Tuesday, November 24, 2015

Decoding the Patent Venue Statute

Last Friday, Colleen Chien and I published an op-ed in the Washington Post arguing that the courts and/or Congress should take a hard look at venue provisions. It was a fun and challenging project, because we worked hard to delineate where we agreed and where we disagreed. One area where we weren't sure if we disagreed or not was whether the 2011 amendment to the general venue provisions should affect patent venue.

This is a thorny statutory interpretation issue, and because we didn't have space to discuss it in the op-ed (nor did we agree on all the details), I thought I would lay out my view of the issues here. My views don't speak for Colleen. Further, while my views fall on one side, they do so based solely on statutory interpretation. I don't have a horse in the policy race other than to say that it's important, it's complicated, and it should be considered.

Here is my tracing of the history:

1789: Section 11 of the Judiciary Act - suits in civil cases filed only where the defendant inhabits (including patents)

1875: suits wherever defendant may be found (broad venue)

1887-1888: suits wherever D inhabits, but in diversity may be brought where plaintiff resides

After 1887: courts determine that 1887 Act doesn't apply to patent cases, and continue to allow venue where D can be found

1897: Congress adds provision that PATENT defendants should be sued where they inhabit - to reverse the confusion in the courts to the contrary

1911: Congress reenacts statute allowing for broader venue when there are two defendants

1942: Stonite says that special patent venue rules apply - case must be filed where D inhabits

1948: Judicial code revised - "inhabitant" becomes "residence" in 1400(b) (the patent venue section), 1391(c) created, says that corporate defendant resides anywhere it is doing business. This is essentially a rework of the "anywhere they are found" language of 1875.

1957: Fourco Glass says that 1391(c) is general statute, 1400(b) is specific statute. Nothing indicates that Congress intended to change the meaning of 1400(b) given the prior history of the 1875 statute: "The question here, then, is simply whether there has been a substantive change in that statute..."

1988: Congress amends 1391(c) to read: "For purposes of venue under this chapter, a defendant that is a corporation shall be deemed to reside in any judicial district in which it is subject to personal jurisdiction at the time the action is commenced." This changes two things: a) it broadens jurisdiction beyond "where it may be found" and b) defines residense "under this chapter"

1990: VE Holding (Fed Cir.) says that this change was substantial enough to change meaning of 1400(b), and venue in patent now essentially governed by the definition in 1391(c) 

2011: 1391 amended again. Primary changes: a) 1391(a) says the section will apply to venue in all civil actions "Except as otherwise provided by law" and b) instead of "under this chapter" 1391(c) now says "For all venue purposes" (there are other changes to structure one might argue is important, but my view is that these are the operative ones)

2011: The House Report 112-10 says: "New paragraph 1391(a)(1) would follow current law in providing the general requirements for venue choices, but would not displace the special venue rules that govern under particular Federal statutes.[fn] The footnote says: "The ALI notes that there are over 200 specialized venue statutes in the United States Code. These specialized statutes would continue to govern within their respective fields, and the general venue statute would govern diversity and Federal question litigation outside these special areas." 28 U.S.C. 1400 is NOT one of the special venue statutes listed by the ALI. None of the special venue rules listed by the ALI refers to a court case - only to statutes.

That's the history - now what do we make of it? I don't know, but I know this much: the answer is not "we should just default back to Fourco because that's the law." I don't think that works for two reasons. First, Stonite and Fourco were statutory interpretation problems. Second, this is a statutory interpretation problem. But the statute in Fourco is different from the statute today and has been amended twice since. We cannot rely on a supposed "rule" about a statute that no longer exists.

Instead, we must ask the question asked in Fourco: was the statute changed sufficiently to change the specific application of 1400(b) into the general application of 1391(c)? I think there are two ways to get there:

1. VE Holding was wrongly decided. I think this is the best chance. The argument would have to be that the "under this chapter" was still general, and thus Congress never intended to broaden venue. The problem with this argument is a) the Court has had opportunities to consider this since and declined, and b) Congress has reformed both the patent and the venue statutes since and not made a change. Both imply that no one thought VE Holding was wrong.

2. The change again in 2011 makes the venue statute closer to what it was at the time of Fourco, and thus the interpretation of Fourco should apply again. I think this is the weaker argument for three reasons.

First, you've got VE Holding in between. This means that Congress knew about patent venue, and yet never mentioned it or otherwise addressed it. While in 1957 you could argue that there had been no substantial change to adjust the specific meaning of patent venue, that's a much taller order after two amendments that seem to broaden the general provision to more specifically cover 1400(b).

Second, it is not clear to me that the 2011 amendment is narrowing at all. The legislative history and the language all seem to imply broadening. It's no longer just about the chapter, but instead about venue for all purposes -- unless otherwise allowed by law. Further, the statute now expands beyond corporations to all associations. This does not seem like Congress trying to rein in patent venue rules about corporate residency, but rather to broaden it!

Third, the key hook for the contrary argument "except as otherwise provided by law" does not scream out "patent venue." Reliance on a 60 year old interpretation of a different statute is not really "provided by law" in my view. Furthermore, this argument gets no help from the legislative history, which neither cites any court cases nor section 1400 as a specialized statute. This all implies that the patent venue statute was not viewed as "other" law by Congress anymore - for good or bad.

So, that's how I see the statutory interpretation. I joined Colleen on the op-ed because I think the court should take up the issue and give an answer one way or the other. At that point, Congress can act if it wants. I don't see venue as a divisive reform in the way I see other reforms.

I recognize that there are costs in all directions: someone has to pay if they are in a foreign venue. I'm persuaded that the nearly 100 year history of special patent venue is enough to default to the old meaning of the statute -- in part because I don't think Congress intended to change the meaning of the special statute in 1988. That said, I think it's pretty clear that Congress did change the meaning under the plain language and the subsequent unchallenged VE Holding case, and that's something that Congress should now address head-on.

To be clear, this post is about statutory interpretation and agnostic to the right policy. Our op-ed makes clear that there is a problem with venue that needs to be fixed. But the fix is unclear, and depends on the competing costs and benefits of venue. We may address it in a further post, but options include venue based on company size, number of defendants, expanded use of MDL, expert patent courts, etc. The question is not necessarily just one of where plaintiff is incorporated versus where defendant is incorporated.

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