The pending Federal Circuit mandamus action of In re TC Heartland involves an interesting legal question that has now been fully briefed. The Federal Circuit has not yet announced whether it will hold oral arguments in the patent venue debate.
In the dispute, Heartland has asked the court to reconsider its interpretation of the patent venue statute 28 U.S.C. § 1400(b) and order that the limiting elements of the provision be given effect. Under the proposed interpretation, a patent infringement case could only be filed in districts either (1) the defendant resides or (2) the defendant has both committed acts of infringement and has a regular and established place of business. This proposal stems directly from the language of 28 U.S.C. § 1400(b) which requires either (1) residency or (2) a combination of infringing acts plus a regular-place-of-business as a prerequisite to proper patent venue.[1] For the past several decades the limits of § 1400(b) have been given essentially no weight after being undermined by 28 U.S.C. § 1391(c). This broadened provision undermines § 1400(b) by providing a very broad definition of the term “resides” — indicating that that “except as otherwise provided by law,” a defendant will be deemed to “reside” in any venue where the defendant is subject to that court’s personal jurisdiction in the action at hand.[2] When § 1400(b) and § 1391(c) are read together, it appears that patent cases can be filed in any venue with personal jurisdiction over the defendant. The point of the TC Heartland mandamus action is that those two provisions should not be read together, but instead, the more traditional and limited definition of “residency” should apply when interpreting 1400(b). If the Federal Circuit (or Supreme Court) were to flip on this, we would see a major impact on the current concentration of venue in the Eastern District of Texas.
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Party Briefs:
Briefs Amici:
- Heartland.Acushnet (Supporting petitioner)
- Heartland.EFF (Supporting petitioner)
- Heartland.USInventors (Supporting respondent)
Discussions of the Case.
- NYU law
- Patently-O
- Patently-O
- Patently-O
- The Legal Intelligence
- Prof Michael Risch on Written Description
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The history of the issues here have gone back-and-forth. The key Supreme Court case is Fourco Glass Co. v. Transmirra Products Corp., 353 U.S. 222 (1957). In that case, the Supreme Court ruled that “28 U.S.C. § 1400(b) is the sole and exclusive provision controlling venue in patent infringement actions, and that it is not to be supplemented by the provisions of 28 U.S.C. § 1391(c).” This statement was reiterated by the Supreme Court in Brunette Mach. Works Ltd. v. Kockum Indus., Inc., 406 U.S. 706 (1972) (“Congress placed patent infringement cases in a class by them-selves, outside the scope of general venue legislation.”) However, in 1988 Section § 1391(c) was amended to greatly expand the residency definition to the limits of personal jurisdiction and included a statement that its residency definition in § 1391(c) was “for purposes of venue under this chapter.” Subsequently, the Federal Circuit ruled in VE Holdings that the 1988 statutory amendments overruled Fourco and that the expanded residency definition §1391(c) now applies in patent cases. (§ 1400 (the patent jurisdiction provision) is in the same chapter as §1391.) In 2011, Congress again changed its statute – this time repealing the “for purposes of venue under this chapter” and instead added in that the statute applies in all civil cases “except as otherwise provided by law.”
The petition also argues for a recognition of limits on personal jurisdiction. In particular, the petition argues that a court should not automatically have jurisdiction to rule on acts of infringement that occurred in another state when the court’s personal jurisdiction over the defendant is derived from the specific alleged acts of infringement in the forum state (specific jurisdiction vs general jurisdiction). The logical key to the argument here is the legal fiction that each infringing act is a separate and distinct infringement – as such, sales in Delaware should not automatically give the Delaware courts jurisdiction to rule on whether sales in New York or California were infringing.
This case is certainly one to watch.
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[1] Section 1400(b) states that “Any 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.”
[2] Section 1391(c) states that “an entity … shall be deemed to reside, if a defendant, in any judicial district in which such defendant is subject to the court’s personal jurisdiction with respect to the civil action in question.”
I am reminded of the “notion” from eBay that patent law is not to be treated differently than other laws…
Ned: The problem patent owners face when the sue in the big company’s hometown is a bias in favor of the local big company. I hope you recognize this.
That “bias” — to the extent it’s real — is readily surmountable by all kinds of existing checks in the system (e.g., jury selection). I don’t think it’s particularly difficult to find people in a district who are vehemently “biased” against the nearby giant corporation. And there’s plenty of people in between who simply don’t care one way or the other. Judges, of course, need to police the attorneys and prevent them from introducing irrelevant or speculative evidence about how important the company’s allegedly infringing activity is to the well-being of every person in the state.
