Hatch says patent venue reform likely regardless of SCOTUS decision in TC Heartland

By Gene Quinn
February 16, 2017

Senator Orrin Hatch (R-UT), the Chairman of the Senate Republican High-Tech Task Force, rolled out his innovation agenda for the 115th Congress during a special event today at the United States Capitol.

With respect to patent litigation, which he characterized as a tremendously thorny issue, Senator Hatch explained that there is a very real chance that venue reform will happen this year. Hatch explained:

I believe there’s one area where we can see real progress this year: venue. Abusive litigants have exploited a hole in the law to direct a disproportionate number of suits to plaintiff-friendly forums, and to one such forum in particular. 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. I intend to take a leading role on this critical issue.

Earlier today I hosted a webinar discussing patent reform in 2017, which focused on likely legislative, judicial and executive changes to the patent system. I was joined by Bart Eppenauer, former Chief Patent Counsel for Microsoft and current Managing Partner of the Seattle office of Shook, Hardy & Bacon, and Hans Sauer, who is Deputy General Counsel for the Biotechnology Innovation Organization (BIO). We all agreed that the Supreme Court’s consideration of TC Heartland is one of the biggest issues people in the patent community should be watching.  We also all agreed that patent venue reform in the form of new legislation is actually more likely regardless of what the Supreme Court decides in TC Heartland. It would seem that Senator Hatch, and presumably the Republicans in the Senate agree.

Senator Orrin Hatch (R-UT) unveils his innovation agenda.

Senator Orrin Hatch (R-UT) unveils his innovation agenda.

The statutes in question when the Supreme Court decides TC Heartland will be 28 U.S.C. § 1400(b) and 28 U.S.C. § 1391(c). Pursuant to § 1400(b), a “patent infringement may be brought in the judicial district where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business.” Pursuant to § 1391(c), a corporation is deemed to be a resident of “any judicial district in which such defendant is subject to the court’s personal jurisdiction…”

In Fourco Glass Co. v. Transmirra Products Corp., 353 U.S. 222 (1957), the Supreme Court held that § 1400(b) is not to be supplemented by § 1391(c) and that “§ 1400(b) is the sole and exclusive provision controlling venue in patent infringement actions…” While that might seem to end the inquiry on its face, the Federal Circuit has for the last 25 years ignored the Supreme Court ruling in Fourco Glass based on the belief that 1988 amendments by Congress “rendered the statutory definition of corporate residence found in § 1391 applicable to patent cases.” Thus, it is the belief of the Federal Circuit that Congress overruled the Supreme Court’s ruling in Fourco Glass, which Congress obviously has the authority to do.

Eppenauer disagrees with the Federal Circuit that the 1988 amendments did overrule Fourco Glass, and told our webinar audience that he expects that the Supreme Court took this case to overrule the Federal Circuit’s interpretation of 1391(c). Sauer said that the way business is conducted today many companies are incorporated in jurisdictions where they do not really do business or have any real presence, so it is questionable whether a return to 1400(b) as the only jurisdictional statute would make sense in a modern world.

It is hard to argue with Eppeneaur when he predicts the Supreme Court will overrule the Federal Circuit. While the Supreme Court does from time to time affirm the Federal Circuit, in the vast majority of cases either the judgment or legal rulings are overruled or at least substantially alerted. In other words, the Supreme Court rarely takes a case from the Federal Circuit to express a high opinion of that court’s jurisprudence.

Equally clear, however, is that if the Supreme Court were to once again rule that § 1400(b) is the only venue statute applicable to patent infringement actions that would go well farther than any proposed venue reform legislation, and specifically much farther than the venue reform bill submitted by Senator Jeff Flake (R-AZ) during the 114th Congress. Eppeneaur, Sauer and I were all in agreement during the webinar that a push for venue reform in the wake of the Supreme Court’s decision in TC Heartland seems inevitable regardless of how they rule.

