Venue Data: Litigation Activity in the Nine Weeks Following TC Heartland

Delaware, Illinois, and California have emerged as popular venues for NPEs filing suit in the nine weeks following the Supreme Court’s decision in TC Heartland—a dramatic shift away from Texas. RPX data also show that existing defendants in the Eastern District of Texas meanwhile have eagerly tested post-TC Heartlandground during this period with more than 350 motions to transfer or dismiss for improper venue. (Subscribe here to receive RPX’s daily transfer alert email summarizing all transfer motions and orders.) District courts have yet to rule on over three-fourths of those motions.

Figure 1 below shows that in the first 20 weeks of 2017—leading up to the May 22 decision in TC Heartland—the Eastern District of Texas accounted for 57% of new NPE litigation (as measured by defendants added). In weeks 21-29, that district accounted for only 28%. The weekly distribution, which includes the top five venues before and after the decision issued, shows that the District of Delaware, the Northern District of Illinois, and the Northern District of California have taken over as favored venues, at least initially.

While the Eastern District of Texas previously saw an average of 25.7 new NPE defendants added per week, that number has dropped to 7.9 after TC Heartland, just barely edging out the District of Delaware.

Delaware: Fewer Operating Company Plaintiffs

Looking at operating company plaintiffs in the nine weeks since TC Heartland, our analysis reveals some decline in filings in Delaware. This dip is not entirely a surprise, given that operating company venues are a bit more diverse. Figure 2 shows the top five venues before and after TC Heartland for operating company litigation.

Conflicting Interpretations

Courts have also begun to grapple with a variety of legal uncertainties introduced by TC Heartland. Chief among these is the question of whether TC Heartland counts as an intervening change in law, which determines whether defendants in existing cases can challenge venue if they failed to raise improper venue as a defense earlier in the litigation. Several district courts have ruled that in TC Heartland, the Supreme Court merely reaffirmed its 60-year-old decision in Fourco Glass v. Transmirra Products. As a result, the defendants in those cases were deemed to have waived their right to challenge venue, even if they thought that such a defense was unavailable.

At least one court has taken the opposite approach, however. In late June, District Judge Ronald B. Leighton of the Western District of Washington ruled that “TC Heartland changed the venue landscape”, allowing venue challenges that were unavailing under the Federal Circuit’s 27-year-old precedent from VE Holding. According to Judge Leighton’s ruling, defendants “could not have reasonably anticipated this sea change, and so did not waive the defense of improper venue by omitting it from their initial pleading and motions”.

Separately, some courts have begun to find waiver even when defendants have previously acted to preserve their right to challenge venue. In recent weeks, at least two judges have found that a defendant has waived an improper venue defense through subsequent litigation conduct, most notably by challenging the validity of the asserted patents under Alice.

In addition, District Judge Rodney Gilstrap—still the nation’s most active patent judge by number of cases—has weighed in on the issue of how to determine whether a defendant has a “regular and established place of business” in a judicial district under the prong of the patent venue statute not addressed by TC Heartland. In late June, Judge Gilstrap proposed a four-factor, “totality of the circumstances” test for that purpose. The four factors are a defendant’s physical presence in the district; the extent to which a defendant represents that it has a presence there; the extent to which a defendant derives benefits from that presence; and the extent to which a defendant interacts in a targeted way with existing or potential customers, consumers, users, or entities within a district.

Plaintiffs Adjust

As seen in the weeks immediately following the decision’s issuance, a variety of NPEs have been conceding to transfers when faced with venue challenges, including Hailo Technologies, LLC, IP Edge LLC (2017’s top filer to date), SecureNet Solutions Group, LLC, and three NPEs controlled by inventor Leigh M. Rothschild (Display Technologies, LLC, Location Based Services, LLC, and Rothschild Patent Imaging LLC). Some NPEs have also opted to re-file in the defendants’ desired districts in response to venue motions, including prolific filers Blue Spike LLC and Realtime Data LLC along with Eyetalk365, LLC and Lightside Technologies, LLC, with some dismissals by stipulation. Other plaintiffs, including IP Edge as well as Axcess International, Inc., Equitable IP Corporation subsidiary Bama Gaming LLC, Techno View IP Inc., and Zito LLC, have sought to get ahead of possible venue challenges, dismissing and re-filing existing cases in their districts of choice.

For more information on how both plaintiffs and defendants have reacted to the decision, see here.