Trevor Carter, Partner at Baker & Daniels and Practice Center Contributor, and Dorothy R. Auth, Ph.D., Partner at Cadwalader, Wickersham & Taft, sent in this article reviewing the legal homework of determining jurisdiction and proper venue, and discussing considerations parties must make to select the proper forum and how to keep their patent case there through resolution. Trevor Carter will be speaking at PLI’s 5th Annual Patent Law Institute in San Francisco on Monday, March 21st. Here is an excerpt from the article….
Venue
Chapter 87 of the Judicial Code addresses venue for various types of civil actions. There are general venue provisions[1] and special venue provisions.
Venue Statutes – Patent cases: 28 U.S.C. § 1400(b)
Venue for patent infringement cases and copyright cases is addressed under a special venue statute, 28 U.S.C. §1400. In particular, the venue statute for patent cases is §1400(b), which 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. § 1400(b).
The history of §1400(b) is long and convoluted. There has been controversy over whether § 1404(a) was intended to supplement the general venue statute or supplant it for patent cases with regard to corporate defendants. Eventually Congress broadened the definition of a corporation’s residency in §1391(c) in 1988 to read in relevant part:
For purposes of venue under this chapter, a defendant that is a corporation shall be deemed to reside in any judicial district in which it is subject to personal jurisdiction.(emphasis added). The Federal Circuit has held that, based on the plain language of § 1391(c) and the legislative history of the 1988 Act, § 1391(c) applies to § 1400(b). VE Holding Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574 (Fed. Cir. 1990), cert. den. 499 U.S. 922 (1990) (the new definition of corporate residence applies to all venue statutes, including § 1400(b)).
Nevertheless, the special patent venue statute remains and provides a narrower venue for natural person defendants. Further, the statute retains a limited effect on patent cases involving corporate parties.
The language of § 1400(b) does not track the “arising under” language of 28 U.S.C. § 1338, but rather specifies “action for patent infringement”; by contrast, the language of § 1400(a) for copyright cases does track the “arising under” language:
Civil actions, suits, or proceedings arising under any Act of Congress relating to copyrights or exclusive rights in mask works or designs may be instituted in the district in which the defendant or his agent resides or may be found. § 1400(a).
This distinction is important, because section § 1400(b) has been interpreted as inapplicable to declaratory judgment actions for patent non-infringement or invalidity. See, e.g., Emerson Elec. Co. v. Black & Decker Mfg. Co., 606 F.2d 234, 238-39 (8th Cir. 1979) (“Venue in a declaratory judgment action for patent invalidity and noninfringement is governed by the general venue statute, 28 U.S.C. § 1391(b) and (c), not the patent infringement venue statute, 28 U.S.C. § 1400(b)”) C.J. Markey of C.C.P.A. sitting by designation (citations omitted); see also VE Holding, 917 F.2d at 1583. The effect of this distinction may be limited to natural person defendants, however, because as discussed above § 1400(b) permits venue over corporate defendants based on personal jurisdiction under § 1391(c), which does not differ substantially from the §§ 1391(b), 1391(c).
A plaintiff cannot join a second alleged infringer that is a non-resident without establishing proper venue in the forum under § 1400(b) for that second defendant, unless there is some connection between the infringing acts. See, e.g., Botvin v. Okiebug Distrib. Co., 385 F. Supp. 190 (D. Okla. 1974). A motion under § 1406(a) to dismiss or transfer is an appropriate means to address a defect of venue under § 1400(b).
For obvious reasons, it is the plaintiff who initially chooses the forum, and the choice of venue is usually given weight. See, e.g., Qr Spex, 507 F. Supp. 2d at 665 (noting the deference usually afforded to plaintiff’s choice of forum, stating “[i]t is well established that a plaintiff’s choice of forum is usually highly esteemed. . . . While this factor is neither conclusive nor determinative, . . . in most cases the plaintiffs choice of forum ‘should not be lightly disturbed.’”) (citations omitted). The defendant may then file any counter-claims in the same forum, or if the defendant does not like the plaintiff’s choice of forum, he may move to dismiss, move to transfer venue or choose to file a separate action as plaintiff in another forum (e.g., a declaratory judgment action).[2]
Courts do not commonly grant requests for discovery of issues relating to transfer. See, e.g., Saleh v. Titan Corp., 361 F.Supp. 2d 1152, 1168-1171 (S.D. Cal. 2005) (finding no published cases holding plaintiff entitled to conduct discovery directed to transfer issue, and refusing a “fishing expedition” for witnesses and their potential inconveniences).
Alternative Forums
In considering the proper forum for a patent case, one should also consider alternatives to the Federal District court system.
