Thursday, January 15, 2015

Patent Forum Selling

Two papers have been posted this fall related to the negative effects of courts consciously encouraging litigants to file cases in their districts, such as E.D. Tex. and D. Del. with patent cases—one by Jonas Anderson, and another by Daniel Klerman and Greg Reilly. I recommend both; they're the most interesting discussions of venue in the patent context that I've seen since Jeanne Fromer's Patentography.

Court Competition for Patent Cases by Jonas Anderson (American)
The traditional academic explanation for forum shopping is simple: litigants prefer to file cases in courts that offer some substantial advantage — either legal or procedural — over all other courts. But the traditional explanation fails to account for competition for litigants among courts. This Article suggests that forum shopping in patent law is driven in part by the creation of procedural and administrative distinctions among courts that are designed to attract, or in some cases to repel, patent litigants. 
This Article makes two primary contributions to the literature, one theoretical and one normative. First, it theorizes that judicial competition for litigants is an inherent drawback of specialized adjudication, thus connecting the theoretical scholarship on specialized courts (primarily the literature on bankruptcy law's experience with court competition) with the abundant literature on forum shopping. Normatively, this Article examines three possible modifications to patent case assignment rules that could be used--possibly in conjunction with venue restrictions--to reduce both forum shopping and court competition. First, Congress could require district courts to randomize their assignment procedures. Second, patent cases could be assigned randomly to a subset of district court judges, similar to the current Patent Pilot Program (PPP). Third, patent cases could be assigned by a judicial panel, similar to the one used for Multi-District Litigation (MDL). Ultimately, while the more radical case assignment procedures would reduce forum shopping and court competition for patent cases, they would also increase litigation costs for all patent plaintiffs--not just forum-shopping plaintiffs. Thus, this Article supports a more modest fix: a randomization requirement for federal district courts.

Forum Selling by Daniel M. Klerman (USC) & Greg Reilly (Cal Western)
Forum shopping is problematic because it may lead to forum selling. For diverse motives, such as prestige, local benefits, or re-election, some judges want to hear more cases. When plaintiffs have wide choice of forum, such judges have incentives to make the law more pro-plaintiff, because plaintiffs choose the court. While only a few judges may be motivated to attract more cases, their actions can have large effects, because their courts will attract a disproportionate share of cases. The most prominent example of forum selling today involves patent litigation in the Eastern District of Texas. Judges in that district have distorted the rules and practices relating to case assignment, joinder, discovery, transfer, stay pending reexamination, and summary judgment in order to attract patent plaintiffs to their district. Judges in the Eastern District have been motivated by prestige, a desire to help the local bar and economy, and eagerness for a more interesting caseload. As a result of their efforts, nearly a quarter of all patent infringement suits were filed in the Eastern District of Texas in 2012 and 2013. This high case load is not the result simply of speed, efficiency, or pro-plaintiff juries. Rather it reflects a judicial effort to favor patent plaintiffs through a variety of procedural mechanisms largely immune from appellate review. The District of Delaware has used similar techniques to attract patent cases. Forum selling has also occurred in other areas of the law, including ICANN domain name arbitration, class actions and mass torts in “magnet jurisdictions” such as Madison County, Illinois, bankruptcy and the District of Delaware, and common law judging in early modern England. Forum selling can be cured by rules relating to jurisdiction and venue that give plaintiffs fewer choices.

One of the differences between the two articles is their scope: Anderson argues that "judicial competition for litigants is an inherent drawback of specialized adjudication," whereas Klerman & Reilly focus on "forum selling" in a broader array of fields and argue that "it is a danger that exists whenever jurisdictional rules give plaintiffs wide choice of forum." Additionally, Anderson views the best solution as increased randomization in case assignment, while Klerman & Reilly argue for more restrictive venue and personal jurisdiction rules. (Without delving into the merits of either proposal for solving the forum selling problem, I'll note that in Patent Experimentalism I argue that there are huge benefits to finding more ways to introduce randomization into the patent system.) Both papers are well worth a read, and not just for patent scholars. Indeed, understanding the extent to which "forum selling" (I love that term) is a patent-specific problem has important implications for ongoing debates about specialized patent adjudication.

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