TC Heartland v. Kraft Foods: Will the Court Curb Patent-Law Forum Shopping?

Twelve years ago Congress passed the Class Action Fairness Act of 2005, much of whose point was to curb the then-rampant practice in class actions of national forum-shopping, that is, filing a lawsuit in whichever of many possible courts around the U.S. was most favorable to the plaintiff, whether or not the state or district associated with that court had a natural link to the underlying controversy (such as being the place where the alleged misconduct occurred or where its defendant had its base of operations). But forum-shopping remains rampant and damaging in some other areas of litigation, such as product liability: thus pharmaceutical cases get taken to California and asbestos cases to Illinois and New York even if plaintiffs have never set foot in those states. And in perhaps the best-known litigation bazaar of all, a large share of patent cases (44% in 2015) are filed in the Eastern District of Texas, centered on Marshall, Texas, a rural community far from most defendants and their headquarters, and known for its exceedingly plaintiff-friendly judges and juries. The result has been a series of large verdicts even on dubious claims of infringement, coupled with enormous pressure on defendants to settle cases they would have resisted with confidence if filed in a different, randomly chosen district.

This scandalous situation has cried out for reform for years, and much of the tech and corporate community is hoping that the vehicle for doing so will be T.C. Heartland v. Kraft Foods, a case to which the Supreme Court granted certiorari last month on appeal from the Federal Circuit. The dispute turns on rather dry questions of statutory interpretation, both in its ultimate origins – the Federal Circuit opened the floodgates to forum-shopping in 1990 when it adopted an ultra-liberal interpretation of where a defendant business “resides” – and in the proposed solution, which is to interpret Congress’s 2011 amendments to a general venue statute as having implicitly overruled the 1990 ruling. The Federal Circuit declined to interpret the 2011 amendments that way. In favor of its position, it can be said that had it been widely noised about in 2011 that the amendments under consideration would close down the E.D. Tex. litigation gravy train, they would have been much more politically hard-fought. But then, it’s not as if the original green light for forum-shopping, 27 years ago, had resulted from clear Congressional deliberation or guidance either.

Isn’t it frustrating? Over the past quarter century, to the world’s astonishment, a jackpot patent litigation sector in the U.S. has grown up that shifts around billions of dollars, a good bit of it winding up in the hands of “patent trolls” and their lawyers. To its defenders, the dominance of Marshall and a couple of other special venues has improved the caliber of protection of intellectual property and put a scare into infringers; to its critics, it has opened up countless chances for abusive litigation and tactical extraction of money from innocent and productive players in the economy. Congress could clear up the matter in ten minutes – either by adopting a venue rule explicitly contemplating forum-shopping, or by closing it down in favor of narrowly defined venue – but it doesn’t. After all, making a decision might offend one side or the other. And so this enormous policy decision gets kicked over to the Supreme Court.

My own suspicion is that not in a thousand years would a thoughtful deliberative process have entrusted the future care of intellectual property in America’s tech sector to the bench and bar of Marshall, Texas, population 24,501. But that’s in no way a reflection on the quality of the able if wily legal talent to be found in East Texas. It’s a reflection on the quality of the lawmakers in the U.S. Congress.