Patent Trolls' Favorite Judge Comes Up With Test To Keep Patent Cases In East Texas, No Matter What SCOTUS Said

from the take-that-scotus dept

We've written a few times about Judge Rodney Gilstrap, an East Texas federal district court judge, whom patent trolls seem to love. For well over a decade, we've discussed how patent trolls absolutely love to file cases in East Texas, and in the past few years, Gilstrap has basically been the judge for patent cases in East Texas. Incredibly, in 2016, Gilstrap alone handled 20% of all patent cases in the country (that was true in earlier years as well). Not 20% of the patent cases filed in East Texas -- but in the whole country. And if you read that link, you see that Gilstrap seems (a) proud of this and (b) insists that people are upset about all the patent cases going to East Texas because they don't like small-town America -- and not because the court makes it that much easier for trolls to shake down everyone.

Now, as you may recall, the Supreme Court, just a few months ago, appeared to slam the door shut on patent troll venue shopping with its ruling in the TC Heartland case. In that case, the Supreme Court ruled that patent law is pretty clear, that you need to sue where the supposed infringer "resides." For years, the courts had ignored this -- despite it being plainly stated in the law -- and said that you could file a lawsuit wherever a company did any business (and with many companies, that means anywhere at all).

Many folks suggested that the SCOTUS TC Heartland ruling should put a real damper on patent trolls running to Judge Gilstrap and East Texas.

However, it appears that Gilstrap may have other ideas. Ryley Bennett, from the Washington Legal Foundation, recently wrote up a depressing article about how Gilstrap appears to have come up with a new "test" for patent venue that more or less wipes out the Supreme Court's ruling. The case was a patent infringement case where Raytheon sued Cray in East Texas. Cray argued for a change of venue, which Gilstrap denied (just a month before the SCOTUS ruling on TC Heartland), pointing to a sale Cray had made in East Texas. So after TC Heartland, Cray asked Gilstrap to reconsider with that new precedent. And here, Gilstrap single-handedly created a new "test" about what is meant by "resides" in, making it possible to keep many cases in East Texas. The key here was that Cray had a single sales person who worked from home in the Eastern District of Texas. And, to Gilstrap, that's enough to establish "residence."

Bennett explains why this is so problematic:

According to Judge Gilstrap, to demonstrate that a defendant maintains a regular and established place of business, there does not have to be a physical presence or place at all—that’s just a persuasive factor for the court to consider. Inventory, under this analysis, is persuasive in finding a regular and established place of business. Thus, under Judge Gilstrap’s interpretation, a plaintiff can secure its venue of choice by using downstream targets. Even when a corporation does not have property in the EDTX, under this test, if the corporation has remote (work-from-home) employees—who are reimbursed for business expenses such as cell phone and internet use, along with travel reimbursement—it can be subject to venue in a district where any of its remote employees resides.

Further, under Judge Gilstrap’s second factor, a defendant’s “representations” can be a mere advertisement about what the company does or where it is located, even if the company is located in a different state. Ironically, although Judge Gilstrap repeatedly stated that the business world has changed since the adoption of § 1400 and it should be adjusted accordingly, he cited a 1910 decision when stating that customer inquiries directed at an agent who happens to be in the EDTX should be considered persuasive when determining if there is a regular and established place of business there.

Judge Gilstrap’s third factor—benefits received—is not limited to sales revenues; rather, any benefit that the defendant derives from presence in the EDTX should be considered. Does this mean that a happenstance conversation in a restaurant with a person who then becomes a customer outweighs other factors and gives rise to a regular and established place of business? Under Judge Gilstrap’s third factor of his test, it does.

In explaining the final factor—targeted interactions—Judge Gilstrap cited a Sixth Circuit personal jurisdiction case as support that existing or potential customers, customer support, or targeted marketing efforts give rise to a regular and established place of business—the same type of personal jurisdiction considerations that the Supreme Court in TC Heartland said did not apply to venue determinations.

Because of all of this, Bennett notes that the new "test" feels an awful lot like the old rules that the Supreme Court just threw out. Not surprisingly, Cray immediately asked the appeals court to weigh in on the issue, while Raytheon has asked to leave Gilstrap's ruling in place. As it stands, CAFC is still reviewing the issue, and various parties are lining up filing amicus briefs urging the court one way or the other.

However, it does at least give the appearance of a highly criticized East Texas court judge effectively stacking the deck with this test in a manner that will allow him to ignore the clear spirit and substance of a Supreme Court ruling, in an effort to keep the patent troll case train to keep dumping cases at his courtroom doorstep.


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  • icon
    aerinai (profile), 7 Sep 2017 @ 8:05am

    Goodbye East Texas Jobs

    So let's assume for a second this is allowed to stand.... All I'm hearing is it is dangerous as a company to have business dealings or employees in East Texas...

