Will Nationwide Venue for Patent Infringement Suits Soon End? David Kitchen Shannon McCue

Will Nationwide Venue for Patent Infringement Suits Soon End? David Kitchen Shannon McCue

Syllabus Brief review of patent jurisdiction and venue. Historical review of patent venue decisions, focusing on VE Holding Corp. Is there a justification for determining venue differently for patent actions than for other civil actions? Should the recent concentration of patent cases in a few jurisdictions affect venue rules? The Federal Circuit s recent decision in TC Heartland and potential for Supreme Court review. Proposed legislative reform to redefine venue for patent actions. 2

Jurisdiction and Venue Subject Matter Jurisdiction Venue Personal Jurisdiction 3

Subject Matter Jurisdiction Jurisdiction over nature of dispute Federal Question or Diversity. Federal courts have exclusive jurisdiction over all suits "arising under any Act of Congress relating to patents. 28 U.S.C. 1338 Not all suits that raise patent questions arise under the patent laws. E.g., suit for breach of a patent license in which the invalidity of the underlying patent is raised as a defense. 4

Personal Jurisdiction Jurisdiction over the parties Federal Circuit law applies. Avocent Huntsville Corp. v. Aten Int l Co., Ltd., 552 F.3d 1324, 1328 (Fed. Cir. 2008) Minimum contacts' test. Specific jurisdiction 'arises out of' or 'relates to' the cause of action even if those contacts are 'isolated and sporadic.' General jurisdiction arises when a defendant maintains 'continuous and systematic' contacts with the forum state even when the cause of action has no relation to those contacts. LSI Industries Inc. v. Hubbell Lighting, Inc., 232 F.3d 1369, 1375, 56 USPQ2d 1965, 1969-70 (Fed. Cir. 2000) 5

Personal Jurisdiction General jurisdiction - Stream of commerce Accordingly, the inquiry under Goodyear is not whether a foreign corporation s in-forum contacts can be said to be in some sense continuous and systematic, it is whether that corporation s affiliations with the State are so continuous and systematic as to render [it] essentially at home in forum State Daimler AG v. Bauman, 134 S.Ct. 746, 761 (2014) (emphasis added). 6

Venue Venue refers to the geographic specification of the proper court or courts for the litigation of a civil action that is within the subject-matter jurisdiction of the district courts in general 28 U.S.C. 1390 Transfer of Venue "For 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." 28 U.S.C. 1404(a) 7

Venue (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. 28 U.S.C. 1391(b) 8

Venue (Patent) "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. 28 U.S.C. 1400(b) 1887: To stem venue abuse, Congress limits venue to districts where defendant resides or, for diversity cases, where plaintiff resides. 1893: Supreme Court holds that in patent cases, venue is proper anywhere valid service can be made upon the defendant. In re Hohorst, 150 U.S. 653, 662 (1893) 1897: Congress enacts Section 1400(b) to bring clarity to patent suits. A special new venue statute for the occasion: patent infringement claims were to be heard only in the district where the defendant was an inhabitant, or the district where he committed acts of infringement and also maintained a regular and established place of business. (emphasis added) Brunette Mach. Works, Ltd. v. Kockum Indus., Inc., 406 U.S. 706, 712 (1972) 9

Roundtable Discussion Is there justification for determining venue differently for patent actions than for other actions in general? Should a specific patent venue statute be read as the exclusive authority or as an additional authority to general venue? 10

Venue Rulings (Pre-Federal Circuit) Where the defendant has committed acts of infringement and has a regular and established place of business Interpreted by regional circuit courts based on factors such as physical presence and employee authority within the venue. Where the defendant resides Corporations reside' only in their state of incorporation Fourco Glass Co. v. Transmirra Prods. Corp., 77 S.Ct. 787 (1957) Fourco Glass Co. v. Transmirra Prods. Corp., 77 S.Ct. 787 (1957) Section 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 [section] 1391(c) Specific terms prevail over the general in the same or another statute which otherwise might be controlling. 11

Federal Circuit re Venue (In re Cordis) In re Cordis, 769 F.2d 733 (Fed. Cir. 1985) Regular and established place of business Cordis (FL) sued by Medtronic in Minnesota Cordis seeks mandamus after district court denies 12(b)(3) motion Federal Circuit turns to regional law for precedential examples (Fourth, Seventh, and Ninth Circuits) Facts: Cordis did not rent or own a fixed physical location within the district. However, it did employ two full-time medical device sales representatives exclusive to Cordis in the district. Holding: Venue found. A regular and established place of business requires that the defendant does its business in that district through a permanent and continuous presence but does not require a fixed physical presence in the sense of a formal office or store. 12

