TC Heartland: Statutory Interpretation, Fairness, and E.D.Texas

by Dennis Crouch

The topside briefs have been filed in TC Heartland with strong support for the petitioner who is looking to dismantle the notion of nationwide venue against accused patent infringers.  The question presented in the case is one of basic statutory interpretation of Congress’s venue statute: Whether 28 U.S.C. § 1400(b) is the sole and exclusive provision governing venue in patent infringement actions and is not to be supplemented by 28 U.S.C. § 1391(c).

28 U.S.C. § 1400(b) appears to severely limit venue in patent cases to “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.”  Section 1391(c), however seems to broaden the definition of residence “For all venue purposes . . . (2) . . .[defendant] shall be deemed to reside … in any judicial district in which such defendant is subject to the court’s personal jurisdiction.”  Since most patent defendants are subject to nationwide personal jurisdiction, venue is then proper in any jurisdiction.

This first-level statutory interpretation seems to make TC Heartland’s case a loser. The thing is, the Supreme Court already decided what is almost the exact same case in its 1957 decision Fourco Glass (limiting patent venue) and the unusual concentration of patent cases in the E.D.Texas has certainly reached the ears of the high court in a way that may influence the outcome.

TC Heartland’s attorneys Dabney & Duffy write:

This is an extraordinary case because it presents a question of statutory interpretation that this Court specifically answered more than a half century ago.

[Petitioner’s Merits Brief: 16-341_pet-authcheckdam1]

In addition to stare decisis, the brief offers a cogent explanation that the narrower, specific interpretation makes sense and that the “for all venue purposes” phrase in the broader statute is limited by its preparatory statement “except as otherwise provided by law.”

One debate here that may arise is a question of what is the “settled law.”  The Federal Circuit broad-venue doctrine has been the approach since its 1990 VE Holdings decision.  Here, however, TC Heartland raises the little known case of  Andrews v. Hovey (1888) for the proposition that a patent statute’s interpretation “cannot be regarded as judicially settled [until] so settled by the highest judicial authority which can pass upon the question.” I wonder though, whether creation of the Federal Circuit should be seen as overruling that prior statute – likely not.

A strong set of amicus briefs have been filed in support.  Most briefs are fairly similar – arguing the statutory interpretation and that the result is bad policy / unfair.  See Bankers Brief [16-341-tsac-aba];  ABA [16-341-tsac-american-bar-association]; APP Ass’n [16-341-tsac-act]; Internet Companies and Retailers [16-341-tsac-48-internet-companies]

The only party in opposition thus far is AIPLA who argues, inter alia, that if a policy needs changed then congress should do the changing. [16-341-ac-aipla]

Although I do not expect the Federal Government (SJ) to weigh-in on the case, one interesting brief comes from a group of 17 state attorneys general, including Texas whose “citizens [have been facing] abusive claims of patent infringement, which businesses and residents confirm are a drag on economic growth.” [16-341-texas-et-al]

Without the Government Brief, Mark Lemley’s brief (on behalf of 61 professors) may be seen as the most influential.  However, I would suggest that the brief loses some amount of its “law professor” credibility by being so one-sided in its statutory construction. [16-341-tsac-61-prof-of-law] Alongside Lemley’s brief is that filed by Stanford’s IP Clinic that argues, inter alia, harm to small businesses and start-ups: “frivolous PAE litigation is negatively correlated with venture capital (VC) investment.” Implicit (and often explicit) in these briefs is the argument that E.D.Texas is supporting frivolous litigation. Stanford writes:  “The Eastern District of Texas Exhibits Abnormal Forum-Selling and Litigant Gamesmanship That Undermine the Appearance of Integrity of the Patent Litigation System.” [16-341tsacengineadvocacy] Orange County IP Law Association’s brief filed by Bill Brown raises the real argument that E.D. Texas Judges now have “de facto policy making authority.” [16-341-tsac-ocipla]; See also Unified Patents [16-341-tsac-unified-patents]

Intel and Dell also offered a strong brief filed by Donald Verrilli in his new role at Munger Tolles: All indicia of statutory meaning show that Congress narrowed patent venue in 1897 and has never expressed an intent to expand it.” [16-341tsacintelcorporation].  Following onto Intel’s intent argument, WLF explains that post-Fourco amendments by Congress should be considered “within the context of a century of special rules governing patent cases. [16-341tsacwashingtonlegalfoundation] The Intel brief also focuses on a common complaint against the Federal Circuit – that it fails to really respect and follow the principles of statutory interpretation.  Here though, the issue is failing to follow Supreme Court precedent.  Intel argues that the “Court does not depart from the doctrine of stare decisis without some compelling justification.” (quoting Hilton v. S. Carolina Pub. Rys. Comm’n, 502 U.S. 197, 201 (1991).

GiantCo GE offers some crocodile tears at the “unfairness” of the provision to nice companies like GE.  Astutely foreshadowing a likely upcoming challenge, GE also reflects that part of the problem is “the Federal Circuit’s expansive approach to personal jurisdiction [that] has further stretched the boundaries of permissible venue in patent cases.” (citations omitted). [16-341-ac-ge]

Although GE’s unfairness arguments likely fall flat, one of the best briefs is that filed by EFF who does a great job of explaining how venue’s primary concern is that of fairness and that the Federal Circuit’s interpretation completely ignores that import. [16-341-tsac-electronic-frontier-foundation]

Generic Pharma adds to the statutory construction by explaining that the venue provisions in Hatch-Waxman Act are inconsistent with the Federal Circuit’s interpretation. [16-341-tsac-generic-pharmaceutical-association]

Finally, last but not least, Chicago’s IP Law Ass’n offers its analysis that patent venue battles over the “best venue” are wasting time and would be unnecessary under Fourco. [16-341-ac-intellectual-property-law-association] [16-341-ac-appendix]