E.D. Texas Venue Case Goes En Banc; AIPLA Amicus Brief

The AIPLA believes that the Eastern District of Texas is hearing too many patent cases. Legally, the organization has decided that E.D. Texas judges are “misapplying federal transfer rules by giving too much weight to plaintiffs’ choice of venue.”

In re Volkswagen is up for an en banc hearing in the 5th circuit court of appeals. The VW case is a product liability case stemming from a VW Golf crash that killed a 7–year old girl. The accident occurred in Dallas (location of the N.D. Tex.), but the case was filed 150 miles away in Marshall. 

VW argues that the District Court (Judge Ward) abused its discretion in denying the defendant’s §1404 venue transfer motion — arguing that it would be “unduly burdensome” for the multinational to litigate in the Eastern District of Texas rather than the Northern District of Texas.

28 U.S.C. §1391, the venue statute, broadly allows cases to proceed in any venue where a defendant corporation “is subject to personal jurisdiction at the time the action is commenced.”  Even when venue is proper, a court may still transfer the case to a more convenient location. 28 U.S.C. §1404 provides that a district court may transfer a civil action when it is both more convenient for the parties and witnesses and is “in the interest of justice.” 

In an amicus brief filed in the case, the AIPLA argues that there are many cases sitting in the Eastern District of Texas that should more properly be heard elsewhere, and that the district court has been too slow to transfer venue.

“The routine filing of patent infringement complaints in the Eastern District of Texas that have essentially no connection to that district has been encouraged by the seeming reluctance of courts in that district to transfer cases under § 1404(a).”

As a backstop to its arguments, the AIPLA also raised the threat of legislation:

“It is also worth noting that legislation on patent reform currently before Congress seeks to narrow drastically venue in patent cases, driven to a great extent by a desire to address the kind of forum shopping that occurs in the Eastern District of Texas.4 Providing the district courts clear guidance on applying the transfer provision will go a long way toward solving the forum shopping problem that is the impetus behind the pending venue legislation.”

The AIPLA Argument:

  1. The location of filing should only be a presumptive starting point in the venue analysis. If a defendant shows “good cause” reason to transfer, then the presumption should evaporate.
  2. “Proximity of evidence” should be a major factor.
  3. This decision is made at a very early stage in the litigation, thus the court should not require a high level of precise evidence to prove convenience.
  4. The “public interest” is usually a sham argument. (That the people of E.D. Tex. have an interest in having their courts adjudicate patent cases if the goods are sold there).

Read the AIPLA Brief

22 thoughts on “E.D. Texas Venue Case Goes En Banc; AIPLA Amicus Brief

  1. anonymous,

    I do not have a source to cite for the reversal rates of ED Texas. I do not keep most of the readings on this subject. So I understand my statement is conclusory. However, I do remember reading that ED Texas reversal rates are lower (but not the lowest) when it came to patent cases. Its claim construction reversal rate was somewhere around 25%. So we may have to agree to disagree on this one.

    I disagree with your characterization that “No one’s talking about sanctioning the plaintiffs for filing in E.D. Tex.” This is exactly what the AIPLA brief and those so up in arms about ANY rocket docket are attempting to do. A filing in ED Texas is not automatically gratuitously inconvenient, but this is what AIPLA, and the defendant’s bar would have one believe.

    Were previous rocket dockets gratuitously inconvenient? They must have been because the same tired arguments were used to transfer cases from their dockets. An analogous situation exists in Delaware for shareholder actions, yet Congress isn’t creating a “get out of Delaware” statute. I don’t see anyone up in arms about getting cases transferred out of Delaware. Few large corporations actually have a presence there, except a filing and a statutory agent. Are we to believe this is what it takes to make things “more convenient?”

    I agree that there are abuses on both sides of the ball. But I am tired of seeing judges who develop expertise in certain areas of the law being chastised due to their expertise (when they rightfully are able to keep cases). According to the latest PricewaterhouseCoopers report, plaintiff success rates for EDTx are 37%. Not exactly a boon for plaintiffs. Transfer provisions and “stopping forum shopping” nonsense are red herrings. I believe there are two issues: (1) Businesses have yet to understand that patent searching must be included in their product development (they do it for trademarks) to truly understand their risks, and (2) better management and information flow at the PTO. Solve these problems (better said that done, I know) and this nonsense about venue will go back to its usual noise level.

  2. Oh, and don’t take the 54% to mean all issued patents, those are again, litigated patents. I guess we can’t find good numbers on issued ones overall, it would be impossible.

  3. I cannot find much better numbers than that off hand, but there it is. Also, you should note the Section V of that paper. The paper just happens to be The Lewis and Clark Law Review 2005. Whatever that means.