Federal Circuit re Venue (VE Holding Corp.) VE Holding Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574 (Fed. Cir. 1990) Defendant is resident VE Holding sues Johnson (IA) in N.D. California VE Holding seeks mandamus after district court grants 12(b)(3) motion. (Johnson had admitted pers. jurisdiction) Issue: Does the 1988 Amendment to Section 1391 supersede Fourco s holding that corporations reside' only in their state of incorporation? Holding: Yes. Venue in a patent infringement case includes any district where there would be personal jurisdiction over the corporate defendant at the time the action is commenced[, which]. is somewhat broader than that encompassed by the previous standard of place of incorporation. Venue is subsumed within personal jurisdiction. 13

Federal Circuit re Venue (VE Holding Corp.) Section 1391(c) (Original) 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. Section 1391(c) (Amended) For purposes of venue under this chapter, a defendant that is a corporation shall be deemed to reside in any judicial district in which it is subject to personal jurisdiction at the time the action is commenced. (emphasis added) Fed. Cir. justification for abandoning Fourco: Ruling is potentially controversial because the legislative history gives no indication of an intent to alter Fourco. However: Section 1391 clearly and expressly reads itself over the entire chapter, which includes Section 1400. Section 1391 defines a term reside that appears in 1400. This definition does not create a conflict. 14

Jurisdiction and Venue (Patent Cases Since 1990) Subject Matter Jurisdiction Venue Personal Jurisdiction 15

Roundtable Discussion Does the current general venue statute itself comport with the underlying principle of protecting a defendant from the inconvenience of having to defend an action in a trial court that is either remote from the defendant s residence or from the place where the acts underlying the controversy occurred. VE Holding Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574, 1576. Does the current general venue statute serve the purpose of limiting a plaintiff s choice of forum to only certain courts from among all those which might otherwise acquire personal jurisdiction over the defendant? Id. 16

Concentration of Cases Forum Shopping and Trolls

Preferred Venues PE v. NPE

Current Trends Forum Shopping Speed Case friendly judges Procedural advantages Disproportionate filings in Texas 40% of patent suits filed in the E.D. of Texas 25% of all patent filings before Judge Gilstrap Standing orders favor plaintiffs

Federal Circuit re Venue (In re TC Heartland) In re TC Heartland LLC, 821 F.3d 1338 (Fed. Cir. 2016) Kraft sues Heartland (IN) in Delaware. Heartland seeks mandamus after district court grants 12(b)(3) motion. (Also disputes personal jurisdiction) Issue: Does the 2011 Amendment to Section 1391 supersede VE Holding and reinstate Section 1400(b) as the sole provision for patent venue? Holding: No. The 2011 Amendments are minor and do not address the definition of reside. Fourco was superseded in 1988 and was not intended by Congress to be reinstated. Venue is still subsumed within personal jurisdiction. 20

Federal Circuit re Venue (In re TC Heartland) Section 1391(c) (1988 Am.) For purposes of venue under this chapter, a defendant that is a corporation shall be deemed to reside in any judicial district in which it is subject to personal jurisdiction at the time the action is commenced. (emphasis added) Section 1391 (2016 Am.) (a) Applicability of Section. Except as otherwise provided by law this section shall govern the venue of all civil actions brought in district courts of the United States (c) Residency. For all venue purposes [a defendant corporation] shall be deemed to reside in any judicial district in which such defendant is subject to the court s personal jurisdiction TC Heartland argues: 1. Congress removed the phrase under this chapter, which was the sole reason for extending 1391(c) to cover 1400(b) in VE Holding. 2. 1391 is now simply a general venue provision. Under Fourco, 1400(b) is once again the only patent venue provision. 3. Also, the new phrase as otherwise provided by law incorporates Fourco into the statutes. 21

Federal Circuit re Venue (In re TC Heartland) Section 1391(c) (1988 Am.) For purposes of venue under this chapter, a defendant that is a corporation shall be deemed to reside in any judicial district in which it is subject to personal jurisdiction at the time the action is commenced. (emphasis added) Section 1391 (2016 Am.) (a) Applicability of Section. Except as otherwise provided by law this section [1391] shall govern the venue of all civil actions brought in district courts of the United States (c) Residency. For all venue purposes [a defendant corporation] shall be deemed to reside in any judicial district in which such defendant is subject to the court s personal jurisdiction Fed. Cir. rejects the arguments; upholds VE Holding: 1. The 2016 Amendments are minor and do not directly address the definition of resides in Section 1400(b). 2. The 1988 Amendments superseded Fourco. The decision is therefore not law cannot be otherwise provided. 3. VE Holding is recognized controlling law. 22

