The Venue Reform Bill Won’t Stop Patent Trolls, but It Will Slow Them Down
There’s a new bill in Congress that would finally address the egregious forum shopping that dominates patent litigation. The Venue Equity and Non-Uniformity Elimination Act of 2016 (VENUE Act, S. 2733) would bring a modicum of fairness to a broken patent system.
Forum shopping is a phenomenon that can appear when plaintiffs get a lot of latitude over which federal district to file a case in. Some plaintiffs make their choice based not on what federal district has the strongest connection to the dispute, but rather on which court they believe they have the best chance of winning in. A canny plaintiff will exploit differences between courts in her favor—differences in how they enforce certain rules, for example, or in their track records with a type of case. As anyone knows who’s been following the patent reform debate for very long, forum shopping runs rampant in patent cases.
The VENUE Act would require the plaintiff in a patent suit to file in a district where it makes sense—for example, where the defendant’s principle place of business is; where the patent owner has a working manufacturing facility; or where the inventors of the patent live. It would also allow the parties to mutually agree to a particular district.
Cases should be litigated in courts that have a meaningful connection to the dispute, not where one side thinks it can get an advantage. The VENUE Act would make the process of determining venue more fair for both sides.
If this sounds familiar, that’s because a similar reform was introduced in the House of Representatives as part of the Innovation Act, a more comprehensive patent litigation reform package. It’s disappointing to see the Innovation Act stalled, but in the meantime, let’s tell the Senate to make the VENUE Act a top priority.
Why We Need Venue Reform
In 1990, the Federal Circuit (the court that hears appeals of patent lawsuits) ruled that a patent owner can file suit in any district in which the defendant does business. A few years later, the court further clarified that for the purposes of determining where a patent case is heard, a business is considered active in any state in which its products or services are available. No one could have predicted the mess that the court invited with those decisions.
Today, nearly half of all patent lawsuits are filed in one district, the Eastern District of Texas. It’s not hard to see why: Eastern District courts have extremely plaintiff-friendly practices in patent lawsuits. Eastern District judges have adopted practices that can make a patent suit more expensive for defendants. Eastern District judges have routinely imposed rules seemingly designed to frustrate defendants and raise costs. One lawyer recently told Law360 [subscription required], “In a lot of cases in the Eastern District of Texas, it’s pretty clear that the plaintiff doesn’t really intend for it to go very far. [The patent owner is] interested in a quick settlement, in the range of five figures sometimes, and at that point, it’s much cheaper to settle than to litigate." That’s not how courts should work.
The problem isn’t just the Eastern District, though. If it changed its practices tomorrow, then other districts might take its place. The problem is that giving plaintiffs complete control over the venue for a patent lawsuit can lead to forum selling, where districts adapt their rules and procedures to the inflow of litigants. The problem is not a few unfair courts, but a system that risks rewarding unfairness.
A Step Toward Further Reform
Let’s be clear: the VENUE Act won’t end patent trolling. It won’t stop the endless parade of stupid software patents from the Patent Office. Innovators will still be hit with egregious demand letters all the time, and a lot of them will simply pay the fee rather than fight back.
What it will do is take away one of the trolls’ weapons. As we’ve discussed before, forum selling weakens other improvements in patent litigation. When a new rule makes life harder for trolls, trolls shop for the district that applies that rule the most leniently (or in some cases, not at all). Without venue reform, any other reform is only as good as the worst court.
There’s a different patent reform bill in the Senate called the PATENT Act. It would require patent owners to provide more information upfront about the alleged infringement. It would make it harder for trolls to target end users. When the court rules against a troll, it would allow the court to more easily require the troll to pay the defendants’ legal fees. Every one of those measures could be undermined—or at least weakened—by forum shopping and selling. The VENUE Act is a great foundation on which to build future reform.
Tell the Senate: Venue Reform Now
For years, we’ve fought for meaningful patent litigation reform in Congress. The VENUE Act is not the comprehensive reform we need, but we can’t keep waiting while unfair procedural rules put innovators and small businesses at an unfair disadvantage. Let’s tell Congress to pass the VENUE Act now.