Jessica Karmasek May 10, 2016, 3:42pm


WASHINGTON (Legal Newsline) - A recent decision by the court charged with handling all U.S. patent appeals could help proposed federal legislation aimed at allowing patent lawsuits to be brought in certain judicial districts gain some much-needed traction.

The U.S. Court of Appeals for the Federal Circuit, in its April 29 opinion, denied TC Heartland LLC’s petition for a writ of mandamus directing the U.S. District Court for the District of Delaware to either dismiss or transfer the patent infringement lawsuit filed against it by Kraft Foods Group Brands LLC.

TC Heartland, a manufacturer of water flavorings, had appealed to the Federal Circuit to transfer the case from Delaware to the U.S. District Court for the Southern District of Indiana, where the company has its headquarters.

Typically, defendants in patent cases prefer to have cases heard where they are headquartered because they believe they will get a more favorable verdict from jury members close to their home base.

But the Federal Circuit stood by its precedents. Since 1990, the appeals court has generally held that patent infringement litigation can be filed anywhere the defendant makes any sales. That means most big businesses, which tend to conduct business in a majority of states, can be sued for patent infringement just about anywhere.

“The arguments raised regarding venue have been firmly resolved by VE Holding, a settled precedent for over 25 years,” the three-judge panel wrote in its 12-page opinion. “The arguments raised regarding personal jurisdiction have been definitively resolved by Beverly Hills Fan, a settled precedent for over 20 years. As a panel, we are bound by the prior decisions of this court.”

Some observers argue that siding with TC Heartland, instead of Kraft, no doubt would’ve shook up where such patent litigation cases are filed in the nation. Currently, a majority of patent cases are brought in U.S. District Court for the Eastern District of Texas, which is seen by some as a plaintiff-friendly jurisdiction.

While the Federal Circuit rejected pleas from companies and various interest groups to crack down on forum shopping by so-called patent “trolls,” a piece of legislation floating around the halls of the U.S. Senate still has a chance to change that.

In March, U.S. Sen. Jeff Flake, R-Ariz., introduced the VENUE, or Venue Equity and Non-Uniformity Elimination, Act.

S. 2733, as it also is known, would amend the federal judicial code to allow patent actions to be brought only in judicial districts where:

- The defendant has its principal place of business or is incorporated;

- The defendant has committed an act of infringement of a patent in suit and has a regular and established physical facility that gives rise to the act of infringement;

- The defendant has agreed or consented to be sued;

- An inventor named on the patent conducted research or development that led to the application for the patent in suit; or

- A party has a regular and established physical facility and has managed significant research and development for the invention claimed in the patent, has manufactured a tangible product alleged to embody that invention, or has implemented a manufacturing process for a tangible good in which the process is alleged to embody the invention.

Under the bill, if a foreign defendant does not have a principal place of business, incorporation or a physical facility in the United States, that foreign defendant may be sued in any judicial district, and joinder of such a defendant shall be disregarded in determining where the action may be brought with respect to other defendants.

Also, according to the legislation, a teleworking employee’s dwelling or residence shall not constitute a regular or established physical facility of a defendant.

The bill has been read twice and referred to the Senate Judiciary Committee, where it has remained for weeks.

Flake could not immediately be reached for comment on the bill and its likelihood of passing.

So far, other patent reform measures have stalled.

The Innovation Act was introduced in the U.S. House of Representatives in 2013 and passed with bipartisan support, but then died in the Senate.

A somewhat similar bill, the PATENT Act, was introduced in the Senate in April 2015, but remains stuck in committee.

Supporters of S. 2733 argue the bill is different, and would finally address the “egregious” forum shopping that dominates patent litigation.

The Electronic Frontier Foundation, a San Francisco-based digital watchdog group, contends the legislation would bring a “modicum of fairness to a broken patent system.”

“Cases should be litigated in courts that have a meaningful connection to the dispute, not where one side thinks it can get an advantage,” EFF’s Elliot Harmon recently wrote. “The VENUE Act would make the process of determining venue more fair for both sides.”

Critics of the legislation argue that limiting forum choice in patent cases is problematic.

Scholars at the Center for Protection of Intellectual Property at George Mason University School of Law, in particular, contend the bill weakens patent rights across the board, severely limiting all patent owners, especially legitimate ones.

“Instead of acknowledging the broad collateral damage their changes would cause to all patent owners, venue revision advocates invoke the talismanic ‘troll’ narrative and hope that nobody will look closely at the details,” CPIP’s Devlin Hartline recently wrote. “The problem with their take on venue revision is that it’s neither fair nor balanced, and it continues the disheartening trend of equating ‘reform’ with taking more sticks out every patent owner’s bundle of rights.”

Adam Mossoff, a law professor at GMU and director of academic programs and senior scholar for CPIP, argues the VENUE Act is just the latest in a long line of proposals by certain companies and interest groups looking to revise the rules of the patent system.

“The forces that have been pushing for and spending hundreds of millions on those other patent reform bills have now decided perhaps the better approach for them, tactically, is to have them enacted piecemeal,” Mossoff told Legal Newsline. “I don’t see this bill any differently than H.R. 9 (the Innovation Act). It reflects the same problems that H.R. 9 has: it’s entirely one-sided and fails to acknowledge the extensive abuses in the patent system.”

Mossoff said while the Federal Circuit’s decision in TC Heartland may give the VENUE Act a boost and its sponsors hope, he still doesn’t expect it to move anytime soon.

“I think there are a lot of factors in play,” he said. “You have a Senate Judiciary Committee that’s now stalled over a Supreme Court nominee. You’re entering the election season, as well. So senators and representatives are becoming more concerned about things that have nothing to do with the patent system.”

Just because it won’t pass this year, doesn’t mean it won’t in the near future, Mossoff added.

“There are a lot of people pushing for those (patent reform) bills,” he explained. “Big companies are spending millions of dollars, and they don’t want to see their money go to waste.

“Most likely, if it doesn’t go anywhere this year, it’ll be reintroduced next year.”

From Legal Newsline: Reach Jessica Karmasek by email at jessica@legalnewsline.com.

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