Patent Litigation Reform Bill Targets Venue Abuse

Timothy Lee
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Posted: Jan 26, 2016 12:33 PM
Patent Litigation Reform Bill Targets Venue Abuse

In our judicial system, the concept of "venue" plays a critical role in ensuring fairness and due process for litigating parties.

The term essentially refers to judicial rules specifying the district in which a particular lawsuit may be litigated. Ideally, cases should only be heard in districts where a defendant resides, where a substantial portion of the events giving rise to the lawsuit occurred or where a substantial portion of the witnesses or property at issue are situated.

Although the subject of venue may gloss the eyes of first-year law students and the general public alike, our Founding Fathers considered it of such import that they specifically listed "transporting us beyond Seas to be tried" among their grievances against King George III in the Declaration of Independence. The concept of venue remains important today, as it helps ensure against excessive burden or unfairness to involved parties who should not be unfairly forced to travel to faraway locations in pursuit of justice.

Unfortunately, while venue rules exist to preserve procedural due process, in practice venue abuse facilitates injustice and judicial abuse.

That's because current federal law permits lawsuits to be filed almost anywhere, even though the central concept of venue aims to protect all parties against being forced to litigate cases in places unrelated to the laws, facts and evidence at issue in the dispute. Consequently, plaintiffs forum shop for districts notoriously hospitable to "jackpot jury" awards or wrenching nuisance settlements from defendant parties simply hoping to avoid attorney fees and the time, resources and distractions inherent in battling burdensome claims.

That abusive practice has fueled the problem of excessive litigation in the United States over the years, diverting countless resources from American innovation and investment.

Patent litigation, an important issue currently before Congress, provides a perfect illustration of the problem. Astonishingly, the number of patent lawsuits filed in the U.S. has skyrocketed in recent years, more than doubling from approximately 2,500 in 2009 to over 6,000 in 2014.

Even more astonishingly, a single district court among many in the U.S. - the Eastern District of Texas - accounted for nearly one-third of all new patent cases in 2014 and 44% of all cases this past year. In fact, a single judge in the Eastern District named Rodney Gilstrap maintains a docket of 900 patent cases, nearly one-fifth of all patent cases in the entire country.

Many reasons explain that glaring disparity, including the Eastern District's plaintiff-friendly local rules of court, its tolerance of overly burdensome pretrial discovery, a disproportionate number of outsized damage awards, a particularly high success rate for plaintiffs and its disproportionately low number of cases allowed transfer out of the district. Plaintiff attorneys concoct synthetic connections to the Eastern District of Texas in order to sustain lawsuits there, including such tactics as maintaining shell offices and warehousing documents there to convince judges to overrule motions to transfer venue to other districts. According to reports, patent litigators account for 90% of hotel bookings in the town of Marshall, Texas.

But regardless of the substantive bases for the disparity of patent cases in the Eastern District of Texas, the simple fact that such a preposterously high percentage of plaintiffs specifically choose to sue there demonstrates a serious problem demanding correction.

Fortunately, that necessary correction exists as part of broader patent reform litigation currently before Congress.

The Innovation Act, which passed out of committee and was approved by a 325 to 91 vote in the previous Congress, includes fair but effective provisions to limit trial lawyers' ability to maintain suits in faraway districts possessing no legitimate territorial connection to the underlying dispute. Nothing in the bill would prevent legitimate patent litigants from suing in any federal district where the parties are situated, where central witnesses and documentary evidence are located, where the invention at issue was created or where the resulting product is manufactured.

Accordingly, the only people with anything to fear from the Innovation Act are opportunistic lawyers and illegitimate litigants seeking to exploit our judicial system for quick personal gain.

Patent litigation reform is badly needed for America's economy and judicial system, not least for its potential to finally constrain the ongoing practice of venue abuse. Americans who rightly favor reform of abusive patent litigation and venue rules should therefore contact their elected representatives in Congress and ask them to vote accordingly.