With Eyes on Patent Venue Reform, What Should In-House Counsel Expect?

Many eyes are on the TC Heartland case before the U.S. Supreme Court, which asks the high court to make a determination about which of two statutes should control venue in patent litigation.

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Many eyes are on the TC Heartland case before the U.S. Supreme Court, which asks the high court to make a determination about which of two statutes should control venue in patent litigation. On top of that, Sen. Orrin Hatch, R-Utah, said Feb. 16 that regardless of what the Supreme Court decides, there will likely need to be "follow-on legislation to prevent future forum-shopping."

With both the Supreme Court and Congress poised to take up this issue, it's likely that in-house legal departments will face some changes, patent lawyers say.

In December 2016, the Supreme Court added TC Heartland v. Kraft Foods Group Brands to its docket. At issue is whether venue for patent cases should be determined solely by the patent venue statute—which limits patent infringement suits to venues where a defendant "resides," or has committed infringement and has a "regular and established place of business"—or may be supplemented by the general venue statute that allows suit in any location where there's personal jurisdiction.

In an April 29 ruling, the U.S. Court of Appeals for the Federal Circuit rejected TC Heartland's request to transfer venue in a patent infringement case, finding the issue was resolved by a 1990 Federal Circuit decision that held that patent cases can be heard anywhere a defendant is subject to personal jurisdiction.

In fact, it was the Federal Circuit's decision more than 25 years ago that ultimately opened the floodgates for patent litigation forum-shopping, which has led to a concentration of cases in the Eastern District of Texas, where nearly one-third of all patent cases in 2015 were assigned to one judge in the Eastern District's Marshall Division.

"Abusive litigants have exploited a hole in the law to direct a disproportionate number of suits to plaintiff-friendly forums, and to one such forum in particular," Hatch said in rolling out his innovation agenda for the 115th Congress. And while the Supreme Court's ruling could change this landscape, Hatch added that legislation will likely be needed to ensure "litigants have a meaningful connection to the site of the suit."

With change likely on the horizon, legal departments may gain more predictability around patent litigation, said Doug Luftman, general counsel and chief innovation officer at IP management and analytics software company Lecorpio. "I think the dynamics around gearing up for litigation—having the right resources and preparing witnesses—will be more predictable and be more consistent with where the company has resources," he explained. "The amount of gamesmanship around intellectual property litigation, and patent litigation specifically, will decrease."

For larger companies, Luftman said, reform will also enable in-house legal teams to refocus their resources on substantive issues related to patent litigation. As it is now, when evaluating patent litigation, attorneys would look at the validity of a patent and whether there's infringement, Luftman said, while additionally looking at what outcomes might be based on venue. "That has nothing to do with the merits of the case, but instead fear of an unpredictable outcome," he said. "With venue being reinterpreted, it ensures there's more consistency with respect to venue and a more consistent application of the law and then you can defend based on the merits."

What's more, in-house counsel will be able to more efficiently manage litigation resources, Luftman said. "This will also help litigation groups tee up resources where they will predictably litigate," he said. "So they may not have to spread resources as thin."

While reform may decrease pure forum-shopping, there may be an increase in disputes at the outset of litigation about which venue is proper, said John Sganga, a partner at Knobbe, Martens, Olson & Bear who handles cases in the Eastern District of Texas. "If you're a big company, you have regular and established business in a lot of states and you might have employees working from home offices," he said. "Are those regular and established places of business that you can get sued in?"

"These are the types of questions that companies may end up fighting over," Sganga said, "and how those things will be decided is where you are going to get some unpredictability."

There are many powerful and legitimate interests on both sides of this issue, said David Manspeizer, a partner at Morrison & Foerster and a former in-house attorney at pharmaceutical company Wyeth. On one hand, a branded pharmaceutical company may have to litigate against many different generic companies related to a patent, he said, so having to potentially litigate in a number of jurisdictions is concerning. "But on the other hand, I certainly sympathize with companies that are subject to suits in the Eastern District of Texas where they have little or no connection to that jurisdiction."

Going forward, companies should not only be thinking about where a company would be subject to suit and what the courts are like there, but also about playing a role in Congress, Manspeizer said. "Talk to representatives and senators, make them understand how significant this issue is," he said. "I don't think you can sit back and just say, 'Well, we'll just deal with it after Congress decides.' That's probably not the right approach."

Originally published on Corporate Counsel. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

Contributing Author

Jennifer Williams-Alvarez

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