Today’s Patent Litigation Venue Considerations

Presented by:

Esha BandyopadhyayHead of Litigation – Winston & Strawn Silicon Valley

Presented at:

Patent Law in Global PerspectiveStanford University

Paul Brest Hall, Munger Graduate ResidencesFriday, October 20, 2017

Background

Background

Patent venue statute limits which judicial districts a case may be filed in:

“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).

3

Background

“where the defendant resides”

The term “resides” (for U.S. corporations) was interpreted by the Supreme Court in 1957 to mean the state of incorporation. Fourco Glass Co. v. Transmirra Products Corp., 353 U.S. 222, 226 (1957).

4

Background

In 1988, a separate venue statute (not specific to patent litigation) defining “reside[s]” more broadly was 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.”

28 U.S.C. § 1391(c) (1988)

5

Background

VE Holding Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574, 1578, 1584 (Fed. Cir. 1990):

“On its face, § 1391(c) clearly applies to § 1400(b), and thus redefines the meaning of the term ‘resides' in that section.”

Result: personal jurisdiction may be found in many districts due to a broad examination of a defendant’s contacts with that district, including, e.g., products in the “stream of commerce”

6

Background: Patent Cases Filed by Forum

0

1000

2000

3000

4000

5000

6000

7000

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017EST

DistrictCourts PTAB ITC

Background: Patent Cases Filed by District

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017EST

TXED DED CACD ILND CAND NJD FLSD NYSD FLMD

Background: Patent Cases Filed by Venue

2008 2009 2010 2011 2012 2013 2014 2015 2016

TXED 297 239 542 580 1252 1498 1428 2548 1679

DED 167 234 257 486 1001 1335 942 544 458

CACD 198 272 230 329 506 411 320 278 288

ILND 144 136 247 232 239 217 151 162 245

CAND 164 163 205 230 257 246 250 221 196

NJD 160 146 158 192 160 144 284 270 189

FLSD 34 45 74 67 132 185 112 129 141

NYSD 108 113 118 160 141 131 117 152 113

FLMD 44 43 66 80 76 58 90 72 76

ALL DCT 2605 2531 3349 3899 5454 6094 5008 5783 4641

ITC 36 30 56 71 45 47 37 38 55

PTAB 111 792 1677 1798 1758

Background: Patent Cases Filed in E.D. Tex.

10Docket Navigator searching &Matthew Sag, IP Litigation in U.S. District Courts: 1994-2014, 101 Iowa L. Rev. 1065, 1111 (2016)

6

2536

0

500

1000

1500

2000

2500

3000

Background: District Court Ranking for Number of Patent Suits

11

0

10

20

30

40

50

60

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

E.D. Tex. D. Del. C.D. Cal. N.D. Cal. E.D. Va.

Matthew Sag, IP Litigation in U.S. District Courts: 1994-2014, 101 Iowa L. Rev. 1065, 1111 (2016)

Background: TXED Contested Transfer Motions

0

20

40

60

80

100

120

140

160

2008 2009 2010 2011 2012 2013 2014 2015 2016

Granted Partial Denied

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2008 2009 2010 2011 2012 2013 2014 2015 2016

Granted Partial Denied

Background: DED Contested Transfer Motions

0

5

10

15

20

25

30

35

40

2008 2009 2010 2011 2012 2013 2014 2015 2016

Granted Partial Denied

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2008 2009 2010 2011 2012 2013 2014 2015 2016

Granted Partial Denied

TC Heartland

TC Heartland

“where the defendant resides”

Fourco controls the interpretation of “where the defendant resides” in patent venue statute (i.e., US corporations reside where they are incorporated)

TC Heartland LLC v. Kraft Foods Group Brands LLC, 137 S. Ct. 1514 (May 22, 2017)

15

Raytheon Co. v. Cray, Inc. (E.D. Tex.)In re Cray (Fed. Cir.)

TC Heartland Aftermath

Since TC Heartland, focus has shifted to the second prong of venue statute – “regular and established place of business”:

“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).

17

Raytheon v. Cray

Judge Gilstrap in E.D. Tex. set forth a four-factor test to determine existence of a “regular and established place of business”

1. defendants’ physical presence in a venue; 2. defendants’ prior representations that they have a

presence in a venue; 3. benefits received by defendants from a venue, e.g.,

sales revenue; and 4. defendants’ targeted interactions with a venue.

Raytheon Co. v. Cray, Inc., No. 2-15-cv-1554, 2017 WL 2813896, at *11-13 (E.D. Tex. June 29, 2017).

18

Raytheon v. Cray

House Judiciary Committee chair Bob Goodlatte, R-Va. was quoted as stating:

“[TC Heartland] was expected to lead to a sharp reduction in cases being filed in one particular district in Texas that seems skilled at attracting patent trolls … Unfortunately, one judge in this district has already re-interpreted both the law and the unanimous Supreme Court decision to keep as many patent cases as possible in his district in defiance of the Supreme Court and congressional intent.”

https://www.law360.com/ip/articles/942170/lawmakers-slam-reprehensible-new-gilstrap-venue-rules

19

In re Cray

The Federal Circuit rejected the E.D. Tex venue test:

[O]ur analysis of the case law and statute reveal three general requirements relevant to the inquiry: (1) there must be a physical place in the district; (2) it must be a regular and established place of business; and (3) it must be the place of the defendant. If any statutory requirement is not satisfied, venue is improper under §1400(b).

In re Cray Inc., No. 2017-129, 2017 WL 4201535, *4 (Fed. Cir. Sept. 21, 2017).

