TC Heartland: Statutory Interpretation, Fairness, and E.D.Texas

by Dennis Crouch

The topside briefs have been filed in TC Heartland with strong support for the petitioner who is looking to dismantle the notion of nationwide venue against accused patent infringers.  The question presented in the case is one of basic statutory interpretation of Congress’s venue statute: Whether 28 U.S.C. § 1400(b) is the sole and exclusive provision governing venue in patent infringement actions and is not to be supplemented by 28 U.S.C. § 1391(c).

28 U.S.C. § 1400(b) appears to severely limit venue in patent cases to “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.”  Section 1391(c), however seems to broaden the definition of residence “For all venue purposes . . . (2) . . .[defendant] shall be deemed to reside … in any judicial district in which such defendant is subject to the court’s personal jurisdiction.”  Since most patent defendants are subject to nationwide personal jurisdiction, venue is then proper in any jurisdiction.

This first-level statutory interpretation seems to make TC Heartland’s case a loser. The thing is, the Supreme Court already decided what is almost the exact same case in its 1957 decision Fourco Glass (limiting patent venue) and the unusual concentration of patent cases in the E.D.Texas has certainly reached the ears of the high court in a way that may influence the outcome.

TC Heartland’s attorneys Dabney & Duffy write:

This is an extraordinary case because it presents a question of statutory interpretation that this Court specifically answered more than a half century ago.

[Petitioner’s Merits Brief: 16-341_pet-authcheckdam1]

In addition to stare decisis, the brief offers a cogent explanation that the narrower, specific interpretation makes sense and that the “for all venue purposes” phrase in the broader statute is limited by its preparatory statement “except as otherwise provided by law.”

One debate here that may arise is a question of what is the “settled law.”  The Federal Circuit broad-venue doctrine has been the approach since its 1990 VE Holdings decision.  Here, however, TC Heartland raises the little known case of  Andrews v. Hovey (1888) for the proposition that a patent statute’s interpretation “cannot be regarded as judicially settled [until] so settled by the highest judicial authority which can pass upon the question.” I wonder though, whether creation of the Federal Circuit should be seen as overruling that prior statute – likely not.

A strong set of amicus briefs have been filed in support.  Most briefs are fairly similar – arguing the statutory interpretation and that the result is bad policy / unfair.  See Bankers Brief [16-341-tsac-aba];  ABA [16-341-tsac-american-bar-association]; APP Ass’n [16-341-tsac-act]; Internet Companies and Retailers [16-341-tsac-48-internet-companies]

The only party in opposition thus far is AIPLA who argues, inter alia, that if a policy needs changed then congress should do the changing. [16-341-ac-aipla]

Although I do not expect the Federal Government (SJ) to weigh-in on the case, one interesting brief comes from a group of 17 state attorneys general, including Texas whose “citizens [have been facing] abusive claims of patent infringement, which businesses and residents confirm are a drag on economic growth.” [16-341-texas-et-al]

Without the Government Brief, Mark Lemley’s brief (on behalf of 61 professors) may be seen as the most influential.  However, I would suggest that the brief loses some amount of its “law professor” credibility by being so one-sided in its statutory construction. [16-341-tsac-61-prof-of-law] Alongside Lemley’s brief is that filed by Stanford’s IP Clinic that argues, inter alia, harm to small businesses and start-ups: “frivolous PAE litigation is negatively correlated with venture capital (VC) investment.” Implicit (and often explicit) in these briefs is the argument that E.D.Texas is supporting frivolous litigation. Stanford writes:  “The Eastern District of Texas Exhibits Abnormal Forum-Selling and Litigant Gamesmanship That Undermine the Appearance of Integrity of the Patent Litigation System.” [16-341tsacengineadvocacy] Orange County IP Law Association’s brief filed by Bill Brown raises the real argument that E.D. Texas Judges now have “de facto policy making authority.” [16-341-tsac-ocipla]; See also Unified Patents [16-341-tsac-unified-patents]

