Patent Baristas

One of the less-noticed items during the Senate Judiciary Committee mark-up of the Patent Reform Bill (Senate Bill S. 1145) was the adoption of Senator Specter’s amendment on venue. Following is an analysis of that amendment:

S. 1145 (before today): Implements venue reform by limiting venue to where (1) either the patent holder or infringer resides (for a corporation, this means the principal place of business or state of incorporation), or (2) where infringer has committed acts of infringement and has a regular place of business.

There was discussion and concerns raised by Senator Cornyn about a change that would limit venue to 3 states (WI, CA, VA) which I believe referred to Leahy’s 2nd manager’s amendment. From an e-report:

*Cornyn: “The manager’s amendment already fixes the problem. I oppose abusive forum shopping. But I fear the Specter provision would effectively limit patent litigation to WI, CA, and VA. There would be an inadvertent backlog in patent litigation.”

The 2nd manager’s amendment was adopted (which included venue among them), then Senator Specter’s amendment on venue was adopted, superseding the manager’s amendment. The limitation to three states does not appear to be in the Specter Amendment. However, in my opinion, its effect is worse.

S. 1145 (after today):

(1) prohibits patent holders from “manufacturing venue” by assignment/incorporation to establish venue for a specific district (e.g., companies setting up shells in ED Texas to invoke that venue); [probably ok]

(2) expands venue restrictions to apply not just to claims for infringement as well as declaratory judgment actions [outrageous result when considered with changes below — DJ filers (infringers taking a preemptive strike) can file suit and take advantage of the subsequently described venue restrictions];

(3) Provides that venue for a US infringer will be (a) where infringer resides (the principal place of business or state of incorporation) or (b) where infringer has committed “substantial” acts of infringement and has a “regular and established physical facility”. [note the expansion of limitation from “regular place of business” to “physical facility of significance”];

(4) Provides that venue for a foreign infringer will be (a) the foreign corp’s residence, which is where its main U.S. subsidiary is located or (b) where the foreign corp. has committed “substantial” acts of infringement AND has a “regular and established physical facility” [this is an *outrageous* result — (a) provides LESS jurisdiction over a foreign corp than a U.S. corp. by limiting the jurisdiction only to where the U.S. subsidiary is located, and it gives incentive for a foreign corp with a U.S. subsidiary to “locate” in the most infringer friendly forum of their choosing; and (b) provides no jurisdiction over those foreign corporations without a U.S. subsidiary who do not meet the criteria of a “regular and established physical facility” in the U.S.]

(5) Provides a “safe harbor” for universities from venue reform restrictions by allowing venue for university plaintiffs to be where the university resides [nice nod to universities on its face, but universities (a) are, at best, reluctant plaintiffs, and (b) have no protection for their tech-transferees, which means that the incidences of universities having to be plaintiffs will rise, their tech-transferees will be further disadvantaged, and ridiculous accusations and controversy of further “commercial” activity and Bayh-Dole abuse by universities be further fed.];

(6) provides a safe harbor for individual inventor plaintiffs who qualify as a micro-entity by allowing venue where the individual resides [again, nice on its face, but any individual inventor who has $4.5 million necessary to litigate will be highly unlikely to qualify for micro-entity status].

Finally, the inclusion of the safe harbors for universities and individual inventors highlights the most outrageous component of this amendment: that which is missing and removed. The original language of S.1145 provided jurisdiction where either the infringer *or* patent holder resides (for a corp, this means the principal place of business or state of incorporation).

The amendment eliminates jurisdiction where the patent holder resides for all but universities and micro-inventors! This means 99% of aggrieved patent holders who need to turn to litigation to defend their patent rights will now be forced to seek recourse against U.S. based accused infringers only on the infringer’s “home turf” with friendly jury pools predisposed to the substantial local business operations of the accused infringer. Worse, an aggrieved patent holder who needs to enforce his rights against a foreign patent holder will have even more restrictive avenues, and in some cases, will have NO recourse where a “regular and established physical facility” of a foreign corp. cannot be established.

This means that the traditional rule that the plaintiff chooses the forum is eliminated for most all constitutionally protected patent holders. Worse, it also means that *neutral* sites are eliminated as forums which have jurisdiction over patent suits. The only jurisdiction where patent infringement remedies can be brought for most all patent infringement cases is based upon the forum which, if at all, is that which is most favorable to the accused infringer!

Today’s post comes from Guest Barista David P. Vandagriff, Vice President of Intellectual Property at Helius, Inc.