The problem of patentees (big or small) dragging hundreds of companies (big and small) into a distant venue because “1391(c) says so” is another thing entirely.
MM, While convenience is a factor, the plaintiff’s choice of forum needs to be respected in my opinion, unless the inconvenience factors are overwhelming. For big companies, there really is no inconvenience.
However, I still would like to know what the “abuses” were that lead to the patent venue statute.
Re: “For big companies, there really is no inconvenience.” ?
Having all attorneys, witnesses and documents travel long distances to small towns in the middle of nowhere with no good public transportation to get all the way there and back, and extremely limited local counsel choices and other facilities, plus local rules, adds considerably to attorney expenses and delays. That increases settlements made just to avoid expenses. To escape that venue now [even when neither party has any relation to that venue] requires the additional expense of filing a venue transfer motion in each case.
Paul, you have got to be kidding.
Depositions are taken where the witness is located, not where the court is located.
Typically, patent trials are battles of experts and experts are not “located” in any particular district and are rather hired guns that will travel.
There is typically very little need to actually put a corporate witness on the stand during trial unless there is some controversy about invention or about willful infringement.
[…] Patent Venue: Limits on Venue in Patent Infringement Litigation […]
So let’s look at the forrest of statutes:
28 USC 1400 (b) Any 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.
Resides is not defined.
28 USC 1391
(a)Applicability of Section.—Except as otherwise provided by law—
(1) this section shall govern the venue of all civil actions brought in district courts of the United States; and
(2) the proper venue for a civil action shall be determined without regard to whether the action is local or transitory in nature.
(b)Venue in General.—A civil action may be brought in—
(1) a judicial district in which any defendant resides, if all defendants are residents of the State in which the district is located;
(2) a judicial district in which a substantial part of the events or omissions giving rise to the claim occurred, or a substantial part of property that is the subject of the action is situated; or
(3) if there is no district in which an action may otherwise be brought as provided in this section, any judicial district in which any defendant is subject to the court’s personal jurisdiction with respect to such action.
(c)Residency.—For all venue purposes—
(1) a natural person, including an alien lawfully admitted for permanent residence in the United States, shall be deemed to reside in the judicial district in which that person is domiciled;
(2) an entity with the capacity to sue and be sued in its common name under applicable law, whether or not incorporated, shall be deemed to reside, if a defendant, in any judicial district in which such defendant is subject to the court’s personal jurisdiction with respect to the civil action in question and, if a plaintiff, only in the judicial district in which it maintains its principal place of business; and
(3) a defendant not resident in the United States may be sued in any judicial district, and the joinder of such a defendant shall be disregarded in determining where the action may be brought with respect to other defendants.
So two different readings:
(1) 1391 defines resides – therefore 1400 supplemented
(2) 1391 does not
Which one based on “Except as otherwise provided by law”? Does 1400 provide otherwise? I’m not sure.
Kraft makes a nice argument – resides is not defined. When Congress writes laws it means what it says – in this case resides means personal jurisdiction unless otherwise provided by law.
Heartland’s “otherwise provided by law” requires the Federal Circuit to revisit (en banc) a prior holding, overturn it, and reinstate Fourco [a case interpretting different statutory language]. That’s not really a strong argument for “otherwise provided by law.”
Basically – Congress wants you use 1400 only, but hey “resides” is not defined! Good thing congress didnt give us 1391 (the definitional section of District Court venue provisions). Since Congress didnt define the term – we revert to Fourco. Seems pretty convoluted.
I would like them to haveseen some examples of other sections that DO define “resides” (or some other phrase and that is clear that it was “except as otherwise provided”) [they only prvide examples of other sections that use the term without definition [I’m not sure any exist in the other direction].]
drop by, if “resides” means effectively anywhere in the US for corporations, then the second clause, which is really addressed to corporations, “where the defendant has committed acts of infringement and has a regular and established place of business” is rendered surplussage.
The reading given the statute by the Federal Circuit makes no sense. It effectively erase 1400(b). Congress did not intend that because they did not repeal it.
I agree Ned – it’s just hard to ignore the definitional framework Congress employed (wisely or not).