20

The Effect of TC Heartland and Cray on Venue Statistics

21

Venue Before TC Heartland

22Docket Navigator Searching

E.D. Tex.36%

D. Del.10%

C.D. Cal.6%

N.D. Ill.6%

D. N.J.4%

N.D. Cal.4%

All Others34%

Cases Filed in 2016

Venue After TC Heartland

23

E.D. Tex.13%

D. Del.21%

C.D. Cal.9%N.D. Ill.

6%D. N.J.

6%

N.D. Cal.6%

All Others39%

Cases Filed Post-TC Heartland

Docket Navigator Searching

Challenges to Patent Venue after TC Heartland and Cray

• Convenience transfers under 28 U.S.C. § 1404(a) remain available

• Courts can find venue proper under TC Heartland but, in the same case, grant a 1404(a) convenience transfer• Prowire LLC v. Apple Inc., No. 17-cv-223, 2017 WL 3444689, at *7 (D.

Del. Aug. 9, 2017) (finding single retail store enough to meet “regular and established business” prong of Section 1400(b))

• MEC Resources, LLC v. Apple Inc., No. 17-cv-223, 2017 WL 4102450, at *2 (D. Del. Sept. 15, 2017) (transferring litigation when Apple’s single retail store in Delaware was the only connection to the venue).

25

Challenges to Patent Venue after TC Heartland and Cray

• TC Heartland and Cray will likely lead to more § 1404(a) convenience-based transfers being sought.

• D. Del., in particular, has seen a significant increase in patent litigation after TC Heartland; some view D. Del. (which recently had one judge retire and another take senior status) as now more willing to consider a request for a convenience transfer due to increased workload. The statistics bear this out. • Since Judge Robinson’s transition to senior status in February 2017,

D. Del. has granted transfers in 19 cases, nearly double the 11 transfers granted in all of 2016.

26

Challenges to Patent Venue after TC Heartland and Cray

• Talsk Research Inc. v. Evernote Corp., No. 1-16-cv-2167-TMD (N.D. Ill. Sept. 26, 2017 Order at 13)• Patent owner attempted to file “protective” action in Delaware (where

defendant was incorporated) and dismiss N.D. Ill. Case (where venue no longer proper under TC Heartland).

• Although “plaintiff’s choice of venue must be respected” (id. at 18), the Court transferred the case to California because the “interests of justice” weighed in favor of California, which was the center of the accused activity. Id. at 17-18.

27

Challenges to Patent Venue after TC Heartland and Cray

• Symbology Innovations LLC v. Lego Systems Inc., No. 2-17-cv-86-AWA, 2017 WL 4324841 (E.D. Va. Sept. 28, 2017 Order at 6).• Plaintiff sought to transfer to Delaware; Defendant wanted transfer to

Connecticut• The Court transferred to Connecticut: “Having chosen an improper

venue in the first instance, Symbology's attempt to tap its ruby slippers and make another wish is uncompelling.” Id. at 26.

28

Challenges to Patent Venue after TC Heartland and Cray

The State of Venue Analysis Since TC Heartland and Cray

• Whether the venue specific facts of a parent corporation should apply to its subsidiary, or vice versa. See Blue Spike, LLC v. Caterpillar, Inc., No. 6-16-cv-1361-RWS, 2017 WL 4129321, at *2 (E.D. Tex. Sept. 19, 2017); and Manville Boiler Co. v. Columbia Boiler Co. of Pottstown, 269 F.2d 600, 606 (4th Cir. 1959); Symbology, 2-17-cv-86-AWA Sept. 28, 2017, 2017 WL 4324841 (E.D. Va. Order at 17-18) (declining to impute the physical presence of a Lego subsidiary in Virgina (retail stores) onto the named Lego parent).

30

Open Issue Being Disputed in Courts

• Effect of storing documents/products within a judicial district

• Use of administrative services in a judicial district• Nature of relationship between employer/employee (for

remote employees)• Ability to move without employer approval• Employer owns/pays rent

• How Defendant presents itself to world (e.g. marketing a particular location)

31

Additional Open Issues Mentioned in Cray

E.D. Tex.’s Continued Dominance:Perceived Advantages• Time to trial• Broad, self-effecting discovery obligations• Reluctance to grant dispositive motions• Friendly juries who award big damages• Experienced, smart judges unencumbered by criminal

docket• And plaintiff can game judge selection

E.D. Tex.’s Continued Dominance:How Are Judges Assigned?• Many or most districts assign randomly

• DED distributes new cases roughly evenly• CAND assigns patent and copyright cases district-wide to distribute

workload

• TXED permits plaintiff to choose division• Choice of division largely determines judge

• Judge Gilstrap: Marshall (95%)• Judge Schroeder: Texarkana (80%) or Tyler (70%)• Beaumont or Lufkin = Clark; Sherman = Mazzant

E.D. Tex.’s Continued Dominance:Plaintiffs Shop for Venues to Shop for Judges

Venue/Judge 2016Cases

Nationwide 4641 100.0%

TXED– Marshall/Texarkana/TylerJudges 1602 34.5%

Gilstrap 1122 24.2%

Payne 769 16.6%

Schroeder 489 10.5%

Craven/Love/Mitchell 182 3.9%

TXED– Beaumont/Lufkin/ShermanJudges 60 1.3%

DEL(secondmostpopular) 458 9.9%

• Plaintiffs likely to be more particular about which Defendants they sue, e.g., suing only some of a set of related corporate entities, based on most favorable venue

• Plaintiffs may begin to file multiple simultaneous lawsuits and seek consolidation via MDL

• Defendants may begin filing more declaratory judgment actions in order to obtain a particular transferee venue

35

Expected Strategies