Posts Tagged: "venue reform"

The Senate Republican High-Tech Task Force convened in order to hear from patent experts on the impact of the U.S. Supreme Court’s ruling in TC Heartland, the IPR process and patent eligibility, and to discuss what Congress can do in terms of additional patent reform in order to improve the U.S. patent system… The Hatch op-ed would seem to be music to the ears of beleaguered patent owners in the life science and computer implemented innovation areas. The problem, however, is with those the Senate Republican High-Tech Task Force heard from during this private meeting.

Why is Steven Anderson citing his case as a reason why Congress must create stricter venue rules when he hasn’t even filed a motion to transfer venue? Anderson being trotted out as the poster child for venue reform is curious given he does business in EDTX and is seldom sued. Is this some charade? …. The company has only filed a motion to dismiss based on invalidity of the asserted claims under 35 U.S.C. Section 101. In fact, Culver filed an answer with affirmative defenses three weeks after the Supreme Court decided TC Heartland which notes that “Culver’s does not contest whether personal jurisdiction over it properly lies in this District in this case… Culver’s admits that venue may be proper, but denies that venue is convenient in this District as to Culver’s. Culver’s admits that it conducts business in this District.”

In their recent TC Heartland decision, SCOTUS created unequal protection against patent infringers based on geographical incorporation decisions. They added uncertainty in time, cost, and outcome in patent litigation. Standardized local rules and demand letter reform at the federal level would help mitigate this unfortunate situation… Unless Congress acts to change venue laws, patent owners are now severely restricted in the choice of venue. And, if proposed legislation like S.2733 and the corresponding portion of H.R.9 are any indication, action by Congress may not change much regarding venue. So for now, patent owners must live with the restrictions resulting from TC Heartland.

Joint-defense groups lower costs and increase efficiencies for all defendants in the groups. Certain prominent patent litigation boutiques and Big Law departments have skillfully made a business of being retained by many of the accused infringers in a single multi-defendant case. Even if counsel is not shared among defendants, the benefits of joint-defense groups inure greatly to small- and medium-sized companies that gain the benefit of top-notch defense teams retained by larger tech companies, without having to pay for them. Joint-defense groups also leverage economies of scale to accomplish more at lower costs for everyone. For instance, filing four or five IPR petitions may be feasible when those costs are spread around a group, but prohibitive for any individual defendant. In short, the pre-TC Heartland framework provided significant cost-savings and efficiencies to defendants, and in particular, small- and medium-sized companies.

We believe that the fallout from the Court’s ruling last week will be less dire for patent owners than most commentators predict. The conventional wisdom is that TC Heartland will cause a mass exodus of patent filings from the Eastern District of Texas and other supposedly plaintiff-friendly venues to Delaware, the Northern District of California and, to a lesser extent, the other states. The assumption underlying this view is that all those plaintiffs will be forced to file in the state where the defendant is incorporated. Yet even post-TC Heartland, patent owners have options and can continue to be strategic about how and where they proceed.

“What we do know is that motion practice will heat up and courts must determine how they want to handle the influx of motions to dismiss and related challenges with no clear instruction from TC Heartland,” Storm said. “Many defendants will likely move to dismiss or transfer venue, and for the latter, may take the step to proactively file in their chosen jurisdiction and then request transfer to such jurisdiction.”

What follows is reaction from a distinguished panel of industry insiders who have been following this case. Each have offered their own instant analysis, several pointing out that important questions remain about what this Supreme Court decision will mean for the many thousands of patent cases already filed, many that are now in inappropriate venues. It is probably fair to say that the ruling did not surprise most of our panel, although several point to the Supreme Court’s decision as more in a decade-plus line of cases that have continually eroded the rights of patent owners.

The Supreme Court reversed the Federal Circuit and ruled that 28 U.S.C. 1400(b) remains the only applicable patent venue statute, that 28 U.S.C. 1391(c) did not modify or amend 1400(b) or the Court’s 1957 ruling in Fourco Glass Co. v. Transmirra Products Corp., and that the term “residence” in 28 U.S.C. 1400(b) means only the state in which a company is incorporated. The importance of this ruling should be immediately felt on patent litigation in the United States. No longer will a patent owner be able to sue an infringing defendant in a district court where the defendant is subject to personal jurisdiction. Instead, patent infringement lawsuits will only be able to be filed in districts within states where the infringing defendant is incorporated, or in districts where there has been an act of infringement and the defendant has a regular and established place of business.

Justices Kagan and Ginsburg seemed skeptical. Indeed, Congress has already passed a general venue statute that defined residency “for all venue places – all venue purposes,” as Justice Ginsburg put it. Justice Kagan chimed in, questioning the propriety of overturning the broader rule, which she called “the decision that the practice has conformed to” and the “practical backdrop” against which Congress was legislating. Next, Justice Breyer noted the many arguments and briefs discussing the Eastern District of Texas, but which he felt were not relevant.

On Monday, March 27th, the U.S. Supreme Court heard oral arguments in TC Heartland LLC v. Kraft Food Group Brands LLC. The case, arising from allegations of patent infringement over liquid water enhancement products, will ask the court to decide whether 28 U.S.C. Section 1400(b), the patent venue statute which provides that judicial actions for patent suits take place in the district within which the defendant resides, is supplemented by 28 U.S.C. Section 1391(c), which provides that an entity may reside in multiple districts.

If the Supreme Court were to reverse the Federal Circuit and revert back to Fourco Glass, that would make it difficult for patent owners, including Whirlpool and others like them, to reasonably seek redress for patent infringement. Essentially, a reversion back to Fourco Glass would mean that patent infringement cases brought by corporations like Whirlpool would have to literally be brought in the home court of the patent infringer, or perhaps in Delaware where so many entities are incorporated. It would also necessitate a multiplicity of lawsuits, as Whirlpool explained in its amicus filing.

With respect to the thorny issue of patent litigation, Senator Hatch explained that there is a very real chance that venue reform will happen this year… HATCH: “The Supreme Court is currently examining the issue, so we won’t have a full view of the landscape until after the Court rules. But no matter what the Court does, we’re likely going to need follow-on legislation to prevent future forum-shopping and to ensure that litigants have a meaningful connection to the site of the suit.”

While calls for widespread patent reform are not as loud as they have been in previous years, 2017 is shaping up to be a year where we may still see significant change to U.S. patent laws. What will the changes to U.S. patent laws look like over the next year? The better question may be to first ask whether those anticipated changes will be coming from the judiciary, legislative or executive branch, all of which will take center stage at some point in 2017.

The genesis of the patent venue “problem” is simple: Many patent infringement defendants complain about traveling to the Eastern District of Texas. They feel that it is too pro-patent, too pro-enforcement, or too difficult for defendants to win on a motion to dismiss… With the US Supreme Court agreeing to hear TC Heartland the perennial patent venue issue is front and center for patent reform in 2017. This case will attract much amicus, media, Congressional, law school, and fake news attention. It should influence how patent owners and litigation investors look at venue options in general and perhaps also with regard to growth markets like Germany and China. It will also tell us how the Trump administration thinks about patent issues.