administrative exhaustion was
an affirmative defense. Venue was merely used as an
analogy. American GNC has not identified any other
cases that make this point or refute the conclusions
reached above on which party should bear the burden on
a venue challenge directed to § 1400(b). Indeed, in the
parallel case of personal jurisdiction, upon challenge by
the defendant, plaintiff bears the burden of affirmatively
establishing the first two elements of the due process
requirement. Celgard, LLC v. SK Innovation Co., 792
F.3d 1373, 1378 (Fed. Cir. 2015).
III
On the merits, the text of § 1400(b) is self-evident that
“[t]he requirement of venue is specific and unambiguous;
it is not one of those vague principles which, in the
interests of some overriding policy, is to be given a liberal
construction.’’ Cray, 871 F.3d at 1361 (internal
quotations and citation omitted). In applying § 1400(b), it
is important “not to conflate showings that may be
sufficient for other purposes, e.g., personal jurisdiction or
the general venue statute, with the necessary showing to
establish proper venue in patent cases.” Id.
As established in Cray, there are “three general
requirements relevant to the inquiry: (1) there must be a
physical place in the district; (2) it must be a regular and
established place of business; and (3) it must be the place
of the defendant.” Id. at 1360. “If any statutory
IN RE: ZTE (USA) INC. 11
requirement is not satisfied, venue is improper under §
1400(b).” Id.
In determining whether the “place of business” in the
venue is “of the defendant,” this court in Cray set forth a
series of non-exclusive factors to be considered. These
include “whether the defendant owns or leases the place,
or exercises other attributes of possession or control over
the place,” and “whether the defendant lists the alleged
place of business on a website, or in a telephone or other
directory; or places its name on a sign associated with or
on the building itself.” Id. at 1363–64.
In denying the motion to dismiss, the district court
found no error in the magistrate judge’s conclusion that
ZTE USA failed to meet its burden. But, as we have now
held, the burden was not ZTE USA’s to carry. Moreover,
the district court concluded that, unlike the issue in Cray
in which the location at issue was an employee’s home,
the question in this case was “whether a business location
established in partnership with a third party . . . qualifies
as a regular and established place of business.” Denial
Order at 2. This court disagrees both with the summary
characterization of the iQor-ZTE USA relationship as a
“partnership” and the district court’s holding that such
determination ended the analysis. To be complete, the
district court must give reasoned consideration to all
relevant factors or attributes of the relationship in
determining whether those attributes warrant iQor’s call
center being deemed a regular and established place of
business of ZTE USA. This the district court did not do.
Counsel for ZTE USA at the September 1, 2017
hearing characterized the call center as having been
established in partnership with iQor, but the record is
unclear as to the nature of that relationship, beyond the
existence of iQor’s arms-length contract for services. The
mere presence of a contractual relationship between iQor
and ZTE USA pursuant to which iQor provides call center
12 IN RE: ZTE (USA) INC.
services to ZTE USA’s customers does not necessarily
make iQor’s call center “a regular and established place of
business” of ZTE USA in the Eastern District of Texas.
While iQor’s call center “has more than sixty
dedicated ZTE USA customer service representatives,”
neither the magistrate judge nor the district court made
any findings on the nature of ZTE USA’s relationship
with those representatives or whether it has any other
form of control over any of them. Magistrate Report, 2017
WL 5163605, at *4. While the magistrate judge found
that ZTE USA “has at least two full-time employees
(supervisors) on site at the call center,” id., the
determining factor is whether those employees render the
call center “a place of the defendant, not solely a place of
the defendant’s employee[s],” Cray, 871 F.3d at 1363.
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. The magistrate judge also made no
findings as to whether any signage on, about, or relating
to the call center associates the space as belonging to ZTE
USA. Finally, the magistrate judge did not make findings
regarding whether the location of the call center was
specified by ZTE USA or whether iQor would need
permission from ZTE USA to move its call center outside
of the Eastern District of Texas or to stop working for ZTE
USA. Id. at 1363–64. These and any other factors
relevant to the question of whether American GNC has
met its burden to show that the call center was “of the
defendant” should be considered on remand. 3
3 We do not imply that every one of these factors
will be relevant or needs to be considered in every § 1406
case, but those considerations are potentially relevant
IN RE: ZTE (USA) INC. 13
Accordingly,
IT IS ORDERED THAT:
The petition is granted to the extent that the district
court’s November 7, 2017 order denying ZTE USA’s
motion to dismiss for improper venue is vacated, and the
district court is instructed to reconsider ZTE USA’s
motion to dismiss consistent with this order, placing the
burden of persuasion on the propriety of venue on
American GNC.
FOR THE COURT
May 14, 2018 /s/ Peter R. Marksteiner
Date Peter R. Marksteiner
Clerk of Court
here and should be considered by the district court on
remand.