Guest Post: What Would Happen to Patent Cases if They Couldn’t all be Filed in Texas?

Colleen Chien, Santa Clara University Law School and Michael Risch, Villanova University Charles Widger School of Law[1]

Today, the Federal Circuit heard oral argument in the mandamus petition brought in the TC Heartland case. At stake is where patentees can properly bring their cases, a question that has received an inordinate amount of attention–even from comedic TV shows–in light of the high concentration of patent filings in just a handful of venues.

We have followed this case with interest because, as we have written before, we believe that revising venue may be a reform that the patent system’s diverse stakeholders can agree upon. Although the reasons that plaintiffs flock to Eastern Texas and a few other districts are contested, we believe that a system that incentivizes skating rinks outside of courthouses to curry favor with local juries is far less defensible.

How did we get here? For nearly 90 years, it was settled law that special rules limiting venue governed patent lawsuits. Congress changed the general venue law in 1988, and the Federal Circuit interpreted this as removing the special rule (28 U.S.C § 1400)’s restrictions, enabling plaintiffs to choose, essentially freely, among district courts where to file their patent suits.

Where might we be headed? Petitioners now argue under a variety of theories that the restrictions in 28 U.S.C. § 1400(b) in effect be reinstated, and given greater effect. Other than our concerns about the end result, we take no position at this time on the legal merits of any particular argument. In any event, it’s not our opinion that matters. If the Federal Circuit agrees, patent venue would revert to either (1) defendant’s residency (place of incorporation) or (2) a combination of infringing acts plus a regular-place-of-business. Congressional proposals are expected to both broaden and narrow this definition, though we caution against the development of proposals that make it difficult for the plaintiff to determine appropriate venue without undertaking substantial discovery in the first place or that makes the determination of “real” places of business uncertain.

But the Federal Circuit will not wait for Congress. How significant would a reversion to § 1400 be? Although impossible to predict with certainty, we think it is worthwhile to consider, so we performed an analysis that attempts to model that venue rule. We considered what would have happened in 2015, had the proposed interpretation been in effect then. Last year patent plaintiffs filed 44% of their cases in the Eastern District of Texas. Where would they have filed (assuming that they would have filed at all) had the previous interpretation of Section 1400 rule been in place? That is to say, where would patent plaintiffs file if they couldn’t all go to Texas?

To carry out our analysis, we chose 500 cases at random, corresponding to 665 defendants, filed in 2015. We then carried out three steps, as described in greater depth here. First, we approximated where each named defendant could be sued according to the more restricted reading of the statute, using place of business and incorporation data provided by complaints and facility/location information provided by Reference USA, a widely-used database of business data. Second, we identified, based on where the case was actually filed, and also where the plaintiff had sued in the past, the likely venue of suit. That is, if a plaintiff sued all over the country, then we assumed it would continue to do so. But if a plaintiff sued only in one district, we assumed they would sue again in that district if it could legally do so. Third, we compared the results of the first two steps and determined the percentage of 665 plaintiff-defendant pairs (“cases” for short) that reflected the following “matches”:

  • An exact match – P could have filed the case as is;
  • A plausible match – P could have filed in “Ps preferred venue” – any venue P filed in in 2014-2015;
  • No match – but P could have filed in the P class’ preferred venue – one of the top 5 venues of OpCos or NPEs; or
  • No match – none of the above.

The resulting analysis suffers from a few limitations. First, our data sources are likely to contain a modest number of errors and only roughly approximate permissible defendant venues. Second, though we assume that infringement took place in each district where the defendant has a location, this assumption may not hold in every jurisdiction. Third, outside of “exact” matches, it’s hard to tell with certainty where plaintiffs would choose to file – though we assume that plaintiffs plausibly would file where they have before, due to greater familiarity with the court, and that certain matches were “preferred” because we assume that P would prefer to file where others in the P’s class have filed in the past, other factors may trump. Finally, our dataset is small – only 500 cases – though we are in the process of extending the analysis. Still, we believe that the results from this initial analysis are instructive, and share them below.

As shown in Figure 1, we find that though approximately 30% of “cases” would have been able to be filed as they were, 70% of them would not have able to be filed as is. While 8% could have been filed where the plaintiff had filed before, in 62% of cases, plaintiffs would have to file in a jurisdiction they had never filed before, though 41% of the time, a jurisdiction preferred by other plaintiffs of the same time was available.