    Assume for a moment that you are a tech company that has to litigate this nonsense. Wouldn't it make more sense for me to lay off my East Texas workforce (especially in remote instances like this) to lower my risk? Be cheaper to fly in a sales person every week than 'establish residence'.

    If you live in East Texas, say goodbye good paying jobs, courtesy of your one and only Judge Gilstrap!

    reply to this | link to this | view in chronology ]

    • icon
      Anonymous Anonymous Coward (profile), 7 Sep 2017 @ 9:18am

      Re: Goodbye East Texas Jobs

      Not only that, but websites will probably block IP addresses assigned to East Texas because Judge Gilstrap will interpret that that constitutes having a business in East Texas. He appears to be quite imaginative in not only his patent case rulings, but in his interpretation of SCOTUS rulings.

      Funny what power does to logic. Or, maybe not so funny.

      reply to this | link to this | view in chronology ]

      • identicon
        Paul Brinker, 7 Sep 2017 @ 10:01am

        Re: Re: Goodbye East Texas Jobs

        I have to agree with this. As a business owner I would restrict all travel, business, and customers from East Texas.

        I would go so far as make this a public corporate policy.

        This way they would have to make some new test like "My Website can be seen from Texas" which will quickly fail in higher courts.

        reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 7 Sep 2017 @ 10:11am

      Re: Goodbye East Texas Jobs

      What is this east texas you speak of? It seems I can't find it on google maps any longer.

      reply to this | link to this | view in chronology ]

    • icon
      ShadowNinja (profile), 7 Sep 2017 @ 11:17am

      Re: Goodbye East Texas Jobs

      Forget employees.

      His sales doctrine basically says you have to refuse to sell ANYTHING in East Texas to stay out of it.

      You also have to avoid advertising in East Texas, so I guess all your TV ads have to specifically exempt whatever TV networks air in East Texas. And all web ads have to never appear on IP addresses associated with East Texas.

      And hell, while we're at it, your website should probably not even show up on google search results done in East Texas. Plus you need to IP block East Texas on your website.

      So essentially, there's not a single business that sells things in America that can survive his East Texas ruling.

      reply to this | link to this | view in chronology ]

      • identicon
        David, 7 Sep 2017 @ 12:10pm

        Re: Re: Goodbye East Texas Jobs

        > So essentially, there's not a single business that sells things in America that can survive his East Texas ruling.

        Or it's East Texas that can't survive his East Texas ruling. They will be the next Cuba.

        reply to this | link to this | view in chronology ]

    • icon
      Ben (profile), 7 Sep 2017 @ 2:19pm

      Re: Goodbye East Texas Jobs

      "... that existing or potential customers [...] give rise to a regular and established place of business"

      Wow. Just wow. Having a potential customer in the Eastern District will qualify the case to be held there.

      So, if you built target detectors for the something like the LHC you could be worried because if they built a super collider in East Texas they would be a potential customer of a potential collider. I don't think anyone could escape that logic.

      I hope when this gets to the CAFC it decides this right -- but they appear to like being smacked down by the supremes.

      reply to this | link to this | view in chronology ]

      • icon
        Bergman (profile), 8 Sep 2017 @ 2:24pm

        Re: Re: Goodbye East Texas Jobs

        It's worth noting that that potential customer test is the one used right now by the federal government to see if the Commerce Clause applies or not -- and if it does apply, therefore whatever it applies to is within federal authority to regulate or prohibit.

        Under current Commerce Clause interpretation, if I choose to buy local products that are entirely locally sourced, because my decision to do so means I didn't buy from someone in another state, my purchase impacts interstate commerce and therefore the commerce clause applies to whatever I bought.

        Judge Gilstrap seems to have simply applied that logic to court jurisdiction. After all, if it's constitutional to do one, both probably are constitutional.

        reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 7 Sep 2017 @ 9:32am

    Can you blame him?

    You would do your best to keep things afloat too, if your kickba-I mean reputation were on the line.

    reply to this | link to this | view in chronology ]

    • identicon
      OneMoreTime, 7 Sep 2017 @ 11:57am

      He just made himself a suspect in criminal cases everywhere...

      He can now be linked to every criminal case ever committed during his life time.

      Why you ask? Because his DNA is made up of the same 4 letters used to represent the chemicals that are the building blocks of life.

      It doesn't matter if it's not "exactly" his DNA sequence at all. The fact that it uses the same 4 letter representations used in other people's DNA is close enough.

      How many criminal cases did he just open himself up to?

      reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 7 Sep 2017 @ 12:42pm

      Re: Can you blame him?

      This judge should be investigated for sure. Why in the world should he be fighting so hard to keep these patent cases?

