MANAGING IP

Sources say the convenience of witnesses factor may be more important now, while the Federal Circuit could still weigh in on venue-related uncertainties

By Rani Mehta 

June 05 2022

Almost five years have passed since the US Supreme Court changed the calculation for determining patent venue in TC Heartland v Kraft Foods.

The court ruled, on June 26 2017, that patent cases had to be brought in districts where defendants were incorporated or had regular and established places of business. It meant that plaintiffs had to be more careful about where they filed.

The number of cases filed in the District Court for the Eastern District of Texas, the previous top court for patent litigation, decreased because a lot of plaintiffs could no longer get venue there. Meanwhile, the number of patent cases filed in the District of Delaware, where most Fortune 500 companies are incorporated, increased.

The decision also helped pave the way for the rise of the District Court for the Western District of Texas, where cases skyrocketed once Judge Alan Albright took the bench. Plaintiffs that couldn’t file in the Eastern District of Texas could often get venue in the western district because tech companies had regular and established places of business in Austin.

Five years on from the TC Heartland ruling, some attorneys such as Stephanie Donahue, principal counsel of patent litigation at Sanofi in New York, say patent venue law is pretty settled.

“That’s not to say that there wouldn’t be any changes, but I think venue requirements for patent cases are pretty well set,” notes Donahue.

But others say there are still circumstances in which it’s unclear whether defendants have regular and established places of business in certain jurisdictions – and the Court of Appeals for the Federal Circuit may weigh in on these in the future.

They add that cases can still be moved from courts if the venues are deemed inconvenient even if defendants do have regular and established places of business there – and plaintiffs and defendants will continue to butt heads over convenience factors.

Sources are uncertain over whether the Western District of Texas will continue to remain the top patent court for the foreseeable future or whether venue issues or other factors could shake up the distribution of cases.

Not so settled

Sources note that the Federal Circuit itself has indicated that patent venue law is still unsettled. In the 2020 case Valeant v Mylan, former circuit judge Kathleen O’Malley remarked that the SCOTUS case “raised more questions than it answered”.

Attorneys point out that the appellate court once again weighed in on patent venue this year.

In March, in the case In re: Volkswagen, the court ruled that dealerships didn’t constitute established places of business for automotive companies because they were not agents of the car businesses.

Lawyers say that even though the court reached a decision in this case, there could still be uncertainty over whether other franchises constitute established places of business.

James Barney, partner at Finnegan in Washington DC, says the analysis in this case depended on the details of the specific franchise agreements. Other companies with franchises could have different types of contracts, which could lead courts to come to different conclusions on venue.

Other venue-related questions are expected to arise, although it’s unclear exactly what these will be.

Barney says courts will have to deal with the facts of other venue-related disputes on a case-by-case basis over the next several years.

“As each of these fact patterns gets resolved, that will provide more clarity,” he says.

The Judicial Conference of the US, the national policy-making body for the federal courts, is also likely to comment on patent venue soon.

In December 2021, Chief Justice John Roberts ordered the Judicial Conference to study judicial assignment and venue for patent cases after senators expressed concerns about the rise of patent cases in the Western District of Texas – although this report has yet to come out.

Time to transfer

One issue that has become especially important in the wake of TC Heartland is whether defendants succeed in transferring cases out of courts that they don’t want to be in or shouldn’t be in.

Defendants frequently file motions to transfer when they are unhappy about being sued in certain courts, and will often appeal these motions to the Federal Circuit if district court judges deny them.

David Jones, executive director of the High Tech Inventors Alliance in Washington DC, says the venue and transfer rules really only matter to the extent that parties can get them enforced up front, before a case goes to trial.

He says this is why mandamus – when the Federal Circuit overturns district court judges’ denials of motions to transfer – has become so important.

“Without mandamus, there’s really no good way to make sure the rules are followed in the first place,” he says.

When defendants can’t claim that plaintiffs’ choices of venue violate TC Heartland, they can still argue that venue is inappropriate for other reasons, such as the convenience of parties and witnesses.

As a result, some lawyers say the convenience of the witnesses factor could be a key venue-related issue to watch in the coming years.

The Federal Circuit has transferred disputes out of the Western District of Texas owing to convenience factors, and has argued that Albright failed to properly consider the convenience of party witnesses (those who are employees of companies in disputes).

But not all lawyers are very happy with how the Federal Circuit has analysed the convenience factor.

Wendy Verlander, CEO of non-practising entity Blackbird Technologies and managing partner of Verlander LLP in Boston, questions whether courts should focus on the locations of defendants’ documents and witnesses to the extent that they have recently.

“Is this a convenience issue or really just the defendants gaming the system to get into a court that’s more favourable to them?” she asks.

Other attorneys are less worried, however.

Barney at Finnegan says this area of the law is pretty well developed. Although there may be decisions on this issue that seem outside the mainstream, the case law and convenience analysis is fairly well settled, he notes.

Court distribution

Attorneys say future Federal Circuit rulings on venue are unlikely to cause a decrease in cases filed at the District of Delaware.

Kelly Allenspach Del Dotto, principal at Fish & Richardson in Wilmington, says the District of Delaware will probably continue to be a popular place for patent litigation because most companies are incorporated in Delaware and can be sued there – and this aspect of TC Heartland is pretty clear.

Others say, however, that it’s possible that future Federal Circuit analysis on what constitutes clear and established places of business could affect the distribution of cases at other courts.

Barney at Finnegan says the Federal Circuit will likely continue to weigh in on venue issues, just as it did in the In re: Volkswagen case in March, and these decisions could drive lawsuits to courts outside of Texas.

But he notes that the Western District of Texas will likely continue to be an active court because many tech companies do have a presence in Austin. He adds that companies can sue foreign defendants anywhere under TC Heartland – and this is unlikely to change.

In the meantime, it’s uncertain whether future patent venue rulings will chip away at cases filed in the Western District of Texas or in other courts. But either way, practitioners should certainly keep an eye on things because, after all, there will very likely be disputes related to patent venue in the next five years.