Figure 1

Figure 1

Applying codings for entity type provided by Unified Patents in Figure 2, we find that the rule change would have a greater impact on NPE plaintiffs (26% would have been able to file in the same district vs. 40% of OpCos) than OpCo plaintiffs, but that many OpCos – about 50% – would also have had to file outside of their past venues. This makes intuitive sense as plaintiffs often prefer to file in their home court, that, even if not generically plaintiff friendly, nonetheless are more convenient and represent areas where the plaintiff’s witnesses, as well as employees, are located.

Figure 2

Figure 2

Where would the cases go? We used the steps described above to determine likely venues for all but the “no match” cases, with the results shown in Figure 3. For the reasons described above – principally that we cannot be sure where plaintiffs would sue, particularly outside of their own past patterns – the data presented here are suggestive, rather than definitive, of projected patterns. With these caveats in mind, it appears that the Delaware would be the top venue, capturing 33% of the cases, followed by the Northern District of California with 21% of cases, and the ED Tex, with 11% of the cases.

Figure 3

Figure 3


So, where does this leave us? Many cases would have to move, and not just those filed by NPEs. Even so, a decent number of cases could have stayed in the same location. That Delaware and Northern California would be the most popular is unsurprising given how many defendants are incorporated in Delaware or headquartered in Silicon Valley. Perhaps more surprising is that Eastern Texas remains third on the list, albeit with a much smaller percent of cases. These cases would likely be filed against retailers selling patented goods from stores located in that district, though there were some defendants in our sample that were headquartered there.

In conclusion, changes to venue rules would likely cause real changes to venue locations. Not all the cases would move to Delaware (as some might have expected), but a decent number likely would. Though some plaintiffs would be inconvenienced, there would be much more diversity in patent venues, with many districts seeing more cases than they have in some time, and a few districts seeing many fewer. While we leave analysis of the legal merits to others, we are literally and figuratively of two minds with respect to this outcome. On the one hand, ending the Eastern District of Texas hegemony would be a good thing. On the other hand, one of us has litigated patent cases in unpopular districts and warns that defendants should be careful what they wish for; there is a reason why so many “specialist” district court proposals have been made.

To the extent that some percentage of patent cases have been made possible solely because of favorable venue, we would expect to see dynamic effects as well, should the Federal Circuit recalibrate patent venue to its nearly century old equilibrium. If Congress doesn’t like the result, it can always act.

[1] We thank Lex Machina for providing us with case data, Unified Patents for providing us with entity codings, and research assistants Reuben Bauer, Emma Stone, Campbell Yore, Max Looper, Amanda Garger, Christie Larochelle, for help with coding.

29 thoughts on “Guest Post: What Would Happen to Patent Cases if They Couldn’t all be Filed in Texas?

  1. The patent venue statute for corporations made sense when most corporations were still small local concerns. But, today, most companies that are likely to be sued for patent infringement are national, and due process would not be offended by having them sued anywhere they are actually doing business.

    The original patent venue statute was enacted because of “abuses.” But what abuses? Have the times changed enough so that those abuses, whatever they were, are no longer relevant?

    I think the court should look at these factors as well, if they have not considered them before.

    BTW, does anyone actually know what the abuses were?

    1. I think, probably, that Bilski, Alice, IPRs, and the like has made the E.D. Tex handwringing less necessary. When I was a SA we had a guy with a midlevel type online retail business get a demand letter for a Amazon-1-click type patent, and he settled because it was obviously cheaper to do that than litigate even if you won on an early summary judgement, particularly if venue was outside of IL.

      I haven’t seen something like that since. So it was either already an unlikely scenario, or it has been curbed. I’d venture there are a few true cases of Etsy people getting sued cross country that everyone piggybacks off of to justify their own agenda.

      It also doesn’t help that ED Texas seems (from an outsider’s perspective) like a Kangaroo court, similar to Cook County juries in civil cases in IL.

      1. Alex, anyone who refused to settle for less than the cost to litigate for even a few months is a fool.

        That being said, you do understand that the cost of litigation game is a two-edged sword? If a patent owner is willing to settle for the cost of litigation, he is somewhat taking advantage of the system — and we should be interested in fixing this somehow such as by providing special courts for small(er) claims.

        But the Eastern District of Texas exists, not as a kangaroo court, but as a court that does not abide by the games that law firms play to drive up the bills and because corporations do not like to settle until they punish the patent owner as much as possible in order to force a lower settlement — because patent owner who go to court are asking for a lot more than litigation avoidance settlements. Getting to trial quickly as the last thing they want because if they lose, they have may have to fork over what the patent owner has demanded or more, and face the possibility of an injunction.

        1. For sure. Just saying that there are probably a few similar fact patterns where the patentholder demanded more, and there was actual litigation that created the mystique of being dragged into Texas.