The International Trade Commission (ITC) provides one such alternative. It is a speedy and efficient means for obtaining an exclusion order, i.e., the equivalent to an injunction in the district court. Cases brought at the ITC are filed pursuant to Section 337 of the Tariff Act of 1930, which states that imported products found to infringe certain intellectual property rights are unlawful. Although the ITC offers no monetary damages, there are several obvious advantages to filing a patent infringement case there. First, the case will be resolved quickly, most likely within 18 months. Second, the resulting exclusion order by a winning patentee is all but certain to block importation of the infringing product by U.S. Customs and Border Protection. Third, the case will not be subject to transfer, because the ITC is the only agency charged with regulating importation of patented products. Finally, the ITC has extensive patent expertise, because a large percentage of their cases are indeed patent cases. Over the past several years, the number of ITC cases filed has substantially increased, from 17 cases ten years ago to 55 cases in 2010. This increase reflects the increasing attractiveness of this forum to patent litigants.
Another forum seeing an increase in use is the United States Patent & Trademark Office. Here, a potential defendant in a patent lawsuit can challenge a patent’s validity by filing a Request for Reexamination pursuant to 35 U.S.C. Chapters 30 and 31, as an alternative to filing a declaratory judgment action in a district court. This procedure strips the patent of its presumption of validity and evaluates the patent in view of prior art raised in the reexamination request. Two types of reexamination are available; an ex parte procedure and an inter partes procedure. The ex parte procedure does not raise an estoppel issue if a subsequent litigation ensues, but the challenger’s involvement in the procedure is limited to his initial Request. Thereafter, the ex parte reexamination proceeds only between the applicant and the Examining Division. In contrast, an inter partes reexamination allows the challenger to file further documents during the reexamination proceeding, but suffers the consequence that an estoppel attaches should the patent survive the reexamination proceeding and be asserted in a patent infringement action. Other advantages of the Reexamination procedure over a declaratory judgment action include: (1) a lower burden of proof, i.e., preponderance of the evidence (as opposed to clear and convincing evidence); (2) claims in a reexamination are construed in the broadest reasonable way (as opposed to following Phillips v. AWH Corp, 415 F.3d 1303 (Fed.Cir. 2005)); (3) knowledgeable Examiners who are experts at the patent law; and (4) lower costs because no discovery is allowed during a reexamination. However, some caution should be exercised when considering a reexamination. Should the patent survive, it will be considered stronger and the challenger’s best prior art against it will already have been considered.
Read the full article Selecting Forum And Venue For Your Patent Litigation here.
[1] The appropriate federal venue for a § 1332 diversity action is determined under 28 U.S.C. §1391(a), and for a § 1331 federal question action proper venue is determined under 28 U.S.C. § 1391(b). Section 1391(a) would govern trade secret or trade dress cases, which involve state law, and §1391 (b) would govern federal trademark cases.
[2] It is generally accepted that the plaintiff may move to transfer the case under § 1404(a) if he discovers that his choice of venue is improper; however some courts view this unfavorably unless the plaintiff shows a change of circumstances justifying a second choice of venue. See, e,.g., Lexington v. Cheek & Zeehandelar, LLP, 2007 WL 593560 at *2 (N.D. Ohio 2007) (finding nothing in the statute to prevent a plaintiff from moving to transfer an action from a venue he selected in the first instance, and weighing the factors as it would under any such motion; Am. Home Assur. Co. v. Glovegold Ltd., 153 F.R.D. 695, 700 (M.D. Fla 1994) (no change in circumstances required); Central Hudson Gas & Elec. Corp. v. Empressa Naviera Santa S.A., 769 F.Supp. 208, 209 (E.D. La. 1991) (same); compare to Orrell v. Motorcarparts of Am., Inc., 2007 WL 895503, at *3 (W.D.N.C. 2007) (refusing to transfer where plaintiff did not demonstrate any change in circumstances after originally filing suit); Health Discovery Corp. v. Ciphergen Biosystems, Inc., 2007 WL 128283, at *3 (E.D. Tex. 2007) (“The plaintiff’s second or third choices of forum receives no deference, especially when the events giving rise to this infringement action do not dominate in either the plaintiff’s or the defendant’s choices of forum.”); Myers v. Doe, 2006 WL 3392692 at *3, (N.D. N.Y. 2006) (finding a change of circumstances which caused the proposed transferee court to become an appropriate forum not to preclude plaintiff from seeking transfer); James v. Daley & Lewis, 406 F.Supp. 645, 648 (D. Del. 1976) (transfer denied because no change in circumstances).
Tags: 28 U.S.C. s1400(b), Emerson Elec. Co. v. Black & Decker Mfg., forum selection, jurisdiction, VE Holding Corp. v. Johnson Gas Appliance Co., venue
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