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IP Alert: Federal Circuit Shrinks Venue Loophole for Foreign Defendants

January 17, 2023

On January 9, in In re: Stingray IP Solutions, LLC, the Federal Circuit vacated a transfer order issued by the Eastern District of Texas, thereby limiting a foreign defendant’s ability to negate venue in one court simply by unilaterally consenting, post-suit, to personal jurisdiction in a different, preferred court.

Patent owner Stingray filed two patent infringement lawsuits against TP-Link Technologies Co., Ltd. (organized and headquartered in China) and TP-Link Corporation Limited (organized and headquartered in Hong Kong) (collectively “TP-Link”) in the Eastern District of Texas. TP-Link asserted personal jurisdiction in the Eastern District of Texas was improper, and moved to transfer the case to the Central District of California, arguing they would be amenable to suit in that court. The Eastern District of Texas agreed, citing Federal Rule of Civil Procedure 4(k)(2), and ordered the case transferred to the Central District of California. Stingray sought a writ of mandamus from the Federal Circuit seeking to undo the Eastern District of Texas’ order.

Rule 4(k)(2) was introduced in 1993 to close a gap in personal jurisdiction whereby a non-resident defendant who did not have minimum contacts with any individual state (but did have sufficient contacts with the U.S. as a whole) could escape jurisdiction in all fifty states. Specifically, Rule 4(k)(2) allows any district court to exercise personal jurisdiction over that same non-resident defendant if the plaintiff’s claim arises under federal law, and: (A) the defendant is not subject to personal jurisdiction in any specific state, and (B) the exercise of jurisdiction satisfies due process requirements. 

However, since its introduction, Rule 4(k)(2)(A), the so-called “negation requirement,” has also opened a loophole for foreign defendants: what if the foreign defendant consents, post-suit, to personal jurisdiction in a specific jurisdiction? Is Rule 4(k)(2) defeated—forcing plaintiffs to litigate in a forum of the defendant’s choosing? As the Federal Circuit notes in this case, the answer to that question has left both district and circuit courts deeply divided.

In an effort to resolve the disagreement between district courts, the Federal Circuit confirmed that to achieve transfer into a forum it considers more convenient, a defendant must identify a forum where jurisdiction would have been proper at the time of filing, regardless of consent. The Court, relying and expanding upon its 2012 decision in Merial Ltd. v. Cipla Ltd., emphasized that a defendant cannot simply rely on its own statement of consent to defeat application of Rule 4(k)(2) and transfer the case into a forum it considers more convenient.

The Federal Circuit’s decision could potentially eliminate the loophole that some courts have allowed to remain open. As noted above, district and circuit courts remain split as to whether a defendant can simply negate Rule 4(k)(2)(A) by conceding to jurisdiction in a state forum. But, while district courts remain split, this decision affirms the Federal Circuit’s prior holdings and appears to also follow recent trends in other federal appellate courts. 

For more information on this decision, please contact Fitch Even attorney Mary F. Fetsco, author of this alert.

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