          Like I said, it probably is a few cases of legitimate gripes that people piggyback all their complaints off of.

        2. You call Eastern Texas, “a court that does not abide by the games that law firms play to drive up the bills.” You’ve obviously never litigated there. It costs far more to litigate in E.D. Texas as a defendant than anywhere else in the country; law firms love it. For many years, you couldn’t even contest discovery scope; the court’s standing order required the defendant to turn over everything that was “relevant” without even awaiting a request. It was heaven for big law firms, and even today, with aggressive amendments to the Federal Rules, it’s still much harder to contest broad discovery in E.D. Tex. than any other district.

          And we all know discovery obligations are asymmetrical in most patent cases; the defendant has an 18-wheel truck full of documents, and an NPE plaintiff (which is 95% of the cases filed there) usually has little more than a copy of the file history and maybe a manilla folder with a few sheets of paper. I’ve seen many cases where big defense law firms do not want to transfer out of E.D. Texas because they will make so much more money defending their clients there, than after a transfer to another district.

          1. Well, “that may be relevant” is a problem. But that was in the rules.

            As to costing more than elsewhere, I doubt it if the whole case is considered. The problem in Texas is the expenditure is compacted into a smaller time space. It just seems like it costs more when it does not.

  2. Is anyone really taking this seriously? I thought that it was all a bunch of fabricated buzz from the cheerleaders at Law 360, trying to make some news.

  3. Interesting, but needs refinement or further explanation. For example, how many of the cases filed in EDTex name or target major (national or multinational) corporations? Likely most, if not all. If so, “reverting” to pre-1988 venue statutes would not make any difference, since merely being licensed to do business was sufficient for corporate resident venue under old 1391(c):

    “A corporation may be sued in any judicial district in which it is incorporated or licensed to do business or is doing business, and such judicial district shall be regarded as the residence of such corporation for venue purposes.”

    The Federal Circuit did not “remove” the “special rule” in 1400(b) pertaining to patent infringement. It held that corporate residence is the same under 1400(b) as it is in 1391(c), which was amended to substitute personal jurisdiction for business license. Non-corporate parties are not subject to the same provision.

    Moreover, the article suggests a mere shift forum shopping from Texas to Delaware (where incorporation for tax purposes should be irrelevant to actually doing business or acts of infringement). While other venues may be affected as well, the article suggests that they are limited in number and that there would not be an even distribution of plaintiff filings or a closer relationship between defendants and the plaintiffs’ chosen forum.

    If the present venue jurisprudence is unfair or flawed beyond the rest of civil jurisprudence, the Federal Circuit cannot fix it. Congress will have to act, and balance the interests of all parties, not just corporate defendants.

    1. Steve – as we note in the post, we used ReferenceUSA to simulate the 1400(b) doing business requirement – so your assumption that we somehow missed multistate companies isn’t satisfied. It’s possible, of course, that Reference USA missed some, but we are relatively confident – there were plenty of non-huge defendants that got sued.

      And you are right that there would be a shift to Delaware – but not entirely to Delaware. Not as many defendants are incorporated in Delaware as we thought going in.

      I’m not sure I agree with your understanding of the venue law history. Colleen and I don’t agree entirely on the legal issues, which is why we leave that to others. If you are interested in my view, it is here:
      link to

      1. I think saying a bunch of “retailer” cases will be filed out there anyway is misleading. Venue may technically pass muster under 1400(b) in that situation if a local retailer is named, but there’s almost no way the CAFC wouldn’t reverse a denial of a discretionary transfer under 1404(a) in that situation. So the truth is that the number of suits in that district would, after a few years, drop down to a tiny trickle.

        Those cases are nothing more than “customer suits,” and likely to be transferred to the district where the underlying supplier company is headquartered. Plaintiffs haven’t been successful in keeping suits in E.D. Tex. by simply naming Wal-Mart as a defendant.

  4. As the noose ever tightens. What is so bizarre to me is that there all these people that “just know” that innovation would be better off without patents when–in reality–they have no real-world experience.

    1. Is that just a general comment showing displeasure with the state of the world? It doesn’t seem to have anything to do with this post. This study wasn’t about innovation or getting rid of patents. Plus, I was a partner at a law firm and represented startups and huge public companies both as plaintiffs and as defendants – how is that not real-world experience?

      1. What is obvious is that this is part of the effort to limit the influence of the ED of Texas which has been –in some respects–a great help against the judicial activist tide to end patents. I know that Colleen Chien puts out a constant stream of anti-patent papers and articles in the popular press that are filled supposed facts that I do not believe represent the real world.

        I know your old law firm. I’ve litigated on the other side of your law firm, though not you to my knowledge.

