Rethinking Venue in Patent Cases
In order for a lawsuit to be considered by a United States District Court, the court must be satisfied that it has jurisdiction and that venue is proper. Jurisdiction relates to the ability of a court to hear the case. Does the curt have the legal right to hear the dispute and does it have the right to exercise authority over all of the parties. In the patent context, a court has jurisdiction over the subject matter of the lawsuit because patents are granted under Federal Law. Whether the Court has jurisdiction over the defendant will usually depend on whether the defendant has done business in the court's jurisdiction which relates to the lawsuit.
Once the court is satisfied that it has jurisdiction, it will consider whether venue is proper. The question of venue asks whether this is the right place for the lawsuit. Thus, for example, the court may deny to hear a case, even if it has jurisdiction over both of the parties, if the actions that gave rise to the lawsuit took place somewhere else.
Under 28 U.S.C. Sec. 1400(b), venue in a patent case is proper "where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business." While this may sound limiting, the Courts have held there a corporation resides wherever it is subject to personal jurisdiction. In the patent context, Venue is proper wherever an act of infringement allegedly occurred. wherever a company sells its allegedly infringing product, it can be sued.
The problem with the current interpretation of venue is that it allows for forum shopping. Usually a company will want to sue in its local court. By suing locally, a monetary advantage is given in that the company's local lawfirm can hand everything without the need to have a second firm file documents in the distant court. Likewise, costs are reduced for court hearings, because travel time is eliminated. Finally, there is often a perception that suing in your hometown will make it more likely that the jury will be on your side. Damage to a local company means loss of jobs in my neighborhood.
According to Legalmetric,the Eastern District of Texas leads the country in Patent litigation filings for the first 6 months of 2007 at 176. So why is the Eastern District of Texas ground zero for Patent disputes? Is the Eastern District of Texas a hot bed of patent filings? Not likely. The Eastern District of Texas does not include Dallas, or Houston or Austin. So why the rush to Texarkana? The Eastern District of Texas is viewed as an extremely friendly place for patent owners to enforce their patents. (Please note as a patent attorney I have no objection to very patent friendly courts - I just wonder if we should allow companies from one state to sue companies from a second state in a remote third state just to get a more patent friendly court).
A prime example is Paice LLC v. Toyota Motor Corporation et al. Paice, a Florida electric motor manufacturer sued Toyota (a Japanese Corporation), Toyota Motor North America, Inc. (a Delaware Corporation based in New York City), and Toyota Motor Sales USA (a Delaware Corporation based in California), for infringing patents on hybrid technology. Why, then did the case end up in Marshall, Texas? Surely the Prius and Camry are sold in Florida. It is most likely that Paice determined that the Eastern District of Texas was more patent friendly than its local court.
The rush to Eastern Texas should raise questions about how much forum shopping we should allow. If a plaintiff has jurisdiction over a defendant in its home state, should the plaintiff be required to sue the defendant either in the plaintiff's home state or in the defendant's home state. Such a requirement would ensure that the states with the greatest interest in the outcome of the suit are involved in the lawsuit rather than some other court which a party believes will give them an advantage. Allowing forum shopping.
Forum shopping also raises the possibility of using the perceived local biases of one jurisdiction against a defendant. For example, if you wanted to sue Airbus, you would be on the next flight to Seattle. A jury in Seattle is likely to have connections to Boeing and may be a little bit slanted against Airbus. If you wanted to sue a company that has a poor environmental record, you may chose a jurisdiction which is known for being environmentally concious, hoping that a green jury will be predisposed against the defendant.
Requiring the ligation to occur in the home state of the Plaintiff or Defendant when possible helps remove improper biases and lets those states with the greatest interest in the litigation decide the outcome. Just a thought.
Once the court is satisfied that it has jurisdiction, it will consider whether venue is proper. The question of venue asks whether this is the right place for the lawsuit. Thus, for example, the court may deny to hear a case, even if it has jurisdiction over both of the parties, if the actions that gave rise to the lawsuit took place somewhere else.
Under 28 U.S.C. Sec. 1400(b), venue in a patent case is proper "where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business." While this may sound limiting, the Courts have held there a corporation resides wherever it is subject to personal jurisdiction. In the patent context, Venue is proper wherever an act of infringement allegedly occurred. wherever a company sells its allegedly infringing product, it can be sued.
The problem with the current interpretation of venue is that it allows for forum shopping. Usually a company will want to sue in its local court. By suing locally, a monetary advantage is given in that the company's local lawfirm can hand everything without the need to have a second firm file documents in the distant court. Likewise, costs are reduced for court hearings, because travel time is eliminated. Finally, there is often a perception that suing in your hometown will make it more likely that the jury will be on your side. Damage to a local company means loss of jobs in my neighborhood.
According to Legalmetric,the Eastern District of Texas leads the country in Patent litigation filings for the first 6 months of 2007 at 176. So why is the Eastern District of Texas ground zero for Patent disputes? Is the Eastern District of Texas a hot bed of patent filings? Not likely. The Eastern District of Texas does not include Dallas, or Houston or Austin. So why the rush to Texarkana? The Eastern District of Texas is viewed as an extremely friendly place for patent owners to enforce their patents. (Please note as a patent attorney I have no objection to very patent friendly courts - I just wonder if we should allow companies from one state to sue companies from a second state in a remote third state just to get a more patent friendly court).
A prime example is Paice LLC v. Toyota Motor Corporation et al. Paice, a Florida electric motor manufacturer sued Toyota (a Japanese Corporation), Toyota Motor North America, Inc. (a Delaware Corporation based in New York City), and Toyota Motor Sales USA (a Delaware Corporation based in California), for infringing patents on hybrid technology. Why, then did the case end up in Marshall, Texas? Surely the Prius and Camry are sold in Florida. It is most likely that Paice determined that the Eastern District of Texas was more patent friendly than its local court.
The rush to Eastern Texas should raise questions about how much forum shopping we should allow. If a plaintiff has jurisdiction over a defendant in its home state, should the plaintiff be required to sue the defendant either in the plaintiff's home state or in the defendant's home state. Such a requirement would ensure that the states with the greatest interest in the outcome of the suit are involved in the lawsuit rather than some other court which a party believes will give them an advantage. Allowing forum shopping.
Forum shopping also raises the possibility of using the perceived local biases of one jurisdiction against a defendant. For example, if you wanted to sue Airbus, you would be on the next flight to Seattle. A jury in Seattle is likely to have connections to Boeing and may be a little bit slanted against Airbus. If you wanted to sue a company that has a poor environmental record, you may chose a jurisdiction which is known for being environmentally concious, hoping that a green jury will be predisposed against the defendant.
Requiring the ligation to occur in the home state of the Plaintiff or Defendant when possible helps remove improper biases and lets those states with the greatest interest in the litigation decide the outcome. Just a thought.
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