Fed. Cir. Panel Blames Congress for Patent Venue Mess

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By Tony Dutra

March 11 — A U.S. Court of Appeals for the Federal Circuit three-judge panel criticized March 11 arguments that Congress has allowed it to place restrictions on where patent owners can file infringement complaints.

Those hoping to see the court end the influence of the U.S. District Court for the Eastern District of Texas over patent litigation are likely in for at least a short-term disappointment, given the judges' comments during oral argument.

TC Heartland LLC is asking the court to say that its 1990 opinion, which created the “forum shopping” opportunity that has made the Texas court a preferred venue, is no longer good law. But Judge Kimberly A. Moore said the court merely followed Congress' lead on expanding venue opportunities in VE Holding Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574, 16 U.S.P.Q.2d 1614 (Fed. Cir. 1990).

“It's like when you make a mess in your bedroom and you blame your sibling,” she said.

In general, Moore and Judges Evan J. Wallach and Richard Linn grilled the petitioner's counsel and let counsel for patent owner Kraft Foods Group Brands LLC make points without challenge and sometimes with open support.

Assuming the panel rejects TC Heartland's request to transfer its case, the alleged infringer's next step could be to request rehearing by the full appeals court, or review by the U.S. Supreme Court. It would not be the first trip there for the petitioner's counsel, John F. Duffy and James W. Dabney of Hughes Hubbard & Reed LLP, Washington and New York.

The attorneys previously took a nonprecedential opinion applying the Federal Circuit's obviousness standard to the Supreme Court and won a reversal in KSR Int'l Co. v. Teleflex Inc., 550 U.S. 398, 2007 BL 12375, 82 U.S.P.Q.2d 1385 (2007).

Patent bills pending in Congress would address the venue issue, but there has been no progress on the legislation in months. A source told Bloomberg BNA on background after the oral argument that there is some momentum in the Senate, at least, to pull the venue provision out of the larger bill and move it as a separate bill. But House bill sponsors have repeatedly said they are uninterested in piecemeal legislation.

How We Got Here

From 1897 up to the 1990 VE Holding change, patent owners were bound by what is now 28 U.S.C. §1400(b): “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.”

The Supreme Court strictly limited the definition of “resides” in Fourco Glass Co. v. Transmirra Prods. Corp., 353 U.S. 222, 113 U.S.P.Q. 234 (1957).

According to the VE Holding court, Congress's Judicial Improvements and Access to Justice Act of 1988 changed 28 U.S.C. §1391 in such a way that it overrode Section 1400(b), with an expanded definition of “resides” that effectively allows a patent holder to sue wherever they like.

At oral argument, Duffy presented TC Heartland's case as dependent on six words modifying Section 1391 in the Federal Courts Jurisdiction and Clarification Act of 2011: “Except as otherwise provided by law.” That means Section 1391 no longer overrides—assuming it ever did—Section 1400(b), because the Supreme Court's Fourco opinion meets those six words, he said.

Congress Believes It Has to Act

That argument was important for the panel's consideration because it cannot, under Federal Circuit rules, overturn VE Holding; only the court sitting en banc can do that. But, Duffy argued, the panel could say that the intervening change to Section 1391 made VE Holding no longer applicable.

Moore, however, pointed to a recent formal report in Congress indicating at least one influential representative doesn't believe the 2011 act changed anything.

“Congress must correct the Federal Circuit’s [VE Holding] mistake, and clarify that patent lawsuits may only be brought in districts with some reasonable connection to the dispute,” Rep. Robert W. Goodlatte (R-Va.) wrote in 2015 in the House Judiciary Committee report on H.R. 9, the Innovation Act.

That was the basis for Moore's “sibling” comment noted above. But to Duffy, she said, “That's pretty strong evidence that even Congress doesn't believe the argument you're making.”

John D. Luken of Dinsmore & Shohl LLP, Cincinnati, argued on behalf of Kraft Foods, which opposes transfer of its District of Delaware case to TC Heartland's home venue, the Southern District of Indiana.

To contact the reporter on this story: Tony Dutra in Washington at adutra@bna.com

To contact the editor responsible for this story: Mike Wilczek in Washington at mwilczek@bna.com

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