There is no place for blatant forum shopping in patent litigation

By Dana Rao
March 25, 2016

Gavel with american flag backgroundOf the 3,604 patent infringement suits filed in 2015, almost 40 percent (1,387) were brought in the Eastern District of Texas. What is so special about the Eastern District of Texas to warrant this flood of patent litigation? Is it a hotbed of innovation? Is it home to America’s largest technology companies? Is the annual Fire Ant Festival in Marshall, Texas a rip-roaring good time for families? The answers to those questions are no, no, and yes – respectively. However, the beloved local fair and music festival is not responsible for making the district a magnet for patent litigation (other than, perhaps, on the latest ant repellant technology).

Actually, the district has become a mecca for patent litigation because its plaintiff friendly characteristics make it an expensive place to defend yourself against an accusation of patent infringement.  Broad local discovery rules require that you turn over pretty much every document and email you have, lengthy timelines for a summary judgment motion or a motion to transfer make the process time-consuming and the local jury pool has been historically friendly to plaintiffs by awarding outsized damages (although that is changing).  The judges in the Eastern District of Texas grant summary judgment at less than one-third the rate as judges in other districts, according to a startling July 2015 study called Forum Selling by Daniel M. Klerman and Greg Reilly. The researchers also found that motions to transfer are successful only 34.5% of the time in the district versus 50% of the time in other major patent districts.  Motions to stay a case pending re-examination or other proceedings are granted more than half of the time nationwide but only about one-third of the time in the district. Even its remote location can put pressure on defendants to settle rather than send their lawyers and company executives to a small courthouse along the Texas-Louisiana border – far away from their work and families, often for weeks at a time.

All this makes one thing clear: The main reason you are choosing to sue in Texas is to leverage the litigation process to achieve settlements. That is not what forum choice is supposed to be about.  The US Courts have explicitly adopted a model where the choice of forum is determined by its suitability to the facts of the case, the litigants, and the court.   There is no principle in American jurisprudence that the plaintiff gets to sue you wherever he or she wants.  Imagine one fine morning that you opened your mailbox in Virginia and found a summons to appear from a court in Alaska, because a company in Maryland is accusing you of driving your car through their billboard off I-495.  You, being a typically careful driver, are astonished.   Would it be fair to make you go out to Alaska and defend yourself? Would it make any sense for the proper resolution of the case for you and your witnesses and the plaintiff and their witnesses to go to Alaska to litigate this case?  Would it make any difference if the plaintiff incorporated itself in Alaska one week before it filed suit against you?  And if the plaintiff then said it would drop its vandalism suit for $500, would you take that offer?

Larger companies like Adobe can defend themselves in court, even in Texas, but upstarts and mom-and-pop small businesses do not have the time or resources to defend themselves in a Texas courtroom for prolonged periods of time. Given the rampant and growing abuse, Congress must pass comprehensive patent legislation that includes critical venue reform measures. Without venue reform, patent trolls will continue to bring lawsuits against America’s leading innovators and small businesses in jurisdictions that have no connection to an alleged infringement.  The choice of forum should not be outcome determinative. That’s not justice.

Thankfully, Senators Jeff Flake (R-AZ), Cory Gardner (R-CO) and Mike Lee (R-UT) introduced the Venue Equity and Non-Uniformity Elimination Act of 2016 (S. 2733) last week. While the Senate Judiciary Committee has numerous items on its agenda, including the nomination of Merrick Garland for the Supreme Court, Chairman Chairman Chuck Grassley (R-IA) and Ranking Member Patrick Leahy (D-VT) need to make patent reform a priority. The committee should not allow election year politics to get in the way of passing much-needed patent reform legislation this Congress. All of the hard work that members have put into patent reform in the 114th Congress will have been for nothing if action is not taken before the end of the year. Comprehensive packages exist in both chambers, and now a venue reform bill has been added to the mix. This is the time for members to make one final push for patent reform before it is too late.

There’s no place in the judicial system for the blatant forum shopping that is occurring in patent litigation today. Our country needs a patent system built for the 21st century innovator, and the first step to achieving that is ensuring forum shopping becomes a thing of the past.