  4. See page 2 citation 2 for a figure of 54% of patents being valid in a population of 300 final validity decisions. The citation is to John R. Allison & Mark A Lemley Emperical Evidence on the Validity of Litigated Patents 26 AIPLA Q.J. 185 205 (1998).

    link to researchoninnovation.org

  5. Cranky GC, you make some good points, but you conflate jurisdiction and discretionary transfers in the third paragraph. The plaintiff has a right to *file* wherever it can establish jurisdiction, but the court has an equal right transfer the case somewhere else “for the convenience of the parties” and in the interests of “justice.” No one’s talking about sanctioning the plaintiffs for filing in E.D. Tex. Also, of course litigation isn’t meant to be convenient, but it’s not supposed to be gratuituously inconvenient either. Procedural rules are meant to make litigation fairer and more efficient, not to arbitrarily give more weapons to either plaintiffs or defendants. And do you have a source for your claim that the E.D. Tex. reversal rate is lower than other districts? I’d be surprised if that’s true.

    I agree with the overall point, though. 1404 gives the judge a lot of discretion–it doesn’t give plaintiffs or defendants any particular entitlement to any particular forum. And, as technology evolves, claims of hardship (especially by large defendants) should be taken less seriously.

  6. “Most studies indicate that 50-70% of issued patents are invalid”

    Bob, could you provide a pointer to a study or two?

  7. The EDtTx has this issue right. The transfer motion statute is a joke and the judges in Marshall are taking the case law tests to task. In this day and age of instant travel, electronic discovery, telephone conferencing, and the ability to secure an attorney via email, the convenience test has become a wet the thumb and see which way the winds blows test. I actually saw a brief that stated driving 100-150 miles for a day or two was so inconvenient that the case had to be transferred, wait for it, not to a closer venue, but to another state. Defendants have made a mockery of convenience reasons and EDTx (and other jurisdictions) have stemmed the b.s. tide. Interests of justice and convenience of witnesses are just easy ways for a judge to get rid of a case, and not for defendants to twist until they appear to be paupers before the court.

    Take a look at basic (read: 1L) jurisdictional case law…the plaintiff has the right to file where its effects of damage are felt. In some of those cases, one contract executed in a venue meant the case had jurisdiction. That’s it. Meet that test, then you should be in. If a defendant doesn’t want to be subject to Texas law, then don’t do business there.

    Mind you the statute says, “may” transfer. The discretion is left to the *judge*. Litigation is not meant to be convenient, and especially not convenient to all parties. In other words, if I decide EDTx is convenient for me as a plaintiff, and I can prove jurisdiction over the defendant, just because the defendant claims it is more convenient to move the case closer to Idaho means it *should* be transfered? I am sure the arguments change drastically when a DJ is filed in a non-convenient venue for the defendant-patent holder. All of a sudden the arguments of conducting a case away from home in a different state become, uh, we filed first. B.S. on both sides.

    The truth of the matter is that the EDTx has gained an expertise in adjudicating patent cases. Their expertise is evidenced by their lower overturn rates than other jurisdictions (though not all). Everyone screams for patent specific courts, yet when Va., Tx, WI decide to become rocket dockets, everyone screams, “wait we didn’t mean you guys.” Just happens these venues aren’t next to a basketball/football arena so people can unwind after a hard day’s work.

    Any attempt to “fix” the venue problem doesn’t work unless you specifically carve out the non-practicing entities so that they never have an advantage. As said above, if someone needs to be “from” a venue, in this day and age of that confounding electronicky communication, voila, I’m a corporation from that venue. Oh wait, that isn’t what we meant, we meant if your are an NPE, we have different rules for you. You have to file where it is most convenient for the defendant, unless you are not a patent case, then we will disregard that rule. Unconstitutional at best.

    Let’s face it without a solution such as, e.g, regional patent district courts or one patent district court (like tax court) deciding the venue issue beforehand or removing it completely, there will always be an opportunity for arbitrage. (Go to an MDL proceeding and see the B.S. slung there. You would think the only place we could file cases is in your mother’s backyard.)

  8. It may not be an undue burden for VW. But it is an undue burden for all of the witnesses, etc.

    Besides, it does seem like it’s time to shut down the “patent hell hole” that has grown up in the EDTex. Most studies indicate that 50-70% of issued patents are invalid. Moreover, we would expect weaker patents to end up in litigation with greater frequency than stronger patents. Therefore, I’d expect that about 90% of district court patent cases should result in the so-called inventor going home empty-handed.

    Drug companies go to great lengths to ensure that their products are protected by valid, enforceable patents. But we rarely see Pfizer or Lilly running to Judge Ward when Teva or Ranbaxy files their Paragraph IV ANDAs. Why is that? Maybe it’s because Pfizer actually believes that its patents are valid, and it therefore doesn’t need run to Marshall, Texas to prove it.

  9. I guess I’d feel better about the chances of overturning this “abuse of the system” of venue, if the defendant wasn’t VW. An “undue burden” for VW to defend the case 150 miles from its original location? They only have to move one time zone in either case. Bad facts, bad law.

