Hughes Network Can’t Move Patent Case Out of East Texas

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By Peter Leung

Hughes Network’s Systems LLC’s petition to transfer a patent infringement lawsuit out of an East Texas court has been rejected by the nation’s patent appeals court ( In re: Hughes Network Sys., LLC , Fed. Cir., No. 17-130, petition denied 7/24/17 ).

The U.S. Court of Appeals for the Federal Circuit July 24 refused Hughes’ petition to review its transfer request. The court said the U.S. District Court for the Eastern District of Texas didn’t act unreasonably when it denied Hughes’ motion, which was filed 16 months after the initial complaint and less than two months before trial was scheduled to start.

The court also said that the trial court acted within its discretion in ruling that Hughes had waived its right to file a motion to transfer venue. Hughes filed its motion for the first time after the U.S. Supreme Court’s May 22 ruling in TC Heartland LLC v. Kraft Foods Grp. Brands LLC, which put limits on where patent owners can sue.

The Federal Circuit’s decision, though nonprecedential, provides some insight into how its judges will handle post- TC Heartland motions to transfer. The Supreme Court’s decision was expected to make it easier for defendants to move cases out of venues with patentee-friendly reputations such as the Eastern District of Texas.

Several federal district court judges have denied motions to transfer on the grounds that the defendant, by not filing the motion until after the TC Heartland decision, waived the right to make its venue arguments. However, the Federal Circuit did not weigh in definitively on the waiver issue. The court emphasized that its decision turned largely on the fact that Hughes filed its motion less than two months before trial, and moving the case would be inconvenient.

Unanswered Questions

The court on July 18 accepted another petition to review a rejected motion to transfer venue out of the Eastern District of Texas, in In re Cray, where it could rule on what constitutes a “regular and established place of business” in a district. The Eastern District of Texas had rejected Cray Inc.'s motion because the supercomputer maker had a sales employee who worked out of his home in East Texas.

Hughes’ case centers on the other big question facing courts handling transfer motions: whether a defendant has waived venue arguments by not raising them earlier. Before TC Heartland, some plaintiffs didn’t bother with motions to transfer venue because they likely wouldn’t have succeeded under the Federal Circuit’s interpretation of 28 U.S.C. 1400(b), the patent venue provision.

Hughes did not file its transfer motion until two days after TC Heartland. Judge Robert W. Schroeder of the Eastern District of Texas said the delay wasn’t justified because the TC Heartland decision wasn’t a change in the law—the venue argument was available when Elbit Land Systems LLC, the patent owner, filed its lawsuit. Hughes’ failure to raise the issue earlier is a waiver of the argument, Schroeder ruled.

When the Supreme Court reversed the Federal Circuit in TC Heartland, it suggested that the law regarding venue hadn’t changed for some 30 years, and the Federal Circuit had misinterpreted the case law.

The Federal Circuit said in its ruling that it doesn’t necessarily agree that TC Heartland wasn’t a change in the law, but that Schroeder didn’t abuse his judicial discretion.

Chief Judge Sharon Prost, along with Judges William C. Bryson and Richard G. Taranto jointly issued the order.

Hughes’ lawyers at Baker Botts LLP did not immediately respond to a request for comment. Elbit’s lawyers at Covington & Burling LLP declined to comment.

To contact the reporter on this story: Peter Leung in Washington at pleung@bna.com

To contact the editor responsible for this story: Mike Wilczek at mwilczek@bna.com

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