By Andrew Williams --
As we reported last week, the Supreme Court will hear oral arguments in the TC Heartland LLC v. Kraft Foods Group Brands LLC case on Monday March 27. In that previous report, we covered the background of the case, and presented the positions of both sides of the issue. Ultimately, this case should boil down to a straight statutory interpretation involving the interplay of the specific patent venue statute with the general venue statute found in the same chapter. Nevertheless, as we previously mentioned, around 30 amicus briefs were filed in this case, whether in support of petitioner TC Heartland, in support of respondent Kraft Foods Group, or in support of neither party. And while these briefs provided some discussion of statutory construction, the overwhelming majority of ink was spent explaining why public policy dictates a specific outcome, with the fate of U.S. patent law hanging in the balance. While we can maintain the somewhat naïve impression that the Supreme Court is not influenced by these public policy arguments for a statutory construction case, it is interesting (and perhaps useful) to look at some of the positions proffered in these briefs. To that end, we provide a review of the arguments advanced by at least 98 self-identified professors that signed onto three different amicus briefs.
Professors in Support of Petitioner
Mark A. Lemley of Stanford Law School was counsel of record on an amici curiae brief filed on behalf of 61 professors of law and economics advocating a narrow interpretation of the patent venue statute. This brief allocates a few pages as to why the patent venue statute should be construed narrowly. Basically, the Supreme Court interpreted the patent venue statute in Fourco Glass Co. v. Transmirra Products Corp., 353 U.S. 222 (1957), and nothing has changed to disturb that ruling. The 1988 changes in the general venue statute were described in this brief as "ministerial," and these professors could find no indication that Congress intended a change to the specific patent venue statute. The Federal Circuit opinion in VE Holding Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574 (Fed. Cir. 1990), was described as wrong for two reasons. First, these professors applied the well-established rule of statutory construction that "Congress does not hide elephants in mouseholes." In other words, if Congress had meant to change the patent venue statute, it would not have done so "in vague terms or ancillary provisions." Second, and more persuasive, these professors pointed out that the Federal Circuit's interpretation renders the second half of § 1400(b) superfluous. As a reminder, that statutory section reads:
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.
As such, the argument goes, "resides" has to mean something other than having "a regular and established place of business." Because patent infringement jurisdiction often focuses on specific jurisdiction, corporations will be subject to jurisdiction anywhere it "has committed acts of infringement and has a regular and established place of business." Therefore, if "resides" means the same thing as being subject to personal jurisdiction, the second half of § 1400(b) would be superfluous.
The 61 professors of law and economics focus most of the argument on the harms that the Federal Circuit's expansive reading of the patent venue statute has caused. Not surprisingly, the term "Patent Troll" is used early and often. "It has led to forum selling and forum shopping, it has contributed to the growth of opportunistic patent litigation by patent trolls, and it has led to undue case concentration." The Eastern District of Texas is touted as the poster child for these problems, with citation to several articles including one by signatory Colleen V. Chien and Michael Risch. (Colleen V. Chien & Michael Risch, Recalibrating Patent Venue, Santa Clara Univ. Legal Studies Research Paper No. 10-1 (Sept. 1, 2016), available here.) Some of the advantages of this district were provided: (1) judges in the Eastern District of Texas take 150 additional days on average to rule on a motion to transfer; (2) they are 10 percentage points less likely to stay cases in favor of concurrent IPRs; and (3) discovery rules have been adopted that begin earlier, end sooner, and require broader disclosure than almost everywhere else. All of these spell large discovery costs for the alleged infringer, which plays into the business model of the so-called trolls because they seek to settle cases for nuisance value.
The ultimate conclusion regarding the Eastern District of Texas is that forum shopping has led to an overall concentration of 44 percent of all patent cases in this district. Moreover, it was found that Judge Rodney Gilstrap of Marshall, Texas was assigned almost one fourth of all patent cases filed from 2014 to 2016. The 61 professors of law and economics professors concluded that Congress did not intend such a concentration of patent cases in a single court, "much less a court chosen by only one side."