MM – I disagree that that is what language was used in VE holding:
“Section 1391(c) as it was in Fourco is no longer. We now have exact and classic language of incorporation: “For purposes of venue under this chapter….” Congress could readily have added “except for section 1400(b),” if that exception, which we can presume was well known to the Congress, was intended to be maintained. Certainly it would not be sensible to require Congress to say, “For purposes of this chapter, and we mean everything in this chapter …,” in order to ensure that it has covered everything in a chapter of the statutes.
VE Holding @ 1579 (emphasis added).
Compare:
except as otherwise provided by law [<–language in the amended statute we have today]
versus
“except for section 1400(b),” [<–what the CAFC indicated would make all the difference if it was present]
You also have to recognize that 1400(b) is undoubtedly "a law" and, moreover, it's a law that was interpreted by the Supreme Court to provide exception to the patent framework back when 1391(c) lacked that "classic language of incorporation" — just as it lacks that language now.
drop by, I don’t see how the Federal Circuit even gets to defining “resides”. They were able to ignore Fourco because — or so the CAFC’s argument went — 1391(c) had been amended to include language (“for purposes of venue under this chapter”) that trumped the Supreme Court’s decision.
But that key language was removed in 2011 and replaced by text (“except as otherwise provided by law”) that — coincidentally or not — mirrors the language that the CAFC suggested in VE Holdings would have swung the interpretation of the two statutes back in the Fourco direction (i.e., 1400(b) would control again and “resides” would be defined according to the Supreme Court’s “traditional” definition provided in Fourco, namely the state of incorporation).
As I recall there was considerable case law on what the 1400 (b) “resides” means from the long era before the Fed. Cir. in VE Holdings judicially mooted that statute. It would still apply if 1400 (b) gets CPR. [One can even wonder if ending the additional judicial burden of patent suit venue disputes was a strong incentive for that Fed. Cir. decision?].
While the cases referred to “abuses” as the reason for Congress attempting to limit patent venue in the 1800s, I have never heard of what these abuses were. Today we see that if you do not limit patent venue, patent cases will be filed in forums not convenient a corporate defendant, but which are best suited to the interests of the patent owner. I wonder if that was happening back in the 1800s as well?
In case anyone forgot, the patentee in VE Holdings filed suit in Northern California. The defendant, Johnson Gas Appliance, was based in Iowa and the district court found that Johnson did not “reside” in California nor did it have a “regular and established place of business” in California.
Does anyone remember where Ve Holding Corporation was incorporated or residing? I noticed that most of the counsel representing them on appeal were located in (surprise!) Texas.
Flip flip flip!
DC In 2011, Congress again changed its statute – this time repealing the “for purposes of venue under this chapter” and instead added in that the statute applies in all civil cases “except as otherwise provided by law.”
Was there any Congressional testimony to the effect that they were attempting to restore 1400(b)’s teeth? On its face, the amendment to 1391(c) referred to above would seem to accomplish that about as plainly as possible without naming 1400(b) explicitly.
I found the answer in the VE Holdings case:
While the legislative history reveals that a purpose of the amendment is to define venue of corporate defendants and to prescribe the venue determination in multidistrict states, it does not speak to how or whether this amendment is intended to affect Sec. 1400(b), or for that matter other sections of chapter 87. Congress’ silence on this issue does not support a negative inference that the 1988 amendment was not intended to affect Sec. 1400(b). See Turkette, 452 U.S. at 591, 101 S.Ct. at 2532 (that the legislative history forcefully supports a major purpose of the statute, but does not address the statute’s scope regarding the issue at hand, does not require the negative inference that the statute does not also have the purpose, and thus scope, in question). Congress’ intention is simply not known. “Ordinarily, ‘Congress’ silence is just that–silence.’ ” Community For Creative Non-Violence v. Reid, 490 U.S. 730, 109 S.Ct. 2166, 2177, 104 L.Ed.2d 811 (1989) (quoting Alaska Airlines, Inc. v. Brock, 480 U.S. 678, 686, 107 S.Ct. 1476, 1481, 94 L.Ed.2d 661 (1987)).
The strongest argument supporting the Federal Circuit’s interpretation of the law appears to be that their interpretation is “not a result so absurd that Congress could not possibly have intended it.” (the CAFC’s own words in quotes).
The “Congressional silence” argument [which can be argued both ways] is not logically the same for the situation of the Fed. Cir. de facto removing by an entire enacted statute that Congress had left right on the books right next to the one it was amending.
