Congress Urged to Reform Laws on Patent-Suit Venue

WASHINGTON (CN) - Patent-law experts warned Congress on Tuesday that recent Supreme Court intervention is not enough to stop the trend of forum shopping by frequent litigants.

"Instead of going away, trolls may adapt their behavior," Colleen Chien, a law professor at Santa Clara University, testified this morning before the House Subcommittee on Courts, Intellectual Property and the Internet.

The hearing comes just over three weeks after the Supreme Court's decided in TC Heartland v. Kraft Foods Brands that companies can only be sued for patent infringement in the jurisdiction where they are incorporated. 

Chien and the other experts called to testify Tuesday voiced confidence that the decision will cut down on the number of suits filed in the U.S. District Court for the Eastern District of Texas, which has heard a disproportionately large number of patent disputes, though few of actually involve local companies.

"This is a sea change that will substantially curb forum shopping and impact every single patent case," Chien told the committee.

The Eastern District’s reputation as friendly to plaintiffs in patent disputes had impacts both on trials and settlements as companies became loath to carry on expensive, lengthy litigation in the far-away court.

By forcing filings in jurisdictions in which the parties are incorporated, the experts say

last month’s ruling might help companies avoid so-called "patent trolls.” Venue-shopping remains a concern for traditional businesses, however, because another part of the venue statute, untouched by TC Heartland, allows companies to be sued in jurisdictions where they do significant business.

Steven Anderson, vice president of the restaurant chain Culver's, said even though his company is headquartered in Wisconsin, it will still be exposed to lawsuits in the Eastern District of Texas because it has three stores in the area.

"For businesses that operate from bricks-and-mortar locations in multiple states such as Culver's and many other restaurants and retail chains, this decision is likely to have no impact," Anderson said at the hearing.

Anderson urged Congress to close a loophole that could still allow serial patent litigants to venue shop for certain types of businesses.

But the answer to exactly what Congress should do, or when it should try to do it, was elusive on Tuesday.

"The court's recent decision is a tremendous step, in my opinion, in the right direction, however additional efforts to rein in abuse of our nation's patent system will need to happen," said Rep. Darrell Issa, R-Calif., at the hearing.

Adam Mossoff, a law professor at George Mason University, cautioned Congress to wait on new legislation until there is more data comes on the impact of the Supreme Court's decision. Mossoff was generally critical of the TC Heartland decision, arguing it would stifle innovation and actually hurts companies trying to contest patents.

"Ongoing introduction of bills over the past five or six years, combined with impact of the substantial majority of Supreme Court decisions ... has created a lot of uncertainty for patent holders," Mossoff said.

Rep. Jerry Nadler, D-N.Y., questioned whether it would actually be a better system if the TC Heartland decision expanded the number of jurisdictions hearing most patent cases from just one to three, a likely outcome given the number of companies incorporated in Delaware and Northern California.

Nadler wondered if Congress should step in and designate specific courts to hear all patent cases, given the highly technical nature of the litigation.

Rep. Issa similarly asked the panel at the hearing about the possibility of changing the patent-venue laws to take into account for factors including corporate headquarters, the number of people a company employs and who was going to be deposed in the case.

After the hearing Issa said he has talked with Sen. Jeff Flake, R-Ariz., about what they might have to do to change issues with patent-venue laws.

"I believe that discretion by judges to find the appropriate venue - the most appropriate venue - may often be the case," Issa told reporters after the hearing.

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