Posts Tagged: "Patent Venue"

On May 22, 2017, in TC Heartland LLC v. Kraft Foods Group Brands, LLC, 137 S.Ct. 1514 (2017), the Supreme Court held that patent venue is controlled exclusively by 28 U.S.C. § 1400(b), which restricts venue in patent cases to (1) where the Defendant resides, or (2) where the Defendant commits an act of infringement and has a regular and established place of business. The decision was immediately hailed by commentators as a significant break with past precedent… Despite the common perception of practitioners that the TC Heartland decision changed the law of venue in patent cases, the majority of district courts to address this issue have come to the opposite conclusion, finding that the decision merely reaffirmed existing law and could not excuse the failure to raise the defense earlier. The reasoning of these decisions is questionable, as is the refusal of these courts to recognize how dramatically TC Heartland changed the landscape for patent litigation.

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.

In re Cray, Inc., the Federal Circuit applied the recent Supreme Court’s TC Heartland decision to grant a writ of mandamus, directing the Eastern District of Texas to transfer Raytheon’s patent case to a proper venue. The district court refused the transfer based on notions of targeting the district for a benefit, according to a four-part test it adapted from In re Cordis Corp. The Federal Circuit disagreed, holding that the listed criteria were not sufficiently tethered to the relevant statute, 28 U.S.C. § 1400(b)… In determining venue in a patent infringement case, the location of defendant’s employees who work from home is not a regular and established place of defendant’s business when the defendant corporation has no material connection to that place, as by rent, inventory, conditioning employment based on the location, or other relevant facts.

After briefly parsing the statutory language of §1400(b) critical to the decision the Federal Circuit concluded that Judge Gilstrap’s four-factor test was not compliant with the statutory language. Judge Lourie simply concluded: “The district court’s four-factor test is not sufficiently tethered to this statutory language and thus it fails to inform each of the necessary requirements of the statute.”… “The fact that Cray allowed its employees to work from the Eastern District of Texas is insufficient,” wrote Judge Lourie as he shifted to the specifics of the case before the Court.

Unfortunately, the answer may be not as much as many expected. Right after the decision there were 350 motions to transfer or dismiss in the EDTX. But the limitations imposed by TC Heartland have been called into question by a ruling from EDTX Judge Rodney Gilstrap in Raytheon Co. v. Cray Inc. In his decision, Gilstrap denied a motion by Cray seeking to transfer the case to another district in light of TC Heartland. Gilstrap found that the existence of a single employee in the district constituted “regular and established place of business,” and he established a four-factor test to decide whether newer cases belong in the district… As hopeful as some folks were about TC Heartland, it certainly hasn’t stopped NPEs. The IP community must acknowledge this and adjust accordingly – it’s still the wild west out there, for now.

During the second quarter of 2017, a total of 1,138 patent cases were filed at the U.S. district court level, an increase of 18 percent when compared to first quarter filings. However, that uptick in patent suits between the first and second quarters of 2017 repeats a trend which has played out since 2013. Compared to the second quarter of 2016, patent case filings were actually down 7 percent on a year-over-year basis. From the beginning of 2016 through the end of 2017, U.S. district courts have seen some of the lowest levels of patent litigation in district courts on a quarterly basis. Interestingly, the Lex Machina update shows a significant decline in case filings in the Eastern District of Texas (E.D. Tex.) correlating strongly with the Supreme Court’s recent decision in TC Heartland LLC v. Kraft Foods Group Brands LLC, a case which restricted the statute on proper venue for patent infringement cases.

Issa decried Judge Gilstrap’s “overreach” in denying a motion to transfer venue in a case coming after the U.S. Supreme Court’s decision in TC Heartland LLC v. Kraft Foods Group Brands LLC, a decision which restricted the venue statute for patent infringement cases. “It is, in fact, an act that I find reprehensible by that judge,” Issa said… American Board of Trial Advocates (ABOTA) noted that Issa’s further assertion that Judge Gilstrap was motivated by personal bias to promote community interests “extended beyond a challenge of the legal precedent to a personal attack on Judge Gilstrap and his integrity as a jurist.”

Under the Federal Rules of Civil Procedure, a party waives its right to assert a defense of improper venue when it fails to raise the defense in a pleading or with other Rule 12 motions.  Importantly, however, that waiver only takes effect if the defense was “available” to the party at the time of filing either the pleading or motion.  Many circuits, including the Federal Circuit, interpret that requirement by recognizing an intervening law exception to the waiver of a defense, whereby an intervening change in law makes available a defense that had not previously been available.  Does the Supreme Court’s decision in TC Heartland constitute a change in the law?  Was the defense of improper venue unavailable until May 22, 2017?

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.”

For the first 220 years of United States black letter law and precedent based directly on the U.S. Constitution, patents are property rights. Even the Republican Party Platform states that patents are property rights. Issa disagrees with all of that. Issa seems to believe that patents are instead some sort of public entitlement like food stamps as is evident in his bill, the America Invents Act, and his continuing actions even last week. Issa’s hypocrisy is so blatant, so obvious and so up front that I’m not sure he even understands what he just said, which is a very dangerous problem. So long as Darrell Issa remains in key lawmaking position in the Republican leadership in Congress, venture capital, patenting, new technologies, startups and jobs will continue to flee from the U.S. to China.

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.

In two recent decisions following T. C. Heartland, district courts have applied two different methodologies in resolving motions to change venue… In the first decision a trial judge in the Eastern District of Virginia denied the venue motion, filed three days after T.C. Heartland but also on the eve of trial.  Cobalt Boats, LLC v. Sea Ray Boats, Inc. (June 7, 2017)… In the second decision, a district court in the Southern District of Ohio applied the standards in § 1400(b) and transferred the action because neither of two defendants resided in the district and neither had a permanent and continuous presence in Ohio.

After TC Heartland, patent infringement filings by patent trolls should be greatly reduced because they can no longer simply file and maintain cases against domestic corporations in plaintiff-friendly districts such as the Eastern District of Texas. Unfortunately for Marshall, Tyler and other East Texas towns, the torrent of lucrative patent litigation-related business traffic may slow to a trickle.