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Wednesday, May 18, 2016
Forum Shopping in Patent Cases
For more than a decade now, patent reform has been on Congress's agenda. Congress passed the America Invents Act (AIA) in 2011, the most comprehensive patent legislation in fifty years. Still, many believe the AIA didn't go far enough, particularly with respect to patent litigation, and have continued to push for further reform. The Venue Equity and Non-Uniformity Elimination Act--co-sponsored by Senators Flake (R-AZ), Lee (R-UT), and Gardner (R-CO)--is the latest development in this patent reform effort.
Currently, patent owners can file infringement suits against corporate defendants in just about any federal court. The patent venue statute, 28 U.S.C. section 1400(b), provides that "[a]ny civil action for 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." (emphasis added) Because section 1400 doesn't define "resides," the definition set out in the general venue provision--i.e., that defendants "reside" where they are subject to personal jurisdiction--applies. 28 U.S.C. section 1391(c). This means that corporate defendants can be sued for patent infringement wherever they are subject to personal jurisdiction, which is virtually every judicial district in the country as long as the allegedly infringing product is sold nationwide. As a result of these liberal venue provisions, patent owners forum shop and file a disproportionate number of patent suits in certain judicial districts, such as the Eastern District of Texas where almost 44% of patent suits were filed in 2015.
The VENUE Act, which is supported by many technology companies and public interest groups, would significantly curtail where patent infringement suits may be filed. At the same time, the Act would expand venue in patent declaratory judgment actions, a topic I've addressed in my scholarship and a recent amicus brief. While a thorough discussion of the costs and benefits of the VENUE Act is beyond the scope of this post, I would like to raise two questions. First, is forum shopping (or forum selection) really that bad or is it just part of litigation strategy? Second, why should defendants in patent cases be treated differently than in other civil suits? In other words, why should we have special venue rules for patent cases?
Posted by Megan La Belle on May 18, 2016 at 05:12 PM | Permalink
Comments
Stuart and PaulB,
Thanks to you both for your comments.
Stuart, with respect to Erie, one concern the Court had with the Swift rule was that it allowed diverse litigants to forum shop (and choose federal court), while non-diverse litigants could not. I understand that concern. But, here, virtually all patent owners are free to choose their preferred federal forum, including the ED of Texas. To your point about procedural advantages, that is certainly one of the reasons patent plaintiffs file in ED Texas. And I agree with you that, in an ideal world, we would eliminate those differences, a topic that I've written about: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2459785. But I'm concerned about addressing this problem with the VENUE Act, which makes it more difficult for plaintiffs to select a favorable forum, and forces them to file in a forum that favors defendants instead. After all, there is supposed to be some deference given to plaintiff's choice of forum. Plus, if a plaintiff chooses a truly unfair and/or inconvenient forum, that should be addressed through the fairness prong of the specific jurisdiction analysis or a 1404(a) transfer.
PaulB -- I have a work-in-progress discussing the phenomenon you mention titled "Influencing Juries in Litigation Hot Spots," which I discussed in an earlier post: http://prawfsblawg.blogs.com/prawfsblawg/2015/06/judicial-specialization-patent-cases-and-juries.html
Posted by: Megan La Belle | May 21, 2016 7:36:09 AM
Stuart, the ED Texas has been notorious for patent cases. Prior to that it was the venue of choice for asbestos litigation. Not only do the judges and attorneys (many of whom are former clerks of said judges) play this game but the local citizenry know that massive judgments for plaintiffs are a key economic development activity for the region. Samsung has been sued in this district so many times that they paid for the construction of an ice rink as a means of gaining good will despite not having any facilities in the area.
Posted by: PaulB | May 19, 2016 9:59:25 PM
I guess my first thought is that forum shopping is generally considered bad because we don't want the parties to obtain significant real advantages from procedural choices (like where to sue). Think of Black and White Taxicab v. Brown and Yellow Taxicab and how the Supreme Court treated that case in Erie. Normally, you might think of choices about where to sue as being largely about convenience to the parties (although even then you have to consider whether one party may be able to obtain advantage by choosing a location and thus choosing the composition of the jury pool). But if there was one venue that was significantly and consistently more favorable to plaintiffs then one would expect them to select it consistently. This leads to the undesirable aspect of forum shopping as parties are obtaining (or think they are obtaining) real advantages from procedural choices.
This leads to the conclusion that we probably don't need special venue rules for patent cases. Rather, the optimal solution would be to rein in whichever venue is favoring one side or another and thus eliminate the incentive to select a particular venue even when that venue has little or nothing to do with the dispute.
P.S. I am not a patent lawyer, so take my thoughts with a grain of salt.
Posted by: Stuart | May 19, 2016 10:53:22 AM