Changes in Venue

Are things still in transition or have they settled into place for now?

hings have somewhat settled in based upon courts’ interpretation of the existing patent venue statutes to construe them in a way that has made it more difficult to obtain proper venue in a particular district. Before the TC Heartland decision, you could typically establish proper venue for a patent plaintiff pretty much in any district where the defendant was infringing the patent. Today, proper venue requires that the defendant be incorporated in the state where the action is filed or that the defendant have a regular and established place of business in the chosen district and that acts of infringement have occurred in that district. However, litigators are still fighting and judges are still deciding what those court rulings really mean, what facts are critical, what considerations must be taken up in order to apply the as-construed statute for venue.

Take Apple for example. They sell their product in every single district in the United States — they had multiple Apple stores in the Eastern District of Texas. Therefore, it was easy to show they had a regular and established place of business there. In light of TC Heartland, and because they no longer wanted to be sued in East Texas, they closed their stores, all of them, in East Texas. People now frequently sue them in the Western District of Texas because, putting aside Apple stores, they have a lot of other offices, facilities, and business in Austin and in other cities in West Texas. But they took the incredible step, against the interests of their own customers, of shutting their stores and basically saying, “Go to Dallas.”

That brings us to the Western District and Judge Albright.

Until recently, if a business had a location anywhere in the Western District of Texas, then you could choose to file a case in the Waco division where Judge Albright is the lone sitting judge. Judge Albright made it very clear that he welcomed patent cases and promised to put them on a fast track to trial. From the day that started, over the next year and a half, 25% of all the patent litigation cases in the United States were filed in Waco.

Recently, the chief judge of the district issued an order that said if you file a patent case in Waco, then it’s going to go into a wheel, and one of the 11 judges of the Western District of Texas will be selected randomly. So, you’ve got a one in 11 chance of getting Judge Albright if that’s what you had in mind. That pulled the rug out from under the patent owners who wanted to be in the Waco division of the Western District. But there are a couple of caveats.

Since that order came down, people have been looking at the statistics, and yes, the number of cases filed in the Western District has fallen, but it hasn’t fallen as dramatically as expected. About half the cases filed in Waco are still going to Judge Albright. If a prior case was before him involving the same patents, then later-filed related cases are still going to him. Even under the standing order, that’s permissible. The bigger question is whether the chief judge who issued that standing order is leaving that position this year. There’s lots of speculation on whether the new chief judge will leave that order in place, will modify the order in some way, or will do something different.

If West Texas is no longer the district of choice it has been in recent years, are cases being filed elsewhere?

All things considered, the total number of new patent cases being filed across the United States has remained fairly constant. One of the districts that will remain popular is Delaware. Because the vast majority of major corporations for tax and shareholder reasons are incorporated in Delaware, you can sue them there if you want to. The problem there is court congestion. Time to trial is very lengthy. It can be four years or more from filing to trial, compared to say 15, 16, 17 months in East or West Texas. Also, the judges in Delaware have different rules. They’re willing to stay cases, pending ex parte reexams, or inter partes reviews, where the judges in East and West Texas are less willing to do that.

There’s an overall philosophical difference. In East and West Texas, as a rule of thumb, judges believe cases with merit should go to trial, that a jury should decide these cases. If you’re a plaintiff you usually want the jury to decide.

What’s the current outlook in California?

The Northern District of California is now receiving a lot of cases because they’re being transferred. If a judge denies a transfer of venue, most of the defendants will immediately appeal to the Federal Circuit under a mandamus petition, and they are now moving more cases to the Northern District.

That docket has become very crowded. We had some cases transferred there by the Federal Circuit after a mandamus petition two or three months ago, and we haven’t even had a scheduling conference yet. We’re years and years from trial. We had cases on the docket in the Eastern District where we were three or four months from trial and now we’re three or four years from trial, perhaps more. That’s very inequitable.

The Central District of California is a place you’re going to see more filings because you can get a lot of the companies located in California there, and the judge will probably be less anxious to transfer the case from LA to San Francisco. It won’t be as compelling an argument for convenience factors, but the Central District of California is maybe the third- or fourth-most popular place now.

Speed-to-trial coming into the equation raises the option of the International Trade Commission. What do you see happening there?

The ITC is going to become more important and more popular in the near future with patent plaintiffs that qualify for an ITC proceeding. You cannot get damages in the ITC, all you can ask for in the ITC is essentially an injunction, which would prevent the infringing imported product from entering the United States. But if you were to get an injunction against a company like Google saying they couldn’t bring their Pixel phones into the United States — they’re all made outside the United States — you’d expect the company would rather take a license than see all their products kept out of the country. So, while they can’t grant you damages, as a practical matter a successful ITC proceeding can cause license agreements to be entered into pretty quickly.

On the positive side, it is an extremely fast process — from the day you start it is typically in the neighborhood of a year to get a decision. Very fast. All the discovery, everything that takes place in a case that might take 20 or 30 months in a district court often happens in less than a year in the ITC.

It’s expensive, it’s very demanding of time and effort, but it offers the possibility of a quick result before an ITC judge. There are no juries in the ITC. We see it as a viable alternative to district court litigation, particularly if your choice is going to be four or five or six years of district court litigation. Assuming you can meet the criteria required, we think it’s a viable and wise place to go.

Given the cost considerations at the ITC, and the delays elsewhere, it makes sense why people are either still willing to spin that roulette wheel in West Texas or more determined than ever to file in East Texas.

One thing to keep in mind — and I wish the people who make policy would also keep this in mind — if you look at the outcomes in East Texas and overall outcomes in West Texas, they’re about 50-50 for plaintiffs and defendants. This is not like you go to East Texas or West Texas and you have a 90% chance of winning because the judges are doing something peculiar. It doesn’t play out that way.

Why are people going there? Because the rules, the culture of at least allowing you to have your trial, and also everything that comes with the pressures of speed. Parties are still trying to settle these cases on both the plaintiff and defense sides. And the best thing for settlement is pressure, time to trial, the fact that you’re going to have to spend a lot of money within a short period of time, and the fact you might actually go to trial. Those are the real reasons that people file in those districts.

You’ve been doing this a long time. Any thoughts on the current state of patent litigation and where we’re headed?

Rules radically changed after the AIA was enacted in 2011. With inter partes reviews, the PTAB proceedings, all of that, everyone thought patent litigation was pretty much over. In the beginning the PTAB was cancelling something like 70-plus percent of all patents that were challenged. A lot of people left this segment of the practice of law because they thought it was going to slowly die on the vine.

We didn’t. We were one of the firms, and I was at a big firm at the time, we doubled down and thought creative lawyers find a way to work within the case decisions and come up with arguments, reasons you can stay in the district. That’s what’s happened over the years. The patent litigation business didn’t go away. In fact, it has increased or has stayed pretty strong. You have to look at the laws construed and make your arguments. There will be changes in the future but we’re not going anywhere.