What would happen to patent cases if they couldn t all be filed in Texas?

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1 Santa Clara Law Santa Clara Law Digital Commons Faculty Publications Faculty Scholarship 2016 What would happen to patent cases if they couldn t all be filed in Texas? Colleen Chien Santa Clara University School of Law, colleenchien@gmail.com Michael Risch Villanova University School of Law Follow this and additional works at: Part of the Law Commons Automated Citation Colleen Chien and Michael Risch, What would happen to patent cases if they couldn t all be filed in Texas? (2016), Available at: This Conference Paper is brought to you for free and open access by the Faculty Scholarship at Santa Clara Law Digital Commons. It has been accepted for inclusion in Faculty Publications by an authorized administrator of Santa Clara Law Digital Commons. For more information, please contact sculawlibrarian@gmail.com.

2 What would happen to patent cases if they couldn t all be filed in Texas? Work-In-Progress Colleen Chien, Santa Clara University Law School Michael Risch, Villanova University Widger Law School 3/4/16 version

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4 [The Federal Circuit s] holding in VE Holding no longer applies and therefore plaintiffs shouldn t be able to sue wherever there is personal jurisdiction over the defendant. Petition for Writ of Mandamus, In re TC Heartland, LLC, No , Dkt. 2 (Fed. Cir. Oct. 23, 2015). Oral Argument scheduled for March 11, 2016

5 Venue Reform in Congress VENUE FOR ACTION RELATING TO PATENTS. Notwithstanding subsections (b) and (c) of section 1391 of this title, any civil action for patent infringement or any action for a declaratory judgment that a patent is invalid or not infringed may be brought only in a judicial district (1) where the defendant has its principal place of business or is incorporated; (2) where the defendant has committed an act of infringement of a patent in suit and has a regular and established physical facility that gives rise to the act of infringement; (3) where the defendant has agreed or consented to be sued in the instant action; (4) where an inventor named on the patent in suit conducted research or development that led to the application for the patent in suit; (5) where a party has a regular and established physical facility that such party controls and operates, not primarily for the purpose of creating venue, and has (A) engaged in management of significant research and development of an invention claimed in a patent in suit prior to the effective filing date of the patent; (B) manufactured a tangible product that is alleged to embody an invention claimed in a patent in suit; or (C) implemented a manufacturing process for a tangible good in which the process is alleged to embody an invention claimed in a patent in suit; or (6) for foreign defendants that do not meet the requirements of paragraphs (1) or (2), according to section 1391(d) of this title.

6 What Would Happen to patent cases if venue were restricted - hypotheses 1) They would leave Texas 2) They would all move to Delaware 3) Forum shopping would be curbed 4) Cases would redistribute, and the impacts across defendant classes would not be experienced uniformly

7 Basic Query TC Heartland Analysis Where would patentees likely have filed their 2015 cases if, in accordance with 28 U.S.C. 1400(b), they could only bring cases: 1) where the defendant resides (place of business (PPB) or incorporation (POI)), or 2) where the defendant has a regular and established place of business and infringement (facility).

8 Approach Step 1: Determine where D could be sued under a more restrictive interpretation of 28 U.S.C. 1400(b) (PPB / POI / facilities) Step 2: Determine where P would likely sue based on where P personally, and other Ps of its type, have sued in the past Step 3: Compare results of 1. & 2. and determine % of cases with: a) exact match P could have filed as is b) plausible match P could have filed in Ps preferred venue any venue P filed in in c) no match but P could have filed in the P class preferred venue one of the top 5 venues of OpCos or NPEs d) no match none of the above

9 Limitations - Outside of exact matches, it s hard to tell with certainty where P s would chose to file: - We consider certain matches plausible because we assume that P plausibly would file where they have before, due to greater familiarity with the court, but other factors may trump. Some Ps have only filed in a few venues, creating fewer match opportunities. - We consider certain matches preferred because we assume that P would prefer to file where others in the P s class has filed in the past, but this may not be the deciding factor in many cases regarding where to file. - We relied on complaints for primary place of business (PPB) and state of incorporation (POI) which, though it may be wrong, is what P would use to file initial venue under the well-pled complaint rule. - We used internet/referenceusa for locations but this information may be incomplete or not reliable. - The current sample of cases is small ( cases, ~665 defendants, plaintiffs) we are in the process of extending our analysis - This analysis does not currently include consideration of Congressional proposals.