Intel and Dell also offered a strong brief filed by Donald Verrilli in his new role at Munger Tolles: All indicia of statutory meaning show that Congress narrowed patent venue in 1897 and has never expressed an intent to expand it.” [16-341tsacintelcorporation].  Following onto Intel’s intent argument, WLF explains that post-Fourco amendments by Congress should be considered “within the context of a century of special rules governing patent cases. [16-341tsacwashingtonlegalfoundation] The Intel brief also focuses on a common complaint against the Federal Circuit – that it fails to really respect and follow the principles of statutory interpretation.  Here though, the issue is failing to follow Supreme Court precedent.  Intel argues that the “Court does not depart from the doctrine of stare decisis without some compelling justification.” (quoting Hilton v. S. Carolina Pub. Rys. Comm’n, 502 U.S. 197, 201 (1991).

GiantCo GE offers some crocodile tears at the “unfairness” of the provision to nice companies like GE.  Astutely foreshadowing a likely upcoming challenge, GE also reflects that part of the problem is “the Federal Circuit’s expansive approach to personal jurisdiction [that] has further stretched the boundaries of permissible venue in patent cases.” (citations omitted). [16-341-ac-ge]

Although GE’s unfairness arguments likely fall flat, one of the best briefs is that filed by EFF who does a great job of explaining how venue’s primary concern is that of fairness and that the Federal Circuit’s interpretation completely ignores that import. [16-341-tsac-electronic-frontier-foundation]

Generic Pharma adds to the statutory construction by explaining that the venue provisions in Hatch-Waxman Act are inconsistent with the Federal Circuit’s interpretation. [16-341-tsac-generic-pharmaceutical-association]

Finally, last but not least, Chicago’s IP Law Ass’n offers its analysis that patent venue battles over the “best venue” are wasting time and would be unnecessary under Fourco. [16-341-ac-intellectual-property-law-association] [16-341-ac-appendix]

About Dennis Crouch

Law Professor at the University of Missouri School of Law. Co-director of the Center for Intellectual Property and Entrepreneurship.

24 thoughts on “TC Heartland: Statutory Interpretation, Fairness, and E.D.Texas

  1. Should the Supreme Court reverse and thereby restrict venue,
    1. What will be the increase in caseload resulting from severed defendants?
    2. How will the courts harmonize decisions between jurisdictions?
    3. Where will actions be brought against foreign entities?

    Reply
    1. I mean, I’m on the same side, but I don’t like these arguments. Anything outside the text, I’m not in favor of.

      1) I’m guessing most companies either act alone (and infringe alone, thus not increase the number of cases) or they avail themselves to other jurisdictions and can be joined

      2) It’s “harmonized” in the Fed Cir. Well, theoretically. I’m not sure it actually is harmonized any more than other areas of law where the different circuit might be split on a particular issue.

      3) ?… same as every other case in every other area of law.

      Reply
      1. I agree that 3) seems like an odd question, but your answer to 1) is complicated by the fact that the AIA included a special non-joinder requirement.

        2) begs the supposed answer to the supposed problem of forum shopping (that is, there will still be forum shopping, just in a different flavor)

        Reply
        1. So I don’t have to research it, can you educate me on on the non-joinder requirement?

          Number 2 has nothing to do with forum shopping but questioning the wisdom of a specialized circuit court for patent cases.

          Reply
          1. You are correct as to 2) not related to forum shopping – that was meant to be a second item for 1).

            The AIA mandated patent cases to be (in the short version) NOT joined just because the same patent may be involved in the case between multiple accused infringers.

            Reply
          2. Perhaps we need to start small: New legislation that randomly keeps one in every five patent cases on appeal to its proper geographic circuit would quickly prove the wisdom of abolishing Federal Circuit patent jurisdiction diversion completely.

            Reply
  2. AIPLA’s brief pages 8 to 11 seem the most compelling to me as a policy argument.

    That and the plain reading of the statute.

    Reply
    1. Totally agree.

      It must be remembered that the patent venue statute was first enacted to broaden venue for patent cases, not too narrow venue. Had Congress intended to generally narrow venue in patent cases at the time from a broad venue statute that would have allowed corporations be sued anywhere in United States, as are aliens, then there would be no question that Congress intended the patent venue statute override the broader venue visions. But when Congress is broadening venue of corporations over time, the policy considerations are flipped. The intent to broaden venue of corporations should be incorporated into the patent venue statute as a matter of course.