Federal Circuit re Venue (In re TC Heartland) Atlantic Marine Construction Co. v. United States District Court for the Western District of Texas, 134 S. Ct. 568, 577 n.2 (2013): Section 1391 governs venue generally, that is, in cases where a more specific venue provision does not apply. Cf., e.g., 1400(identifying proper venue for copyright and patent suits). TC Heartland argues this footnote from a non-patent decision demonstrates that the Supreme Court still views Section 1400(b) as the sole patent venue statute, just as Fourco held. Federal Circuit rejects this argument. It is merely a general statement that does not address whether 1391 s definition of resides can be imported into 1400. 23

TC Heartland Appeal Sep. 12, 2016: Certiorari Petition Dec. 14, 2016: Petition Granted Mar. 27, 2017: Argument Only one question on appeal: The question in this case is thus precisely the same as the issue decided in Fourco: 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). 24

TC Heartland Appeal Amicus Briefs filed by: 32 Internet Companies, Retailers and Associations Washington Legal Foundation The Electronic Frontier Foundation, et al. American Bankers Association, et al. Paul R. Michel Dell Inc., and The Software & Information Industry Association 56 Professors of Law and Economics Kraft Foods Group Brands LLC in opposition General Electric Company in support of neither party National Association of Realtors The Electronic Frontier Foundation State of Texas, et al. American Bar Association Engine Advocacy Software & Information Industry Association BSA l The Software Alliance Intel Corporation, and Dell Inc. 25

TC Heartland Appeal Primary Amicus arguments against the status quo: Encourages forum shopping Encourages forum selling (alleged by EFF as to the EDTX) Harms small companies and inventors from de facto nationwide venue Concentrates the districts issuing patent rulings and thereby deprive the Federal Circuit of diverse views. Encourages wasteful attempts to create venue Increases leverage of NPEs to force meritless settlements Leaves Section 1400(b) without any meaning 26

TC Heartland Appeal Primary Amicus arguments supporting the Federal Circuit: Patent venue reform best left to Congress, especially if the motive is forum shopping rather than statutory interpretation. No conflict between the Fed. Cir. and Supreme Court decisions Congress expressly defined residency in 2011 by applying the phrase for all venue purposes to section 1391(c). Eliminating nationwide venue would create perverse incentives for businesses to flee the United States or avoid establishing businesses in additional states. The Courts are not corrupt. 27

Roundtable Discussion There is only one question on appeal in TC Heartland. How will the Supreme Court decide? Should the Supreme Court reinstate Fourco and hold that Section 1400(b) is the exclusive patent venue statute? 28

Roundtable Discussion Considering changes to the law of personal jurisdiction since 1990, in what ways would venue present an opening for challenging jurisdiction that does not already exist? Venue exists: Where defendant resides (incorporation) Where defendant commits acts of infringement and has a regular and established place of business. Personal Jurisdiction requires minimum contacts : Specific jurisdiction 'arises out of' or 'relates to' the cause of action even if those contacts are 'isolated and sporadic.' General jurisdiction arises when a defendant maintains 'continuous and systematic' contacts with the forum state even when the cause of action has no relation to those contacts. Contacts must render [defendant] essentially at home in forum State Daimler AG, 134 S.Ct. 746, 761 (2014). 29

Pre-Cordis Guidance re Venue Venue generally is found if there is a genuine company-owned facility like a warehouse, office, garage, or service center in the district. E.g., Huey Co. v. Plan Hold Corp., 211 U.S.P.Q. 888, 891 (N.D. Ill. 1980). Venue is not found merely because a corporation is authorized to conduct business in a state. E.g., Scaramucci v. FMC Corp., 258 F. Supp. 598, 601 (W.D. Ok. 1966). Transient places of business such as trade shows or traveling salesmen are generally insufficient. E.g., A.O. Smith-Inland, Inc. v Hoeganaes Corp., 407 F. Supp. 539, 542 (N.D. Ill. 1976). A subsidiary s presence in the judicial district is excluded from the analysis unless it is treated as an alter ego. E.g., Am. Can Co. v. Crown Cork & Seal Co., 433 F. Supp. 333, 336 (E.D. Wis. 1977). 30

Proposed Legislative Reform 31

Current Law Venue is proper where a corporation resides Today Corporations reside anywhere they are subject to personal jurisdiction(ve Holding Corp v. Johnson Gas Appliance) TC Heartland 28 USC 1400 is sole basis for venue 32

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Senate and House Bills Senate 2733 VENUE bill House of Representatives 9 PATENT bill 34

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Venue Equity and Non- Uniformity Elimination Act Amends Section 1400 Eliminates reference to General Venue under 1391 36

H.R. 9 continued Venue exclusion: Excludes retail facilities that manufacture products or process or the dwelling of an employee or contractor of defendant from the definition of a facility. Policy: suits against retailers are disfavored 37

H.R. 9 continued Mandamus relief Removes barrier to mandamus relief by specifying that subjecting a party to trial where venue is improper does constitute irreparable harm 38

Thank you 39

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