AML IP, LLC v. BATH & BODY WORKS DIRECT, INC.

Authored by: Jeremy J. Gustrowsky

A patent owner that lost a case on two independent grounds recently asked the Federal Circuit to erase one of them. AML IP, LLC sued Bath & Body Works Direct, Inc. and The Buckle, Inc. in the Eastern District of Texas, claiming infringement of U.S. Patent No. 6,876,979, which describes e-commerce methods using a “bridge computer” to coordinate transactions between different service providers. Each defendant moved to dismiss on two grounds. First, that venue was improper in that district under the patent venue statute, 28 U.S.C. § 1400(b). Second, that the patent claims were ineligible for patenting under 35 U.S.C. § 101, meaning the complaint failed to state a claim.

The district court granted both. In a single order, it found that AML had not established proper venue and said that “for this reason alone” the case should be dismissed. It then went on to analyze the claims, found them patent ineligible, and dismissed on that basis as well. Notably, the court had earlier stayed the case so it could rule on these threshold issues, expressly recognizing that venue challenges deserve “top priority.”

The case revolves around a narrow procedural question, because AML never challenged the substance of either ruling on appeal. Instead, it argued that once the district court decided venue was improper, it should have stopped there rather than also addressing patent eligibility. The Federal Circuit reviewed the decision as a matter of docket management under Fifth Circuit law, applying an abuse of discretion standard, and affirmed.

The court first observed that venue is not like subject matter jurisdiction. Venue can be waived and is a personal privilege of the defendant, not a limit on the court’s power to act. So while courts routinely dismiss on jurisdictional grounds alone and go no further, nothing required the same treatment here. AML’s supporting authority fell into two groups, and neither helped. Cases directing courts to give venue motions “top priority” are meant to keep defendants from being dragged through merits litigation in an objectionable forum. The district court actually followed that instruction, and AML (the party that chose the forum) was in no position to complain about it anyway. AML’s other cases stood for the sensible idea that a court should resolve venue before tackling a heavy merits motion, partly so a transferee court can decide the merits itself. That reasoning did not apply because no party identified another district for transfer, and the case was dismissed rather than transferred.

The Federal Circuit went further and suggested that deciding both grounds together was actually the efficient approach. By ruling on venue and eligibility in one order, the district court allowed both issues to be reviewed in a single appeal. Had it decided venue alone and been reversed, the eligibility question would likely have produced a second appeal later. The court also rejected AML’s fallback request, which asked for either vacatur of the eligibility ruling or a statement that the ruling carries no preclusive effect. That would amount to an advisory opinion. Whether a judgment has preclusive effect is decided in the later case where preclusion is asserted, not in advance.

The practical lesson for patentees is that a venue win for the defendant does not necessarily insulate the patent from a merits ruling in the same order. When a Rule 12 motion raises both improper venue and patent ineligibility, a district court has discretion to resolve both. Patent owners facing combined motions should assume the eligibility argument will be reached and brief it accordingly, rather than counting on the venue issue to defer the § 101 question to another day.