 

The Author

Dana Rao

Dana Rao is the vice president and associate general counsel of Intellectual Property and Litigation at Adobe Systems Incorporated.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

Discuss this

There are currently 14 Comments comments.

  1. Night Writer March 25, 2016 10:12 am

    Maybe, but the reality is that ED Texas is good right now. It is not bowing to the SCOTUS recent jurisprudence that is clearly unconstitutional. So, —big picture–the SCOTUS is doing whatever it feels like, so yea for the ED of Texas! What you should be writing about is how we should be removing subject matter jurisdiction of patents from the SCOTUS.

    Go ED of Texas!

  2. Night Writer March 25, 2016 11:09 am

    And don’t forget too that Lee was selected, vetted, and approved by Google, which met with her in the Oval Office with other business leaders to approve the appointment. That Google is spending about as much as Goldman Sachs on lobbying to end patent rights. That the Fed. Cir. judges Obama has been appointing are anti-patent and from all appearances have been selected, vetted, and approved by Google.

    So, –guess what–go ED of Texas! You should focus on the real problems. You should ask yourself what is the nexus between the great interest in reining in the E.D. of Texas and the anti-patent judicial activists?

  3. Edward Heller March 25, 2016 12:43 pm

    There is nothing wrong with a national patent court. England has one. The EPC is going to have one located in Paris. I have long heard about proposals for one here in the US.

    The benefits of a national patent court are obvious: expertise in patent law.

    Consider, the patent system is national and those who engage in it are already engaging nationally by obtaining a patent in Washington.

    I think the abuse comes when a patent owner is forced not to litigate in the national patent court, but in a local court favorable to the home town defendant. That structure is decidedly unfriendly to patents.

  4. Valuationguy March 25, 2016 12:51 pm

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    Actually…prior to (in the legal sense) VERY recent cases severely limiting the definition of “nexus”…plaintiffs COULD sue most anywhere a company’s product was sold (and for Adobe…that would be ANYWHERE)….so your statement is entirely misleading….something I would expect from a man in your position (constantly being sue for infringement of patents for technologies you purposefully (or not) incorporate into Adobe products).

    While discovery rules may be more favorable to plaintiffs in EDT…the reality is that even with the “onerous” discovery…cases get resolved much faster….even when taken to court. And while you (as the defendant) might complain about the discovery rules in EDT….others (patent owners and plaintiffs) would certainly complain about the discovery rules elsewhere.

    It is particularly telling that your theoretical example (getting sued in Alaska for driving your can into a billboard in Northern VA) would already be venue transferred for lack of nexus just by requesting it (via a lawyer) in court under the current rules (as you are no doubt aware given your background).

    The reality is that even with recent large changes in pleading requirements which further limit patent owners from pursuing good cases (BEFORE discovery can even start)…you come here promoting your corporate-paid, infringer-friendly, forum-restricting “patent-reform” bill because the statistics showing what a ‘large’ problem “patent-trolling” for America is don’t exist and the federal courts are no longer taking lawyers of ‘efficient infringers’ at their word when the ‘troll’ word is tossed into the ring.

    Valuationguy

  5. Curious March 25, 2016 12:53 pm

    Imagine one fine morning that you opened your mailbox in Virginia and found a summons to appear from a court in Alaska, because a company in Maryland is accusing you of driving your car through their billboard off I-495.
    Wow … that’s a nice straw man argument you’ve constructed.

    The choice of forum should not be outcome determinative.
    Until each forum/venue is composed of identical courts, with identical judges and no differences in the local rules, the choice of forum/venue can influence the outcome. As such, it should be expected that plaintiffs will attempt to find a venue that is most favorable to their case. This is what YOU would do if you were the plaintiff. BTW — when a defendant files a motion to transfer, they are doing exactly that — trying to get a better venue for their case.

    There’s no place in the judicial system for the blatant forum shopping that is occurring in patent litigation today.
    Forum shopping exists not just in patent litigation but in all types of litigation. Plaintiffs can choose to sue in state or federal court depending upon the cause of action. They can also sue in the United States or Germany or the UK or France or Japan or Canada or whatever foreign country depending upon the facts. Don’t pretend that this is a “patent-only” issue.

