“Patent reform” is one of the hottest topics in intellectual property today.  Many industries and trade associations have been advocating key revisions to the U.S. Patent Act for the past five to ten years.  The last substantial revisions occurred in 1952.  Thus, many argue, we are operating a “digital economy” with an “industrial” patent law.  

One of the issues on many groups’ reform agendas is choice of venue.  Several district courts around the country have gotten the reputation as “plaintiff friendly” forums in patent cases.  Typically, they are not areas with significant technology industries, but feature judges and juries that seem (according to critics) to favor plaintiffs, apply "prior art" narrowly, and grant large awards.  The Eastern District of Texas in Marshall, TX is one court frequently cited for this supposed reputation.  When the targeted defendant is a large company selling its products nationally, or over the Internet, sometimes patent plaintiffs file their case in Marshall even though neither party nor witnesses or evidence are located anywhere near there.  Obtaining a transfer from the plaintiff’s “choice of forum” has proven difficult for defendants, as long as its products had been sold in that forum (even if they were sold everywhere else in the country too).  Thus, reform advocates have argued for legislative changes; for example, requiring a proper venue to have a more significant connection to a case than mere sales of defendant’s products.

In the absence of any legislative change, the Federal Circuit seems to have taken a step two weeks ago that may accomplish much of what the reformers had wanted.  In In re TS Tech USA, a three-judge panel of the Federal Circuit reviewed the Eastern District of Texas court’s refusal to transfer a case to a court in Ohio, where witnesses and most evidence were located.  Despite the fact that the plaintiff had chosen to file in the E.D. Tex (traditionally, plaintiff’s choice of forum is given great weight), and despite the fact that the defendant’s infringing headrests had been sold in that district (and across the U.S.), the Federal Circuit ruled that the case must be transferred.  It found that the lower court had fundamentally misapplied the multi-factor test for reviewing motions to transfer, yielding a “patently erroneous result” (no pun intended).  The ruling may be important because, frankly, the district court seemed to apply the test in the same manner that many courts have evaluated transfer motions in patent cases for many years.  The Federal Circuit’s ruling thus may trigger a meaningful change in the way the venue law is applied in patent cases.

In the Eastern District of Texas, as in many jurisdictions, the court must consider a variety of “public” and “private” interest factors in reviewing a motion to transfer.  In the end, courts normally have significant discretion on the final determination whether to transfer.  The relevant factors in the Eastern District include (1) ease of access to sources proof/evidence; (2) availability of compulsory process (subpoena power) to secure the attendance of witnesses; (3) the cost of attendance for willing witnesses; (4) other practical problems that make a trial easy, expeditious and inexpensive; (5) court congestion; (6) the local interest in the dispute; (7) the familiarity of the forum with the law that will govern the case; and (8) the avoidance of unnecessary problems of conflicts of laws [or in] the application of foreign law.  In TS Tech, the district court denied the defendant’s motion to transfer the case to Ohio, where it alleged much of the evidence and many of the witnesses (as well as its corporate headquarters) were.  The district court focused on the importance of preserving a plaintiff’s choice of forum, and the district’s “interest” in adjudicating infringement of goods sold there (notwithstanding that they were sold all over the country).

The Federal Circuit ruled that the district court gave too much weigh to the plaintiff’s forum choice, seeming to make that factor almost dispositive (which it effectively has been in some past cases).  The Court found that the district court should have placed more emphasis on the proximity of witnesses and evidence, favoring transfer to Ohio.  And, the Court held that the “public interest” does not favor keeping the case in the original forum simply because the product was sold across the country, including in the original forum.  The Court stated, “the citizens of the Eastern District of Texas have no more or less of a meaningful connection to this case than any other venue.” It is very significant that the Court's ruling turned on these findings, because patent infringement defendants often had raised similar points in many prior cases, to no avail.

Thus, while the Federal Circuit’s decision did not “change the law” in the sense of articulating a new test, it may compel district courts to apply the existing test in a significantly different way than many had done in the past – including decreased reliance on plaintiff’s choice of forum and increased focus on where the crux of the dispute occurred, and/or witnesses and evidence lay.  It seems more likely that these factors would be satisfied where the plaintiff and/or defendant have offices.  In sum, plaintiffs in patent infringement cases may soon find that they are more limited in deciding where they can properly file their cases. Those in favor of patent reform likely would be pleased with that result.