In a disappointing but unsurprising ruling, the Federal Circuit confirmed today that patent owners essentially have free rein to file suit in any tiny corner of the country, regardless of its minimal connection to the patent owner, the alleged infringer, or the technology involved.
The case is In re TC Heartland. The alleged infringer, TC Heartland, was sued by Kraft in Delaware. TC Heartland asked the Federal Circuit, through a petition for writ of mandamus, to find that the case couldn’t be heard there, according to laws regarding “venue.”
The case is one of statutory interpretation. Prior to 1990, the Supreme Court had long held that in patent cases, the statute found at 28 U.S.C. § 1400 controlled where a patent case could be filed. However, in 1990 in a case called VE Holding, the Federal Circuit held that a small technical amendment to another statute—28 U.S.C. § 1391—abrogated this long line of cases. VE Holding, together with another case called Beverly Hills Fan, essentially meant that companies that sold products nationwide could be hailed into any court in the country on charges of patent infringement, regardless of how tenuous the connection to that court.
Although this case was filed in Delaware, it would have had a big impact on another US district. As we’ve discussed on numerous occasions, the expansion of patent venue has fostered an unprecedented concentration of patent cases in the Eastern District of Texas. In 2015, almost 45% of all patent cases were heard there, with almost 30% in front of a single judge. This concentration is likely due to procedural and substantive rules put in place in the Eastern District of Texas that tend to increase costs on defendants. This in turn incentivizes patent owners with the most dubious patents and claims of infringement to file there, as they can more easily leverage the cost of litigation to get an undeserved settlement.
In today’s decision, the Federal Circuit has indicated that it is unwilling to disturb the status quo. Although it’s still possible for the full Federal Circuit or the Supreme Court to rule otherwise, it may be that a legislative fix is needed.
Three senators recently proposed changing the law that the Federal Circuit says allows this venue shopping. Called the VENUE Act, the law would limit the ability of patent owners to file in any district they want, and would instead require lawsuits to be filed in districts that make sense, like where the inventor lives or where the defendant is located. Congress should step in and make clear it never intended over 40% of all patent cases to be heard in a single, far-flung district. 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 the Senate to pass the VENUE Act now.