        In the real world of innovation, patents play a key role for many reasons. Patents are integrated into large companies and how they do innovation. Patents are an integral part of start-ups. Patents are an integral part of employment arrangements with technology companies. Without patents, we will end up with draconian employment agreements which is what the new trade secret bill is all about.

        The fact is that anyone that has worked in this field next to the innovation knows the great role that patents play.

        1. If I thought that the law schools would take action against the law professors for ethical violations, I would make it my hobby to file ethical complaints against people like Lemley and Chien. But after investigating this possibility, it was clear that the law schools don’t care what the professors do.

        2. Well, I’m in agreement with most of your views. Frankly, I think Colleen is as well, though we disagree about NPEs. Indeed, it should be noted that of all the things we disagree about, we agree that a system where half the cases are filed in one district is not a good thing for the system. If other districts are insufficiently protecting patents and innovation, then that should be fixed, but the solution to underprotection of patents is not to try all the cases in Texas (or Delaware, for that matter)

            1. I didn’t “slag[] [Michael] for being anti-patent”. That is not true. I said this paper was part of the movement to limit the influence of the E.D. of Texas. I did slag Chien and Lemley both of whom I think are very anti-patent and both of whom are judicial activist.

              The fact is that something odd happened in that the E.D. of Texas has fought back against the SCOTUS. It is a good thing. The SCOTUS and Fed. Cir. have been legislating at the bench. Insurrection is the right response and the E.D. of Texas has provided a little bit of this. For example, they have held a number of patents not invalid under Alice. Yea! This has resulted in the anti-patent movement (Lemley, e.g.) taking aim at the E.D. of Texas.

              That is the big picture–reality.

          1. >>If other districts are insufficiently protecting patents and innovation,

            I would kind of like to fix this problem before lessening the influence of the E.D. of Texas.

    2. Remind them of the obstetric forceps invented by the Chamberlens family.

      Nearly a hundred years they kept it secret, as they feared it would ruin them if anyone else could duplicate their feats. Untold deaths caused by the default to secrecy.

      When the incentive for patents are gone, trade secrets will be the rule.

    1. It’s not clear exactly what this panel is going to write but I didn’t detect a whole lotta love for the defendant’s arguments. Moore, in particular, was fairly vocal in expressing her dubiousness.

      I thought the attorneys for both sides made excellent presentations, however. If this study had been published earlier, I wouldn’t have been surprised to hear it mentioned as the parties did discuss the pros/cons of concentrating patent litigation in particular venues.

      Jurisdiction and statutory interpretation nerds will enjoy listening.

      1. This panel is never going to overrule VE on their own…. none of these justices are the legal scholar type famous for writing cutting edge decisions. Moore pretty much told him the case was weak, unless a larger panel thinks very strongly otherwise this is going nowhere. So we will likely have another S Ct case for next year.

  5. Very interesting! One data presentation issue: don’t use pie charts, especially for comparing two sets of data (as in Figure 2). As Edward Tufte notes in The Visual Display of Quantitative Information:

    A table is nearly always better than a dumb pie chart; the only worse design than a pie chart is several of them, for then the viewer is asked to compare quantities located in spatial disarray both within and between charts […] Given their low density and failure to order numbers along a visual dimension, pie charts should never be used.

    Humans are much better at comparing linear differences (e.g. the height of a column) and numbers than they are at comparing angles and areas.

    1. This is a great point. The pie is probably least objectionable when there are just two or three classes being compared, one of the classes overwhelmingly dominates, and the differences between the small classes are irrelevant.

      1. from the Wiki:

        In 1975, while at Princeton, Tufte was asked to teach a statistics course to a group of journalists who were visiting the school to study economics. He developed a set of readings and lectures on statistical graphics, which he further developed in joint seminars he taught with renowned statistician John Tukey, a pioneer in the field of information design. These course materials became the foundation for his first book on information design, The Visual Display of Quantitative Information.

        Golly, maybe he should have tried to get a design patent on that field of information. Or maybe turned it into a new “technological field.”


        1. Also from the Wiki:

          On March 5, 2010, President Barack 0bama appointed Tufte to the American Recovery and Reinvestment Act’s Recovery Independent Advisory Panel ‘to provide transparency in the use of Recovery-related funds’

          Obama appointee….

          …to provide transparency…

          (fill in your own pun chline)

    2. Damn, I’m about to publish a paper that is filled with pie charts. Indeed, there are pie charts within pie charts. But when I tried to present the same data via a table, people’s eyes glazed over.

      I agree here that maybe side by side bars might work as a visualization if not a table.

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