      We must remember that Congress can constitutionally authorize a single patent court to be located anywhere in United States it chooses and be consistent with due process. There is nothing in the Constitution that reasonably prevents this. After all, patent owners are haled into the patent office in Virginia every day to defend their patents.

      Furthermore, it makes no sense to any reasonable person that a corporation may be sued anywhere in United States (it is doing business) for any cause of action, but for patent cases it must have a regular and established place of business. What is the difference, and what is the justification for the difference?

      The problem of the Eastern District of Texas is caused by local rules that seem out of step. I think that problem should be addressed directly by the Supreme Court or by Congress.

      Reply
      1. The problem of the Eastern District of Texas is caused by local rules that seem out of step. I think that problem should be addressed directly by the Supreme Court or by Congress.

        Two things:

        First, this is directly related to the question that I posed when this topic first came out: is that particular district violating some procedural or substantive rule or law?

        The answer back (if you want to call it that), was “well, not that we can define.”

        (Feel free Ned to substantiate your “problem of the local rules” and show what those rules transgress – no one else really has)

        Second, absent any such defined malfeasance, the current direction of the Supreme Court (in their hurry to smack down the CAFC) is to push for more discretion at the district level.

        That more discretion accords with a MORE difficult job of showing malfeasance for ANY district.

        Reply
      2. Can you expand on your criticism of the exercise of personal jurisdiction on companies. You don’t like the purposely availment test?

        Reply
        1. J, we know this is not a real due process test in general, it is simply a venue test, and the venue is permissible if the district court is located in a “district” (read state) where it would be permissible under due process for the state courts to exercise jurisdiction.

          But patents are national. Congress could if it wanted to, and consistent with due process, locate patent infringement trials in any District Court in United States it so pleased. It could establish a National Patent Ct. in Alaska if it wanted to. There would be nothing unconstitutional about that, due process or otherwise. The reason is that the effect of a patent is national and infringement is in the United States, not in particular states.

          Reply
  3. When the facts are on your side, pound the facts.

    When the law is on your side, pound the law.

    When (as here) neither are … pound the policy … and the table … and the walls … and anything else within arm’s reach.

    Which is exactly what TC Heartland and their amicus henchmen are doing.

    Reply
    1. The corollary being, pound those who only want to pound the table with their feelings.

      😉

      Reply
  4. Lemley’s “brief loses some amount of its ‘law professor’ credibility by being so one-sided in its statutory construction.” This doesn’t surprise me. What does surprise me is why we think he should be considered a neutral observer. Lemley is a very smart and persuasive lawyer. But, in several important issues going back decades, he has been more in the mold of an advocate than observer.

    For example, his early advocacy for limiting continuations made it sound continuations were being abused and caused all sorts of problems, ignoring that his supposed remedies would have created all sorts of other problems. The PTO eventually backed down on limiting continuations, and the world has not fallen apart.

    Reply
    1. ” The PTO eventually backed down on limiting continuations, and the world has not fallen apart.”

      Fees went up I do believe instead.

      Reply
      1. Lol – your selective memory of the Continuation Rules smack-down is rather delightful, 6.

        Reminds me: who’s your daddy?

        Reply
  5. WRT fairness, would it be safe to assume that fairness of outcome is more guaranteed in a venue independent of either the corporate plaintiff or the corporate defendant?

    I mean really, when the consequences of the outcome are likely to affect the operations, welfare, and viability of the corporations involved, it arguably affect the jobs, the local economies, the well being of the communities/cities in which the corporation is situated.

    Can one ensure the unbiased, objective, and correct application of the law by people (judges and juries alike) whose communities’ well being are so deeply affected?

    We can’t avoid the role people must take in deciding these cases, but should they be from the town where a plaintiff or a defendant corporation resides? That’s a recipe for bias if ever I heard of one, especially in the “No more forgotten man – Age” we apparently live in now.

    Reply
  6. …and no one points out (well, almost no one), that the Supreme Court trend of more discretion towards lower courts is in the opposite direction of what the efficient infringers want here…?

    😉

    Reply

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