Swelling Docket Pushing Delaware Judges to Transfer Patent Cases

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By Malathi Nayak

Patent infringement case filings in Delaware have doubled since a U.S. Supreme Court ruling in May, but recent orders from short-handed judges citing burdensome caseloads could keep some plaintiffs out of the district.

U.S. District Court for the District of Delaware judges have cited court congestion as the reason for transferring cases to other courts—including an infringement lawsuit against Apple Inc.—even when a broad interpretation of the Supreme Court’s ruling in TCHeartland LLC v. Kraft Foods Grp Brands LLC would have meant the Delaware court was a proper venue. The TC Heartland case originated in Delaware.

The high court ruling is clogging up a court that is already shorthanded on judges, Michael Zoppo, a principal at Fish & Richardson P.C., New York said. “You are going to see this reasoning more and more when people are filing in Delaware relying on very thin connections of the defendant to the forum,” Zoppo said. “The plaintiff’s choice of forum is going to be disturbed.”

The Delaware judges’ strategy of lobbing cases to other courts means patent holders who want to keep their infringement lawsuits in that court are facing new uncertainty, attorneys told Bloomberg BNA.

The Delaware district court has displaced the Eastern Texas district court as top venue for patent complaints since the TC Heartland ruling and saw filings jump from 36 patent infringement complaints in May to 79 in August, according to Bloomberg Law data.

The Supreme Court ruled that patent holders must file lawsuits where a defendant “resides” or is incorporated, not just where it makes a sale. Legal practitioners and academics predicted that the high court’s ruling would shift infringement cases away the U. S. District Court for the Eastern District of Texas, which has a patentee-friendly reputation, to Delaware, where many companies incorporate.

The Delaware district court has two active judges and two vacancies with a handful of visiting judges helping out. Former Judge Sue L. Robinson retired in late July. Judge Gregory M. Sleet was elevated to a senior judge status in May, but is handling a full docket, according to a 2017 annual report the court released in June.

Last week, Apple won a motion to transfer a patent infringement case brought by North Dakota-based MEC Resources LLC to the U.S. District Court for the Northern District of California, closer to its Cupertino, Calif. headquarters. The heavy caseload compared with the California court and the parties’ limited connections to Delaware were cited by the judge for granting the transfer. MEC had argued it can sue in Delaware because Apple has a store in the state ( MEC Res. LLC v. Apple, INC. , D. Del., No. 17-223, Motion granted 9/15/17 ).

Similarly, network security provider Zscaler Inc.succeeded in getting an infringement complaint filed against it by data-security company Symantec Corp. moved from Delaware to the Northern District of California in July ( Symantec Corp. v. Zscaler, Inc. , D. Del., No. 17-806, Motion granted 7/31/17 ).

In the Apple and Zscaler cases, Judge Mark Kearney said the judicial efficiency factor weighed in favor of transferring the lawsuits.

“Given the limited resources, we find it difficult to justly allocate judicial resources in this District to resolve a dispute between California and North Dakota citizens where there is no connection here other than Apple’s single retail location,” Kearney, a visiting judge from the Eastern District of Pennsylvania, said in his order in the Apple case.

For plaintiffs, “it is probably going to be difficult to stay in Delaware, if the defendant does want to transfer out,” and has operations and employees in another state, Shamita Etienne-Cummings, a partner at White & Case LLC in Washington, D.C., said.

Plaintiffs’ Dilemma

The U.S. patent venue statute specifies that a company can be sued in the district where it “resides,” or where it committed an infringing act and has a “regular and established place of business.” Plaintiffs in infringement cases are pointing to retail outlets, such as Apple stores, to argue that particular courts are proper venues for the litigation.

Earlier in the Apple case, the Delaware court in August denied the technology giant’s motion to dismiss MEC’s complaint based on improper venue. However MEC’s arguments weren’t enough to stop Apple’s motion to transfer.

“From a plaintiff’s point of view, even if you win, you lose,” Goutam Patnaik, a partner at Pepper Hamilton LLP in Washington, D.C., said. “You bring a case rightfully in the proper venue but because of this backlog issue you’re kicked out to another court.”

That can be particularly problematic for a plaintiff who is suing multiple defendants and wants to stay in the same court to keep up with a common schedule, Patnaik said.

Lacks Full Bench

The situation could change once more judges are confirmed to the Delaware court, White & Case’s Etienne-Cummings said. However, President Donald Trump has not yet announced any nominees for open seats there.

Anticipating a spike in patent complaint filings after TC Heartland, four visiting judges from the Eastern District of Pennsylvania and the District of Nebraska were roped in to hear cases, Delaware court Chief Judge Leonard P. Stark said in the court’s 2017 annual report. Discussions are underway to seek help from other judges, he said in the report.

Without a full bench in Delaware, high-tech companies in Silicon Valley have a greater chance of getting cases transferred to the Northern District of California as defendants, Etienne-Cummings said.

“Delaware district court judges might not think it is burdensome for pharmaceutical companies, for example, to bring employees and witnesses to their courtrooms if the companies primarily operated from neighboring states,” she said.

To contact the reporter on this story: Malathi Nayak in Washington at mnayak@bna.com

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

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