      How many properties, boats, etc does he own? I wonder if he might be displaying wealth that is disproportionate to his position.

      reply to this | link to this | view in chronology ]

  • icon
    Roger Strong (profile), 7 Sep 2017 @ 9:46am

    The East Texas federal district court is to b*llsh*t what Stonehenge is to rocks.

    reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 7 Sep 2017 @ 10:16am

    so why doesn't the Supreme Court do something about Jockstrap, i mean Gilstrap, and strip him of his judicial status? dont tell me he's come up with a test to get around that?

    reply to this | link to this | view in chronology ]

    • icon
      orbitalinsertion (profile), 7 Sep 2017 @ 10:50am

      Re:

      Boys Club test.
      First rule of Boys Club is you have to be a raging grease dumpster fire traveling at 100 kph toward a rich white people's daycare facility before the Club theatrically slaps your wrist and makes tsk tsk noises.

      On the other hand, some members who have been seen to take a stand for actual justice may receive a bit of a pranging.

      reply to this | link to this | view in chronology ]

    • icon
      R.H. (profile), 8 Sep 2017 @ 8:27am

      Re:

      To remove a Federal Court judge, you have to impeach them in the Senate (since they're appointed for life or until they retire). The Supreme Court doesn't have that power.

      reply to this | link to this | view in chronology ]

  • icon
    OA (profile), 7 Sep 2017 @ 10:54am

    Activist Judge

    Have I heard any spin doctors call Gilstrap an activist judge? This judge is reasoning and RULING to support a preferred conclusion that he must know is improper, Mr. Masnick has said or described evidence to such.

    More broadly, both our justice and political systems have long been on a trajectory where they are openly moved mostly by naked power as opposed to law or even moral or ethical considerations.

    reply to this | link to this | view in chronology ]

    • icon
      ShadowNinja (profile), 7 Sep 2017 @ 11:19am

      Re: Activist Judge

      I don't normally like the 'Activist Judge' term, since it's often just used by Conservatives to describe any ruling by a 'Liberal' judge that they don't like.

      But in this case it actually really does fit. This judge is stepping so far out of line to try to nullify a SCOTUS ruling that he ought to be impeached and removed from the bench.

      reply to this | link to this | view in chronology ]

      • icon
        OA (profile), 7 Sep 2017 @ 12:43pm

        Re: Re: Activist Judge

        I don't normally like the 'Activist Judge' term

        Same here. Same reason.

        I asked the question because I expect we will hear nothing now that it is true.

        reply to this | link to this | view in chronology ]

      • identicon
        Anonymous Coward, 8 Sep 2017 @ 10:33am

        Re: Re: Activist Judge

        You'd think that by just trying to override SCOTUS, they'd want to smack him down. Or at the very least put him back in his place.

        If this does get appealed back to them, SCOTUS will have the tombstone of his career read: "Idiot tried to overrule us."

        reply to this | link to this | view in chronology ]

  • icon
    JoeCool (profile), 7 Sep 2017 @ 11:00am

    Enough

    When a JUDGE plays games with a SUPREME COURT ruling in order to keep the bribes coming in, it's time to lock 'em up and throw away the key. The State Police should be called in, and this douche-bag tossed in a cell in the state capital while they comb through every last bit of his life to find the skeletons.

    reply to this | link to this | view in chronology ]

  • icon
    schnick (profile), 7 Sep 2017 @ 11:54am

    judgement

    I mean, the guy's job is to exercise judgment, and this is evidence of spectacularly bad and self-serving judgment. I understand that the standards for removal are pretty damn high, but doesn't this warrant some type of investigation and censure?

    reply to this | link to this | view in chronology ]

    • identicon
      David, 7 Sep 2017 @ 12:19pm

      Re: judgement

      He is not likely going to accept investigation and censure. This guy is going to ride his high horse until it's decomposed and every bone has been stolen out from under him.

      And he'll still shout "heeyah" and won't let go of the reins.

      Seceding Texas would be worth it for Gilstrap alone.

      reply to this | link to this | view in chronology ]

  • icon
    That One Guy (profile), 7 Sep 2017 @ 3:16pm

    Taste that desperation

    If trolls can't secure an easy win in his area then they have no reason to set up shop there, and he might have to get a job that involves more than just constantly repeating "Yup, that's a patent alright, and that means it's valid. Pay up."

    Hopefully the higher courts slap him down hard for this blatant attempt to keep the parasites under his jurisdiction via a 'test' that looks almost specifically designed to ignore a supreme court ruling.

    reply to this | link to this | view in chronology ]

  • identicon
    Yes, I know I'm commenting anonymously, 8 Sep 2017 @ 11:54am

    3rd factor

    The biggest benefit from filing in East Texas is that there is a pro-troll judge in East Texas. That should open the trolls up to being trolled themselves.

    reply to this | link to this | view in chronology ]


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