If the Supreme Court were to agree with the Federal Circuit the call for venue reform from the tech sector would become deafening. While Eppeneaur said a ruling from the Supreme Court overruling the Federal Circuit and reinstating § 1400(b) is the only venue statute would be loudly celebrated by virtually all technology companies, he did also agree that such a ruling would be harder to accept for many patent owners. So if the Supreme Court reverts to Fourco Glass, look for many patent owners with portfolios and litigation problems of a different character from the tech sector to push for a softening, which would require legislation.

Either way, it seems the days are numbered for the Eastern District of Texas being the patent centric court of choice for many plaintiffs. With 35% to 40% of filings made there the face of patent litigation could be changing quickly. Indeed, thanks to so many companies being incorporated in Delaware, the District of Delaware may become the favorite venue for patent owners in the not too distant future. Of course, that could have ripple effects that are difficult to predict. While the laws of Delaware are quite favorable for incorporation, if things play out the way they seem to be heading will companies (particularly start-up innovation companies) consider incorporating and limiting their operations to those areas where district courts have shown the most hostility to patent owners?

I guess the moral of the story is that if you haven’t been following TC Heartland you absolutely need to follow the case because it could have profound impacts on business decisions and the future of patent reform legislation.

For more see The Future of Venue Shopping in a post-TC Heartland World.

The Author

Gene Quinn

Gene Quinn is a Patent Attorney and Editor and founder of IPWatchdog.com. Gene is also a principal lecturer in the PLI Patent Bar Review Course and an attorney with Widerman Malek. Gene’s specialty is in the area of strategic patent consulting, patent application drafting and patent prosecution. He consults with attorneys facing peculiar procedural issues at the Patent Office, advises investors and executives on patent law changes and pending litigation matters, and works with start-up businesses throughout the United States and around the world, primarily dealing with software and computer related innovations. is admitted to practice law in New Hampshire, is a Registered Patent Attorney and is also admitted to practice before the United States Court of Appeals for the Federal Circuit. CLICK HERE to send Gene a message.

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 12 Comments comments. Join the discussion.

  1. IPdude February 16, 2017 7:00 pm

    Gene,
    One of these days I hope to read a positive post about the resurrection of our defunct patent system. It just seems to be eroding away more and more every day. I really thought the new administration would change the landscape. But, I suppose it’s naive to think the little guy will ever matter. What a disgrace.

  2. Gene Quinn February 16, 2017 8:43 pm

    IPdude-

    I hope to be able to write such a positive post too. I know how you feel. There are many out there working on things. Don’t give up hope and stay engaged.

    -Gene

  3. IPdude February 16, 2017 10:52 pm

    Thank you for leading the charge, Gene.

  4. EG February 17, 2017 8:35 am

    Hey Gene,

    Frankly, I find the SCOTUS grant of cert in TC Heartland to address the “rinky dink” procedural question of venue perplexing given that they refused to grant cert on the more serious substantive issue of patent-eligibility in Sequenom with the en banc Federal Circuit, as well as almost two dozen amicus briefs begging for clarification on the nonsensical and broken Mayo/Alice framework. It speaks very poorly about SCOTUS’ warped sense of priorities in the patent law area.

  5. Lawrence S. Cohen February 17, 2017 2:39 pm

    This is fine, but trivial compared to the damage done by SCOTUS to the patent system, all of which could be cured by Congress. One that I would especially value is return to mandatory (or nearly so) injunction against continued infringement, especially in favor of non-practicing entities whose patents should be just as valuable as those of practicing entities. Historically this distinction was written into the patent law of emerging or undeveloped countries so as to not prevent commercial development. But the US and other developed countries saw the balance the other way because new commerce was not as strictly needed as a powerful patent system, one of whose goals was to reward technology development, and another goal was to encourage further
    development. I think our national economy can still tolerate a powerful patent system, but the Federal government is in such disarray (might I say chaos) that restoring the patent system is way below water in priority. A simple amendment to section 283 would work. Not mention the section 101 fiasco.

  6. Night Writer February 17, 2017 7:20 pm

    Orrin: why don’t you reform patent law so that it is no longer an equity court where the judges can do whatever they want. Bring back law in patent law, then the venue won’t matter so much.

  7. Eric Berend February 18, 2017 3:10 pm

    This is an all out invasion, conducted in every domain except actual war (unless one regards assassinations in such a manner) – promulgated in the social, economic, political and legal spheres, to manifest its desired goals.