  10. Wouldn’t a 1404(a) motion in a patent case be decided under the law of the Federal Circuit as is declaratory judgment jurisdiction?

  11. Please wait another 20 comments or so before letting the thread disintegrate into personal attacks.

    CaveMan, I think TJ’s right on this one. The plaintiff can always choose the forum it wants, but once jurisdiction and venue (the latter of which is irrelevant in patent cases) are established, the trial courts have a good amount of discretion to balance the interests and wishes of the plaintiff against those of the defendant.

    28 U.S.C. 1404(a) states that “[f]or the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought.” Looking just at the statute, it says that the court can do whatever is just and convenient, so long as there’s jurisdiction and venue in the transferee court.

    According to Wright & Miller, many of the cases that give a lot of weight to the plaintiff’s choice of forum come from a misapplication of the Supreme Court’s decision in Gulf Oil v. Gilbert, 330 U.S. 501 (1947). In that case, the Supreme Court explained the standard for a dismissal for forum non conveniens, NOT for a transfer for “convenience of the parties and witnesses” and “justice.” In Gulf Oil, the Supreme Court said that a “strong showing” in favor of the defendant’s choice of forum was required, and that a “plaintiff’s choice of forum is rarely to be disturbed.” However, when 28 u.s.c. 1404 was enacted the following year, many courts ERRONEOUSLY treated it as a codification of Gulf Oil / forum non conveniens.

    The Supreme Court cleared up the confusion in Norwood v. Kirkpatrick, 349 U.S. 29 (1955), but by then the cases conflating Gulf Oil and 1404 had taken on a life of their own…

    If the Wright & Miller treatise is right (and if I’ve summarized its contents accurately), the plaintiff’s choice of forum shouldn’t be entitled to any special weight, and the cases that hold otherwise are the result of confusion from the late 40s and early 50s regarding the relationship between Gulf Oil and section 1404.

  12. “And once again, Mooney is allowed add nothing but snarky and useless commentary with no consequence.”

    Now you sound just like Ray Niro on that webcast. The fact remains that there are consequences that flow from my typically well-aimed snark. One such consequence, for example, is your incessant complaining.

    TJ just took you out to the woodshed, by the way. Have fun.

  13. Caveman, it is completely understandable that you would *attempt*, and you are completely free to *attempt*, to secure the most favorable jurisdiction for your case. The question is whether federal law does or should provide that you will actually get it.

  14. Can someone please explain why, as a plaintiff, I should not attempt, and be free to attempt, to find the most favorable jurisdiction to advance my case? And once again, Mooney is allowed add nothing but snarky and useless commentary with no consequence. Must be something about that satin underwear.

  15. Re: “public interest” — now the argument would probably be that EDTx has a nice cottage industry running based on patent cases there, and it would be against the public interest to transfer cases away.

  16. “Malcolm, you realize that this is just an ABA brief, not a decision of the CA5, right…?”

    Writing on the wall. Just sayin’. Etc. Everybody knows there’s something funny going on. The mayor is eventually going to make his way to the carnival and stop the ride.

  17. Very interesting. Malcolm, you realize that this is just an ABA brief, not a decision of the CA5, right…?

    I guess I have 3 thoughts on this:

    1. Even if the CA5 adopts the AIPLA’s reasoning, I wonder if the plaintiffs won’t still be able to get to the E.D. Tex. with little or no trouble. Patent holding companies could incorporate under Texas law, or plaintiffs could find a way to send cease-and-desist letters from Texas. I don’t know if those things would work so well, but if the E.D. Tex. is eager to keep patent cases, it doesn’t seem like it would be too difficult for the plaintiffs to find ways to make that easier to do, regardless of what the Fifth Circuit does here.

    2. The “threat” of legislation might hurt rather than help the AIPLA’s argument. The AIPLA is asking the Fifth Circuit to think about patent cases when it construes a general statute in a products liability case. If the “problem” the AIPLA identifies is unique to patents and if Congress is already considering a patent-specific solution, then why contort general rules to serve the interests of the patent bar?

    3. On page 11 of the .pdf, the AIPLA complains about a patent case in which the district court distinguished the VW panel decision on the basis that it was a products liability case. The AIPLA is right that that’s specious reasoning (assuming that it’s described the case correctly), but if I were on the Fifth Circuit, I would be wondering why the solution isn’t for the Federal Circuit to smack down the E.D. Tex judges if they’re applying 1404 improperly.

  18. This is a brilliant political move on the part of AIPLA.

    On one hand, they file a brief that appears to support defendants in patent suits, which they can use to show that they don’t always file briefs in support of patent holders and expanding patent rights.

    On the other hand, if VW is successful and the ED Texas is forced to start transferring cases, one of the main points supporters of the Patent Reform Bill has goes down the tube, and we know where AIPLA stands on that bill.

  19. And so another chapter in the saga of patent abuse slowly but surely draws to a close.

    [cue up weepy finale music]

Comments are closed.