Also from the CAFC decision in VE Holdings:
Section 1391(c) as it was in Fourco is no longer. We now have exact and classic language of incorporation: “For purposes of venue under this chapter….” Congress could readily have added “except for section 1400(b),” if that exception, which we can presume was well known to the Congress, was intended to be maintained.
That was 1990. As Dennis notes, “In 2011, Congress again changed its statute – this time repealing the “for purposes of venue under this chapter” and instead added in that the statute applies in all civil cases “except as otherwise provided by law.”
Maybe I’m missing something but this case would seem to be a slam dunk for Heartland.
Thanks Dennis, for bringing more attention to this case.
For those wondering, LexMachina’s statistics for 2015 show the following, a direct impact of the nationwide venue rule of VE Holding:
44% of all new patent cases were filed in ED Tex.
29% of all new patent cases are in front of Judge Gilstrap (ED Tex)
14% of all new patent cases are in front of Judge Schroeder (ED Tex)
Combined, two district court judges have 43% of all new patent cases in the entire country.
Theories as to why these judges are so popular with patent owners (note there are few declaratory judgments filed in ED Tex) are outlined in Klerman and Reilly’s “Forum Selling” and J. Jonas Anderson’s “Court Competition for Patent Cases”. Both articles make compelling arguments.
It’d be interesting to calculate how much money has been siphoned out of California and into the hands of Texan patent litigators and their jurist buddies (cousins?) in Marshall since the CAFC’s decision in VE Holdings.
I recall reading something to the effect that most or nearly most of all the patent filings in the ED TX were handled by two firms.
Vera, venue is about convenience.
However, your objection to the ED of Texas seems to be instead that the judges there are implicitly pro-patent, or at least, not biased, as they should be, you imply, in favor of big company defendants, primarily because the ED of Tex is in a rube district that has no business other that patent litigation.
The problem patent owners face when the sue in the big company’s hometown is a bias in favor of the local big company. I hope you recognize this.
It was my understanding that the ED got a lot of business because it was, at one time, a rocket docket. Big company defendants like to avoid rocket dockets because their litigators want to extend discovery and law of motion as much as possible in order to feather their own nests and to wear down the other side.
Again, I think the only thing that should be considered when considering venue is convenience. However, the patent venue statute was enacted because of so-called “abuses.” I like to know what they were.
Ned,
If you knew me, you would know that I abhor bias period. Perhaps I am an idealist, but I believe we should strive in our judicial system, to eliminate bias to the extent we can, regardless of what “side” or “who for”. (To be clear: you have ignored the myriad small companies that get sued in the Eastern District — that’s who we advocate on behalf of)
You claim that local districts are biased toward the local big company — that may or may not be true — but the effects of that bias, if it exists, are much less pernicious. Few (if any?) practicing companies situate in a particular district in order to get advantages in offensive patent litigation. More likely they are in one district or another for reasons wholly disconnected from the patent system. The contrary cannot be said of those who situate in the Eastern District. Thus even if true that the big company’s home district is “biased” the appearance of the manipulation of the rule of law is significantly less.
Indeed, these same “big companies” that you claim have some advantage in their home forum are also those who own patents and sue for patent infringement (see, e.g., Apple. Fitbit). There is less ability then– if we assume the district is “biased” — for this bias to skew the overall corpus of law in one direction or another. Again, this is not the same in the Eastern District where the vast majority of patent owners filing suit are non-practicing entities.
Vera, I was just thinking so much of locating a business in a particular district to enforce one patents. I was thinking of the general reluctance of any patent owner to sue a big company defendant in his home forum. There is a reason for that and I think it is because it is perceived that the judges and in particular the juries will be protective of their local company.
Ned,
I don’t know about other areas, but in the Bay Area, I don’t think that sort of statement can be assumed true. Tech companies are not exactly universally adored here, and in fact there’s a pretty strong anti-tech-company, especially big company, movement among a sector of the population. There are many people that would like nothing more than to see big tech get their comeupppance.
The relationship between the citizens of the Bay Area and the tech companies here is very complex, and it is presumptuous to assume anyone (judge or jury) will be “protective of their local company”.
You might be right, Vera, that some big companies may not be liked, especially if they are unkind to their employees.
“I don’t know about other areas, but in the Bay Area, I don’t think that sort of statement can be assumed true. Tech companies are not exactly universally adored here, and in fact there’s a pretty strong anti-tech-company, especially big company, movement among a sector of the population.”
Driving the cost of rent through the roof will do that.
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