10 Sources/Thanks to Complaints, case info Entity Status (PAE, other NPE [university], OpCo) Schmooch/WIPO (industry codings) + internet for company locations Our awesome Research Assistants

11 Starting Point: Where Have Patent Cases Been filed? 70% 60% Distribution of Patent Cases 2015 (N=1000 sample) 50% 49% 40% 30% 20% 10% 0% 9% C.D.Cal. D.Ariz. D.Colo. D.Conn. D.Del. D.Kan. D.Mass. D.Md. D.Minn. D.N.J. D.Neb. D.Nev. D.Or. D.P.R. D.S.C. D.Utah D.Vt. E.D.Ark. E.D.Cal. E.D.La. E.D.Mich. E.D.Mo. E.D.N.C. E.D.N.Y. E.D.Pa. E.D.Tenn. E.D.Tex. E.D.Va. E.D.Wis. M.D.Fla. M.D.Ga. M.D.Pa. M.D.Tenn. N.D.Ala. N.D.Cal. N.D.Ga. N.D.Ill. N.D.Ind. N.D.Ohio N.D.Okla. N.D.Tex. N.D.W.Va. S.D.Cal. S.D.Fla. S.D.N.Y. S.D.Ohio S.D.Tex. W.D.Mich. W.D.Mo. W.D.N.C. W.D.N.Y. W.D.Pa. W.D.Tex. W.D.Va. W.D.Wash. W.D.Wis. Grand Total Based on a sample of 1000 cases. N OpCo = 289 ; N other NPE (University, Individual) 48=; N PAE = 663. Entity status codings from Unified Patents.

12 Starting Point: Where Have Patent Cases Been filed? Distribution of 2015 Cases Entity Breakdown (N=1000) 70% 60% 70% 50% 40% 30% 20% 10% 0% 13% 14% 13% 10% C.D.Cal. D.Ariz. D.Colo. D.Conn. D.Del. D.Kan. D.Mass. D.Md. D.Minn. D.N.J. D.Neb. D.Nev. D.Or. D.P.R. D.S.C. D.Utah D.Vt. E.D.Ark. E.D.Cal. E.D.La. E.D.Mich. E.D.Mo. E.D.N.C. E.D.N.Y. E.D.Pa. E.D.Tenn. E.D.Tex. E.D.Va. E.D.Wis. M.D.Fla. M.D.Ga. M.D.Pa. M.D.Tenn. N.D.Ala. N.D.Cal. N.D.Ga. N.D.Ill. N.D.Ind. N.D.Ohio N.D.Okla. N.D.Tex. N.D.W.Va. S.D.Cal. S.D.Fla. S.D.N.Y. S.D.Ohio S.D.Tex. W.D.Mich. W.D.Mo. W.D.N.C. W.D.N.Y. W.D.Pa. W.D.Tex. W.D.Va. W.D.Wash. W.D.Wis. OpCo Other NPE PAE Based on a sample of 1000 cases. N OpCo = 289 ; N other NPE (University, Individual) = 48; N PAE = 663. Entity status codings from Unified Patents.

13 Step 1: Where could plaintiffs have filed? (PPB) 70% 60% 50% 40% 30% Where Ds PPBs are Preliminary Data 20% 10% 11% 11% 8% 7% 0% ALABAMA NORTHERN ARIZONA ARKANSAS WESTERN CALIFORNIA CENTRAL CALIFORNIA EASTERN CALIFORNIA NORTHERN CALIFORNIA SOUTHERN COLORADO CONNECTICUT DELAWARE DISTRICT OF COLUMBIA FLORIDA MIDDLE FLORIDA SOUTHERN GEORGIA NORTHERN IDAHO ILLINOIS CENTRAL ILLINOIS NORTHERN INDIANA NORTHERN IOWA SOUTHERN KANSAS KENTUCKY WESTERN LOUISIANA EASTERN MARYLAND MASSACHUSETTS MICHIGAN EASTERN MICHIGAN WESTERN MINNESOTA MISSOURI EASTERN MISSOURI WESTERN NEBRASKA NEVADA NEW HAMPSHIRE NEW JERSEY NEW MEXICO NEW YORK EASTERN NEW YORK NORTHERN NEW YORK SOUTHERN NEW YORK WESTERN NORTH CAROLINA EASTERN NORTH CAROLINA MIDDLE NORTH CAROLINA WESTERN OHIO NORTHERN OHIO SOUTHERN OKLAHOMA NORTHERN OKLAHOMA WESTERN OREGON PENNSYLVANIA EASTERN PENNSYLVANIA MIDDLE PENNSYLVANIA WESTERN PUERTO RICO RHODE ISLAND SOUTH CAROLINA TENNESSEE EASTERN TENNESSEE MIDDLE TEXAS EASTERN TEXAS NORTHERN TEXAS SOUTHERN TEXAS WESTERN UTAH VIRGINIA EASTERN WASHINGTON EASTERN WASHINGTON WESTERN WEST VIRGINIA NORTHERN WISCONSIN EASTERN WISCONSIN WESTERN Based on sample of ~500 randomly selected 2015 cases corresponding to ~665 defendants