Professors in Support of Respondent
Megan M. La Belle of the Catholic University of America, Columbus School of Law, and Rachel C. Hughey of Merchant & Gould filed an amici brief on behalf of about 15 professors of law and civil procedure. These professors filed their brief in support of Kraft Foods, and advocated for a broad reading of the specific patent statute. This brief focused more attention on statutory construction and how the Federal Circuit's interpretation of the patent venue statute was consistent with other Federal Civil cases. In contrast, Ted M. Sichelman of the University of San Diego School of Law filed an amici curiae brief as counsel of record on behalf of 22 law, economics, and business professors that appeared to be a response to the previous 61 professors. This brief focused almost exclusively on the reasons why the aims of patent law are better served under the current interpretation of the statute as provided by the Federal Circuit.
First, these 22 professors point out that even if the Supreme Court reverses the Federal Circuit on its interpretation, the result would not be a meaningful difference in the distribution of patent cases. It was acknowledged that a significant number (around 60%) of patent lawsuits are filed in just five districts -- the Eastern District of Texas, the District of Delaware, the Central District of California, the Northern District of California, and the District of New Jersey. But citing to the same Chien and Risch article, this brief points out that restricting venue would still leave roughly 60% of patent cases in the same five districts. The difference is that the Eastern District of Texas would drop to about 15% of all cases, and the Northern District of California and the District of Delaware would combine to account for about 37%. In other words, about 21% of cases would shift from one forum to only two other districts. The professors point out that there is no plausible argument that such a shifting in concentration would result in a meaningful distribution of cases.
Second, instead of the red herring of "unjust concentration," these professors allege that the real goal of previous 61 amici professors is "to make it more difficult for certain patent owners to win their lawsuits in district court." This brief points out that it is well known that the Northern District of California and the District of Delaware (for non-pharmaceutical cases) is less favorable for patent owners (including NPEs) than the Eastern District of Texas. Moreover, if the Supreme Court were to adopt Petitioner's construction of the statute, the District of Delaware will become even less favorable because the small number of judges there will find it difficult to manger such an increase in caseload.
These professors again acknowledge that the corporate defendants that find themselves victims of these so-called "patent trolls" have filed numerous briefs in support of Petitioner. In addition, they have lobbied Congress to change the venue statute. However, instead of demonstrating support for Petitioner's position, these lobbying efforts have not resulted in a change to the statute. This suggests that Congress is not necessarily motivated to change the status quo. In fact, despite these lobbying efforts, Congress "effectively authorized" the Eastern District of Texas by including it in the Patent Pilot Program, which is designed to channel cases to particular judges.
Finally, these professors point out that the general rule that corporations can be sued in any district for which there is personal jurisdiction is equally sensible for patent actions. The "forum shopping" highlighted by Petitioner and its amici is essentially federal policy for suits involving corporate defendants. Moreover, the Supreme Court has consistently and regularly corrected the Federal Circuit in recent years when it has attempted to treat patent law differently than other cases. For example, the Court has pointed out there should not be patent specific differences for subject matter jurisdiction (Gunn v. Minton, 133 S. Ct. 1059 (2013)); declaratory judgement actions (Medimmune, Inc. v. Genentech, Inc., 549 U.S. 118 (2007)); and injunctions (eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006)). The brief then addressed the "implicit allegation" that a large percentage of cases brought by NPEs are essentially baseless by citing to several articles to establish there is no valid empirical evidence for such an assertion. Nevertheless, these professors counter the argument by alleging that severally limiting all patent owners because of the actions of some patent owners is "not only ill-advised but fundamentally unfair to those patent owners who file good faith claims." They need look no further for a relevant example than the present case, in which Kraft (a non-troll practicing corporation) filed suit somewhere other than the Eastern District of Texas. As a matter of fairness, why should a blatant infringer get to dictate where it can be sued by a legitimate patent holder asserting its rights?
It will be interesting to see if the Supreme Court Justices provide any hints during the oral argument about whether they were swayed by these 98 professors. We will, of course, continue to monitor this case and provided updates as warranted.