    Larger companies like Adobe can defend themselves in court, even in Texas, but upstarts and mom-and-pop small businesses do not have the time or resources to defend themselves in a Texas courtroom for prolonged periods of time.
    Oh please, let’s not pretend you are trying to stick up for the “mom-and-pop small businesses.” “Larger companies like Adobe” don’t like ED TX because the judges there like to give plaintiffs their day in Court. Instead, the “Larger companies like Adobe” like other jurisdictions where it takes years and years to go to trial and they can use their resources to grind down poorly-funded inventors.

    Why don’t you tell it straight? Bigger companies like Adobe want to have their cases tried in venues that are more favorable to them whereas plaintiffs want to have their cases tried in venues that are more favorable to their cases. This has nothing to do with any inherent unfairness in the system. There will ALWAYS be a venue most favorable to defendants and another venue most favorable to plaintiffs (unless they are all identical which is impossible). You just want to be able to have the cases tried in the venue of YOUR choice.

    The researchers also found that motions to transfer are successful only 34.5% of the time in the district versus 50% of the time in other major patent districts
    … which means that the ED TX still grants motions to transfers. If you have sufficient basis to transfer, then it will be granted. It isn’t like they are refusing all motions to transfer — not even close.

    Even its remote location can put pressure on defendants to settle rather than send their lawyers and company executives to a small courthouse along the Texas-Louisiana border – far away from their work and families, often for weeks at a time.
    Oh please, unless both plaintiffs and defendants are located in the same local area, someone is going to have to travel. You’ve overblown all your points, so I guess you couldn’t resist here.

    local jury pool has been historically friendly to plaintiffs by awarding outsized damages (although that is changing).
    Based upon the last set of data I was aware of, the juries of ED TX were not particularly plaintiff friend in either outcome (e.g., infringement or not) or damages.

    Our country needs a patent system built for the 21st century innovator
    LOL … all the “patent reform” that has been recently passed by Congress has made it easier for infringers and harder on innovators. The latest giveaway (i.e., the AIA), should have been named the America Infringes Act. You are advocating additional protections for infringers — not innovators.

    I have a lot of work that I need to get done today — protecting the rights of inventors, which is what I do every day — but this “article” (nee propaganda piece) begged for a response.

  6. Edward Heller March 25, 2016 1:39 pm

    Recall the creation of the Federal Circuit — to make patent laws uniform in the US?

    Think about that for a moment.

    What the proponents really wanted was to take patent law out of the hands of the Supreme Court.

    What the big boys want this time is to force patent litigation into the home court of the alleged infringer. That is unfair.

    This venue reform effort should consider formalizing one or two district courts as courts of national venue where venue is proper for all defendants if jurisdiction otherwise exists.

  7. Curious March 25, 2016 2:53 pm

    What the big boys want this time is to force patent litigation into the home court of the alleged infringer.
    Everybody likes to play on their home court: basketball teams, football teams, infringers in patent lawsuits, etc. The crowd is usually on their side and the refs (intentionally or not) tend to have a bias for the home team.

  8. Anon March 25, 2016 3:43 pm

    If you really want to fix a “problem,” there are a few mandatory steps.

    The first of which is to clearly understand what the “problem” is.
    To assist in that endeavor, employing a proper root cause analysis (along the lines of the Five Why’s) – and not dismissing certain factors is critical.

    As perhaps underlying the animus the author is seeing (but not perhaps being direct enough), a certain district being more “pro-patent” may be nothing more than that district just not being as anti-patent as other options.

    Other items that the district is being accused of: any such unfair practices of evidence or discovery, should likewise NOT be dismissed.

    If a district is artificially inflating costs, then such should be on the table for verification and remedy.

    But we should not be polly-anna about the general anti-patent fervor that holds sway currently.

  9. Steve March 26, 2016 12:09 pm

    Dana — were you and all the many other intransigent infringers willing to do the good, right, moral, and honorable thing — take licenses to the innovations of others whose inventions you are profiting mightily from — venue wouldn’t matter.

  10. PAUL MORGAN March 26, 2016 12:12 pm

    You have to give Gene credit for now having posted short articles on opposite sides of the current patent venue legislation arguments that have lead to a number of comments.

