Appeals Court Tells Patent Trolls' Favorite Judge He Can't Just Ignore The Supreme Court To Keep Patent Cases In Texas

Patents

from the not-how-it-works dept

A few weeks ago, we noted that Judge Rodney Gilstrap, a judge in East Texas who is infamous for handling approximately 25% of all patent cases in the entire country, appeared to be ignoring the Supreme Court in an effort to keep all those patent cases in his own docket. You see, earlier this year, in an important case, the Supreme Court said that the proper venue for a patent lawsuit to be brought should be where the defendant “resides” rather than just wherever they “do business.” Previously, patent trolls had said that the lawsuits could be brought wherever a company did business — which, with internet firms, meant anywhere — allowing them to file in their favorite court in East Texas. The Supreme Court said “that’s not what the law says.”

But Gilstrap tried, somewhat creatively, to twist himself around those rules, by arguing that all sorts of other factors could be used to determine “residence” — basically including (again) if you had any connection to that jurisdiction at all — and thus continue to allow East Texas to be an acceptable venue. We listed out those factors in the earlier post, but don’t need to do so again, because the Court of Appeals for the Federal Circuit has already weighed in and said “nope, that’s not how it works.”

The ruling is pretty straightforward. Basically, it says “when we say a defendant has to reside in that venue, we mean it.”

As discussed in greater detail below, our analysis of the case law and statute reveal three general requirements relevant to the inquiry: (1) there must be a physical place in the district; (2) it must be a regular and established place of business; and (3) it must be the place of the defendant. If any statutory requirement is not satisfied, venue is improper…

The court then points out that words have meaning, and making up a “test” that is untethered to the meaning of the words in the statute is simply not acceptable.

The statutory language we need to interpret is ?where the defendant . . . has a regular and established place of business.? 28 U.S.C. § 1400(b). The noun in this phrase is ?place,? and ?regular? and ?established? are adjectives modifying the noun ?place.? The following words, ?of business,? indicate the nature and purpose of the ?place,? and the preceding words, ?the defendant,? indicate that it must be that of the defendant. Thus, § 1400(b) requires that ?a defendant has? a ?place of business? that is ?regular? and ?established.? All of these requirements must be present. The district court?s four-factor test is not sufficiently tethered to this statutory language and thus it fails to inform each of the necessary requirements of the statute.

And thus, Gilstrap’s argument that a “virtual” presence in the district is enough… is not, in fact, enough:

As noted above, when determining venue, the first requirement is that there ?must be a physical place in the district.? The district court erred as a matter of law in holding that ?a fixed physical location in the district is not a prerequisite to proper venue.? … This interpretation impermissibly expands the statute. The statute requires a ?place,? i.e., ?[a] building or a part of a building set apart for any purpose? or ?quarters of any kind? from which business is conducted. William Dwight Whitney, The Century Dictionary, 732 (Benjamin E. Smith, ed. 1911); see also Place, Black?s Law Dictionary (1st ed. 1891) (defining place as a ?locality, limited by boundaries?). The statute thus cannot be read to refer merely to a virtual space or to electronic communications from one person to another. But such ?places? would seemingly be authorized under the district court?s test.

The court dings the other prongs of Gilstrap’s test as well, showing that each is insufficient and then sends it back to the lower court to determine which other court the case should be transferred to, but making it clear that “East Texas” is not one of the options.

Filed Under: cafc, east texas, patent trolls, patents, rodney gilstrap, venue, venue shopping
Companies: cray, raytheon