    This disingenuous and treacherous dismantling of the U.S. patent system will not cease, until it has been remade into an institution as phony as everything else ruining U.S. society, today.

    The rage of the communitarians is in full bloom. The tyranny of the “3,000 tyrants, one mile away” warned about; is now, nearly fully realized.

    In the genius of creation: the tool-maker, the explorer, the inventor; an inherent elitism exists. This paragon of excellence is a natural and societal part of the variety human experience. Yet, those who would measure life in terms of outcomes without regard to personal content or process, decry this natural range as being part of the “oppression” of power abuse.

    Nothing could be further from the truth; as, power utilization is wielded largely as an artifice of our societal organizations. These talented individuals, those whom we call “explorers”, “inventors” or “pioneers”, pursue their own higher potential on the basis of their own abilities.

    The cowardly, lazy sallow mass of “the herd” found in all human situations, find an apparently superior moral position with which to associate their banal preferences. The amorphous animal of ‘public opinion’ rears its ugly head. How satisfying it is, to condescend to those whom one feels inferior by comparison, in the comfort of a bleating, conceited crowd! And besides: ‘they tell us that patents threaten the availability of ‘smart phone’ ‘free stuff’ – and anyway, only software matters in the world anymore – right?”

    How lucrative, for those few of higher intellectual prestige in critical positions, to enjoy the rewards of their corruption, by granting an apparent air of righteousness, to this racket. The oligarchs promulgating the mendacious plunder of the fruits of the discoverer geniuses, promote this canard, of course; so as to favor their exploit and marginalize the true creators.

    This fire won’t be done until these darling chauvinists burn the entire house down, along with the simultaneous erection of a sham facade resembling the former regime to the gullible or unpracticed observer. Otherwise, the system, such as it stands today, would have been neutered or repealed entirely. However, since a secondary goal of this racket, is to reserve the benefits of U.,S. patent protection to only the oligarchs of technology and finance, they incessantly proclaim the false canard of “protecting innovation”: ‘innovation’ that, in fact, has been historically presented largely by individual inventors. Therefore, the illusion of patent protection as being available to all classes, is useful to maintain.

    Thus: the inventors get used, exploited and denigrated both ‘coming and going’. The evil of these pirates is boundless. If it took 500 Karen Silkwoods and J.Clifford Baxters to accomplish this goal, then there would be an attempt to explain 500 suicides or unexplained deaths of key persons under suspicious circumstances. These diabolical scum will stop at nothing to own our genius and then take all the credit, rewards and prestige for themselves.

  8. FRANK LUKASIK February 19, 2017 8:11 am

    First-To-Invent and Expiration for non-payment of Maintenance Fees are the most important things that have to be changed. The U.S. should follow the Constitution and not the Paris Convention.

  9. Inventor Woes February 19, 2017 12:19 pm

    FRANK LUKASIK,

    The Constitution empowers Congress to create the body of patent law. It alone holds that power. It decided to amend it in the AIA with first to file, IPR, etc. So it IS following the Constitution. Not sure where you are coming from. La La Land? It won an Oscar but has no bearing on legal analysis.

  10. Anon February 19, 2017 1:57 pm

    IW,

    Your comment here about Congress writing the AIA, so it “must be” following the Constitution only shows yet again that your understanding of the law is suspect at best.

    Even though Congress IS the branch of the government actually authorized to write the statutory law that is patent law, they themselves are also not above the Constitution and cannot write just any old law that they want to. Since patents are property (and the AIA did not change that), the rest of what Congress wrote cannot violate other Constitutional protections of property.

    When you comment, please make sure that your statements do accord with the actual law – especially if you are going to mistakenly use the law to denigrate someone else.

  11. FRANK LUKASIK February 19, 2017 2:41 pm

    The Constitution has not been amended and the Congress has tried to amend it by taking away the First Inventors right to receive a patent.

  12. Anon February 19, 2017 3:18 pm

    Mr. Lukasik,

    There has been no “try to amend it” by Congress.

    The hyperbole does not work for the argument that you want to make.

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