  11. Patent Investor March 26, 2016 2:18 pm

    Every time I start a comment a look at it again and have to wonder if Gene would even allow it and then I start over. Such nonsense. The only thing harder to fathom than the author’s opinion is trying to accept that he actually believes what he is writing! Thanks for the comment pointing out that the vice president and associate general counsel of Intellectual Property and Litigation at Adobe Systems Incorporated doesn’t give two hoots about mom and pop shops being sued by “patent trolls”, I almost choked on my lunch when I read that sentence. I’ll stop now before I have to re-write my comment yet again, but thanks to everybody who responded civilly, you did better than I.

  12. Gene Quinn March 26, 2016 6:13 pm

    Paul-

    Trying to play this one down the middle. I will be following up with my own article in the next few days, which will probably be more down the middle than some might think. Historically I haven’t been a fan of the EDTX because over the years I think they’ve ignored the law (or at least my interpretation of the law) in order to keep hold of cases that should have been transferred. So I can and do certainly understand that frustration. I also think it is antithetical to our system to have 1 federal district judge with 15% to 20% of all patent cases. I’d be in favor of a patent only trial court, or several of them scattered across the country, but we don’t have that model. Even with that model a single judge having that much influence seems wrong to me (regardless of whether that judge is or is not a good judge). Of course, I also can’t help but notice that those wanting this venue bill complain that the courthouse shouldn’t matter but show no similar concern when patent owners get railroaded in other district courts. So the battle cry is just an attempt to win hearts and minds it seems. I also think there are other, better ways to address this issue. As I’ve said tongue and cheek many times before, I hate the 3rd grade approach that punishes everyone for the actions of a few. Similarly, rules that apply to the other 93 districts when 1 district is driving the reform is over the top and makes me think there is another agenda at play.

    So, as I do from time to time, I let the comments and our community help inform and crystallize my thinking.

    Cheers.

    -Gene

  13. Curious March 26, 2016 8:20 pm

    I think they’ve ignored the law (or at least my interpretation of the law) in order to keep hold of cases that should have been transferred
    Still, using his own statistics, 35% of the cases do get transferred. That is not an insignificant number. I also recall seeing Federal Circuit cases (in the ED of TX) in which denials of motions to transfer have been overturn.

    I also think it is antithetical to our system to have 1 federal district judge with 15% to 20% of all patent cases.
    As I stated in my prior comment, there will always be a venue most favorable to defendants and one most favorable to plaintiffs. ND of VA (i.e., the “rocket docket”) used to be a favorite, but it has now shifted to ED of TX. Over time, plaintiffs will figure out what venue is most favorable and find a way to file there. If ED of TX suddenly disappeared, a new favorite will appear and a large percentage of cases will be filed there.

    The questions that should be asked are: Why is ED of TX preferred by plaintiffs? followed by: Should the ED of TX be more like other venues or should other venues be more like the ED of TX?

    What would be interesting to read is a comparison of the ED of TX versus, say, the ND of California (a favorite of defendants). It would be nice to get candid statements from experienced litigators who could describe the differences between these two venues. Once we understand the differences, we can then make better assessments as to what venue is doing it right and what venue is doing it wrong (bearing in mind that both can be doing some things right and some things wrong).

  14. PAUL MORGAN March 26, 2016 10:19 pm

    Thanks Gene,
    One thing would be eliminate most of the problem by elimination of a key E.D. TX difference in unnecessarily increased defendant litigation costs. [This was already part of some of the other proposed patent legislation recently pending.] Namely, to not allow a D.C. to refuse to give a Markman claim interpretation, or refuse to even consider any S.J. motion, until the eve of trial. It leads to “nose of wax” patent litigation in which claims remain undefined and unlimited, and can be asserted to cover all kinds of products, with no opportunity for a defendant to show non-infringement ,until after being subjected to all kinds of costly discovery and pre-trial expenses, even though establishing infringement is supposed to be the burden of the patent owner, not the defendant.
    In districts like N.D. CA the patent owner has to show more than just a bare statement that something is infringed by something before allowing the suit to drag on so long. That was also the intent in the elimination of FRCP Form 18.