14 Step 1: Where could plaintiffs have filed? (POI) 70% 60% 50% 40% 30% 20% 10% 0% 43% 11% Where Ds are Incorporated Alabama Arizona Arkansas California Colorado Connecticut Delaware Florida Georgia Idaho Illinois Indiana Int'l Iowa Kansas Kentucky Louisiana Maryland Massachusetts Michigan Minnesota Missouri Nebraska Nevada New Hampshire New Jersey New York North Carolina Ohio Oklahoma Oregon Pennsylvania Rhode Island Tennessee Texas unincorporated Utah Virginia Washington Washington DC West Virginia Wisconsin Preliminary Data Based on sample of ~500 randomly selected 2015 cases corresponding to ~665 defendants

15 Step 2: Where would plaintiffs have sued? 70% 60% 50% 40% 30% 20% 10% 0% Where Patent Cases were filed in 2015 (N=1000) C.D.Cal. D.Colo. D.Del. D.Mass. D.Minn. D.Neb. D.Or. D.S.C. D.Vt. E.D.Cal. E.D.Mich. E.D.N.C. E.D.Pa. E.D.Tex. E.D.Wis. M.D.Ga. M.D.Tenn. N.D.Cal. N.D.Ill. N.D.Ohio N.D.Tex. S.D.Cal. S.D.N.Y. S.D.Tex. W.D.Mo. W.D.N.Y. W.D.Tex. W.D.Wash. OpCo Other NPE PAE N OpCo = 289 ; N other NPE (University, Individual) 48=; N PAE = 663. Entity status codings from Unified Patents.

16 Step 2: Where would plaintiffs have sued? Preliminary Data Top 5 Districts and Share of 2015 Cases in the Top 5 (by Plaintiff Type) Share in the top 5 districts Individual PAE OpCo E.D.N.Y. (14%) E.D.Tex. (70%) C.D.Cal. (14%) S.D.N.Y. D.Del. D.Ariz. E.D.Tex. N.D.Cal. D.Colo. E.D.Va. N.D.Ill. D.Conn. S.D.Fla. N.D.Tex. D.Del. 54% 85% 46% Based on sample of ~1,000 randomly selected 2015 cases, entity coding provided by Unified Patents, University and small company NPE cases represent less than 5% of the total

17 Step 3: What share of cases would have been impacted by a narrower reading of the rule? Exact or Plausible Match: Match in same district or a district P has filed in before. No Match - But, match within one of P class preferred venues (top 5 in the past 2 years among, e.g. OpCos) - Outside of preferred match: none of the above

18 Step 3: What share of cases would have been impacted? Impact on Filing Venues (N=665 Plaintiff Defendant Pairs) Preliminary Data 21% 30% 41% 8% Exact Match No Match - But Preferred Venue Plausible Match No Match Based on sample of ~500 randomly selected 2015 cases corresponding to ~665 plaintiff-defendant pairs

19 Based on past patterns, the rule change would have a greater impact on NPE choice of venue (26% would have been able to file in the same district vs. 40% of OpCos), but many OpCos would also have to file outside of their past venues NPEs Preliminary Data Impact on Filing Venues (N=665 plaintiff defendant pairs) 21% 41% 30% 8% Exact Match Plausible Match No Match - But Preferred Venue No Match Based on sample of ~500 randomly selected 2015 cases corresponding to ~665 plaintiff defendant pairs 21% 46% 21% 29% OpCos 26% 10% 40% 7%

20 How would the cases, potentially, be redistributed?* 70% 60% Analysis of the 80% of cases that had an Exact, Plausible, and Preferred Match 50% 40% 33% 30% 20% 10% 11% 21% 9% 6% 0% *subject to caveats on the Limitations slide

21 What Would Happen to Patent Cases Hypotheses 1) They would leave Texas Fewer cases would be able to stay there but ED Texas it appears, would still be in the top 3. 2) They would all move to Delaware Delaware could take the top spot but it s not clear. 3) Forum shopping would be curbed NPEs would have to move most of their cases, but so would OpCos. 4) Cases would redistribute, and the impacts across defendant classes would not be experienced uniformly Yes, but how exactly is unknown, except that NPEs would be impacted more than OpCos. Industry analysis TBD.