TC Heartland continues to impact the world of patent litigation. I haven’t run the numbers yet on what’s happened since the decision came down, but just having read through the list of cases filed, the Eastern District of Texas certainly has seen a reduction in cases filed.
Tomorrow morning, the House Judiciary Committee’s Subcommittee on Courts, Intellectual Property and the Internet is holding a hearing titled “Examining the Supreme Court’s TC Heartland Decision.” In advance of the hearing, I wanted to take a look at why there’s a special patent venue statute at all, and why the decision in TC Heartland makes sense in light of that history.
Once Upon A Time
We’ll start back in the 1800s. Back then, venue was proper “anywhere the defendant could be found.” This meant that, if someone was subject to the jurisdiction of the court at all, then it was a proper venue for a lawsuit against them.
But this also meant that a corporation could be sued anywhere an officer could be found, even if there was no real connection between the corporation and that court. So Congress fixed it, amending the Judiciary Act in 1887 and 1888 to set corporate jurisdiction to only be the state of incorporation.
Unfortunately, the Supreme Court at that time decided that this narrowing didn’t apply to patent lawsuits, so corporate defendants in patent cases could still be sued anywhere that they could be found. Ten years later, Congress corrected this, explicitly creating the specialized patent venue statute that would eventually become today’s § 1400.
The entire point of this section of the Judiciary Act of 1897 was to limit venue in patent infringement cases. Rep. Lacey of Iowa, in discussing the 1897 Act, explained that the purpose was to limit venue to judicial districts “where a permanent agency transacting the business is located, and that business is engaged in the infringement.” He made clear that “[i]solated cases of infringement would not confer this jurisdiction.” (29 Cong. Rec. 1900).
In other words, in 1897, Congress said that corporations could be sued only where they operated and infringed.
And every time this was challenged in the Supreme Court, in Stonite and Fourco, the Supreme Court has embraced Congress’s logic back in 1897—patent actions are intended to have narrower venue than lawsuits in general.
And that held until the Federal Circuit got it wrong 25 years ago in VE Holding, an error finally corrected this year in TC Heartland. Other than that 25 year period, patent litigation has always been limited to places with a connection in the district both with respect to the corporate entity and the acts of infringement.
Why We Need Specialized Patent Venue Rules
The decision to limit patent venue wasn’t arbitrary. There are important policies behind it. First and foremost, it’s simply unfair to have a defendant subject to suit in a place where they don’t have a real connection. But beyond that, harms to the system of patent law as a whole stem from the venue decision in VE Holdings. Patent law needs special venue rules for reasons that are specific to patent cases.
1) Diversity Matters
Diversity of opinion is important in a court system. Elsewhere in our courts, we have multiple appellate circuits that review decisions from a variety of district courts and receive the benefit of the diverse opinions of their district court judges. And then those appellate courts themselves have disparate opinions, and those opinions drive cases to the Supreme Court, which benefits from having multiple viewpoints in the circuits below.
The Supreme Court often waits to take cases until there’s a circuit split in part for exactly this reason. By reviewing multiple distinct approaches to a law, they can determine the most correct approach from multiple options, not simply decide if one approach is right or wrong.
It’s even more important in patent law, because (unlike most areas of law) in patent law, there aren’t multiple appellate courts, each one producing distinct opinions and approaches to the law. In patent law, there is only the Federal Circuit; how they interpret Congress’s directives sets how patent law is applied. The Supreme Court can review the Federal Circuit, but the Supreme Court can’t review every single decision they make (or may wind up delaying 25 years before doing so). What the Federal Circuit decides is what controls in court.
And when the Federal Circuit really only sees opinions from a few places, it loses the diversity of opinions that other circuit courts benefit from. If one out of every four cases is decided by the same judge, and 60% come from just three judicial districts, then you simply can’t take advantage of the knowledge bases of judges across the country. You wind up with inferior decisions and bad case law as a result.
2) Procedure Matters
The other problem you run into is that concentration of venue, especially when the venue isn’t close to the operations of the defendant, causes procedural problems beyond the substance of the case. Patent cases tend to be highly complex and technical, and require a lot of time to teach the jury the basics of the relevant technology. Without that, the trials devolve into “I trusted that side’s expert more.”
One of the reasons plaintiffs flocked to the Eastern District of Texas was because cases moved quickly there. But as more and more plaintiffs have filed cases in the Eastern District of Texas, the judges have taken more and more aggressive procedural positions in order to keep their dockets of cases moving quickly.
In one trial I was involved in in the Eastern District, the trial ran a total of five days. That included jury selection, opening arguments, all of the evidence, and closing arguments. And the jury was supposed to absorb enough to understand five different patents, each one with a different set of arguments and defenses, in those five days. And the week before, and the week after? Those were other five day patent trials.
When cases concentrate in one place, you wind up compressing cases, potentially to their detriment, just to get through the cases you’re handling.
3) Location Matters
Patent cases have one other special consideration. They tend to be far more asymmetric than most cases. Typically, the defendant bears the bulk of the burden when it comes to producing witnesses and documents. In troll cases, the troll may not have any documents other than just the patent and its file history, but the defendant may have to give the troll millions of pages of documents along with making computers with confidential source code available for review. Other types of litigation may also be complex, but there’s evidence that patent litigation is uniquely complex and expensive.
This asymmetry is part of why the special patent venue statute was originally created, and it’s only grown to be more necessary over time.
Historically, Congress has always made venue in patent law cases something distinct. The Supreme Court’s decision in TC Heartland affirmed this Congressional approach, and the reasons to keep patent venue special have only grown stronger over the years.