Ask Dr. CopyrightDear Doc:

I know this is not a copyright question, but I hope you can shed light on something that’s been bothering me for some time. Why, in this great and broad country of ours, has it seemed like every other patent case is being decided in an obscure town in East Texas called Marshall? How is that fair to companies that have nothing much to do with Texas, let alone that one small town?



Malus Domestica McIntosh

Dear Mac:

In recent years, 45% of all patent cases have, indeed, been brought in the United States District Court for the Eastern District of Texas in Marshall, Texas. Big companies like Apple, Microsoft and others have been dragged into court in a small Texas town. Because that court has special rules for patent cases, and judges and juries there have become known as being favorable to patent owners, many lawyers engaged in “forum shopping”, choosing to bring their complaints there. They were able to do that because back in 1990, the Court of Appeals for the Federal Circuit (CAFC) decided that Congress changed the law controlling where patent suits could be started. The CAFC had to do some pretty fancy legal footwork to get that result…

In Fourco Glass Co. v. Transmirra Products Corp., 353 U. S. 222 (1957), the Supreme Court had ruled that corporations could only be sued for patent infringement in certain limited places: either the state in which they are incorporated, or where they actually infringe and have a regular and established place of business. It says that clearly in 28 U.S.C. §1400(b), which Congress had enacted in 1948. Then, a few years later, Congress made some changes in the general (non-patent) venue law to make it easier to sue corporations anywhere they did business.

In VE Holding Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574 (Fed. Cir. 1990), the Federal Circuit held that the “reside” provisions in 28 U.S.C. §1391(c) had broadened the patent venue statute, 28 U.S.C §1400(b). That is, §1391 says, “[e]xcept as otherwise provided by law” and “[f]or all venue purposes,” a corporation “shall be deemed to reside, if a defendant, in any judicial district in which such defendant is subject to the court’s personal jurisdiction with respect to the civil action in question.” Because states have “long arm statutes” that allow most corporations doing any business at all in the state to be dragged into court there, this meant that most corporations could be sued pretty much anywhere in the US. Although the CAFC had intentionally ignored Fourco and the words of §1400(b), for the past 27 years, it’s been that way, and most patent suits happened in either Texas or Delaware (where many corporations are established.)For the past several years, the Supreme Court has been systematically giving the CAFC (the court that, by law, decides all appeals in patent case) a beatdown. Nobody knows why, but it’s a pretty safe bet that almost anything the CAFC decides is going to get reversed by the Supremes. So, although it’s been 27 years since VE Holding…

On May 22, 2017, the Supreme Court decided TC Heartland LLC v. Kraft Food Brands Grp. LLC, 581 U.S. ___ (2017), and reversed the CAFC’s long-standing practice permitting venue over domestic corporations to be wherever a court had personal jurisdiction. Now, “[a]s applied to domestic corporations, ‘reside[nce]’ in §1400(b) refers only to the state of incorporation.” The Supreme Court told the CAFC that neither a 1988 amendment nor a subsequent 2011 amendment to §1391(c) changed the meaning of § 1400(b). In a somewhat dubious statement, they said that Congress, “ordinarily provides a relatively clear indication of its intent” when it wants to alter the meaning of a law. The Court found that the current version of §1391, “does not contain any indication that Congress intended to alter the meaning of §1400(b) as interpreted by Fourco.”

What does all this mean? For starters, it means that lawyers can avoid wearing those pointy boots and big hats down there in Marshall. Most corporations are not incorporated in Texas, and few actually have established places of business in East Texas. For the law firms that opened offices there, it means that they’re about to get longer vacations.  On the other hand, our friends in the First State who practice in the District of Delaware may be about to see an increase in business. Given how many corporations are established there, it’s pretty safe to say that they will be going to Wilmington some time very soon.

Have a question about intellectual property law? The attorneys at LW&H eat, sleep and breathe this stuff. Give them a call. You’ll be glad that you did.

Until next month,

The “Doc”

— Lawrence A. Husick, Esq.