Choosing the Ideal Venue for IP Disputes: Recent Developments in Federal Case Law
December 18, 2017
The venue of a lawsuit can be a crucial, even dispositive, decision in managing the strategy of a successful outcome in an IP dispute. Defending a lawsuit on your home turf is often easier than in a distant state – defendants may be more inclined to settle lawsuits that are brought in inconvenient or hostile jurisdictions far from home. Moreover, venue can affect the adjudication of the merits of the dispute, since the various tests for infringement, and even the availability of injunctive relief, can vary by circuit. Accordingly, litigants will often try to tilt the possibility of success by considering all these variables before choosing where to file a case. However, recent developments in venue and jurisdictional law may impact a litigant’s ability to access favorable venues.
The Supreme Court’s recent decision in TC Heartland LLC v. Kraft Foods Group Brands LLC radically changed the law regarding venue of patent lawsuits. Until July 2017, about 40% of patent cases were brought in the Eastern District of Texas. In Heartland, the Supreme Court ruled that defendants in patent cases could be sued only where they are incorporated, or where they have a regular or established place of business. This has led to a substantial reduction in the number of patent cases filed in Texas, and led litigants to reconsider the potential value of forcing defendants into faraway forums.
But what about other types of IP, such as copyrights, trademarks, and trade secrets? Are there similar rules enabling plaintiffs to sue in faraway jurisdictions? Or do plaintiffs in such cases face a more restrictive analysis regarding where they can file their lawsuits?
Venue for Copyright Cases
The venue statute for copyright actions is 28 USC §1400(a), which provides that the action may be brought “in the district in which the defendant or his agent resides or may be found.” This entitles a plaintiff to sue in any district where the defendant is subject to personal jurisdiction, measured by whether the defendant has “minimum contacts” and is “doing business” in that state.
However, another 2017 Supreme Court case limited the availability of a personal jurisdiction analysis. In BNSF Railway Co. v. Tyrell, the Supreme Court held that a railroad was not subject to general jurisdiction in Montana, despite the fact it had over 2,000 miles of track and employed more than 2,000 people in the state. Rather, the Court ruled that, to exercise general jurisdiction, a corporation’s contacts must be continuous and systematic, as “to render them essentially at home in the forum state.” Under a BNSF Railway analysis, plaintiffs in a copyright case might consider whether a purported infringer has sufficient general jurisdiction contacts with a proposed forum.
Notably, the BNSF Railway rule applies only to an analysis of whether general jurisdiction over a party can be found. It does not apply to “specific jurisdiction” over a defendant. “Specific jurisdiction” refers to cases in which the suit arises out of a defendant’s contacts with the forum. In copyright cases, therefore, a plaintiff can usually choose a forum if the acts of infringement occurred in the forum state or the plaintiff was injured in the forum state, even if the infringer otherwise lacks a relationship with the state.
In 2017, the Supreme Court also restricted the availability of specific jurisdiction. In Bristol-Myers Squibb Co. v. Superior Court of Cal., the Court ruled that, “for specific jurisdiction, a defendant’s general connections with the forum are not enough” to assert jurisdiction in the forum. Rather, each plaintiff’s injury must be suffered within the forum in order for a specific jurisdiction to apply.
Statistics show that copyright cases are often brought in states where industries offering copyrighted material are located, namely the Central District of California (26% of cases) and the Southern District of New York (11%). These statistics indicate that sophisticated copyright owners are initiating cases in their home districts.
Venue for Trademark Cases
Unlike patents and copyrights, there is no special statute that prescribes the venue for trademark cases. Trademark actions fall within the general venue statue, 28 USC §1391(b), which permits suit to be brought in a judicial district (i) where the defendant resides, or (ii) where the events occurred, or (iii) in a fallback venue if there is no other proper district, in any district where the defendant is subject to personal jurisdiction.
Many defendants in trademark cases are corporations, and most larger corporations can be considered residents of different states. The venue statute 28 USC §1391(c) allows corporations to be sued in any district in which they are subject to personal jurisdiction.
Courts can broadly interpret venue and jurisdiction rules when dealing with notorious infringers and counterfeiters. For example, the Second Circuit displayed a wide-ranging approach to jurisdiction and venue in Chloe v. Queen Bee of Beverly Hills. The defendant was a counterfeiter of Chloe handbags located in California and Alabama. It shipped one counterfeit Chloe handbag to Chloe’s attorneys in New York, and had sold other counterfeit handbags to New York customers. The Second Circuit held that these acts constituted “minimum contacts” with New York sufficient to allow Chloe to sue the defendant in New York.
Is the Chloe decision still good law after the Supreme Court’s restrictive decisions about jurisdiction in BNSF Railway and Bristol-Myers? The answer should be yes, because, unlike BNSF Railway, Chloe dealt with specific jurisdiction and Chloe was located in the forum. In fact, cases decided after BNSF Railway and Bristol-Myers in the summer of 2017 have cited Chloe and relied on it without mentioning recent Supreme Court cases. Accordingly, we can conclude that the Chloe ruling has continued vitality.
A study of venue in trademark cases by Lex Machina shows that several states predominate in trademark litigation. Of the 10 top judicial districts in which trademark cases are brought, three have over 55% of cases:
Central District of California: 30%
Southern District of New York: 15%
Southern District of Florida: 12%
It is clear, therefore, that sophisticated plaintiffs in trademark cases are choosing their venues with care, and are concentrating their litigation in several desirable venues.
Venue for Trade Secret Cases
In May 2016, the Defend Trade Secrets Act (DTSA) became law in the United States, stipulating that actions for trade-secret theft can now be brought in federal court. The DTSA provides a uniform approach to trade-secret protection throughout the country. It does not contain any specific venue provision, meaning that trade-secret case can be brought in any federal court that has venue under the general civil venue statute.
There are, however, unique aspects of a federal trade-secret case that should dictate venue choices:
- The DTSA uniquely allows ex parte seizure against a defendant, meaning that the case should be brought in the defendant’s home venue, so that the presiding court can have control over the seizure.
- Trade-secret cases frequently involve discovery of computer networks, hard drives, and data locations. It is useful, therefore, to have an electronic forensic expert nearby to conduct such discovery, and to bring the case in a court familiar with the Computer Fraud Abuse Act, 18 USC § 1030.
- Be familiar with the venue statutes for your type of IP case. Patent and copyright cases have their own venue statutes; trademark and trade-secret cases are governed by the general-venue statute.
- Understand that venue and jurisdiction rules are intertwined. Venue statutes often permit cases to be filed in any district that has jurisdiction over the defendant.
- Different circuits have different laws, cultures, procedures, jury pools, attitudes, and judges. If you have a choice of venue, you should learn about the factors that make a venue desirable or hostile for your client.
- Do not assume that you must file suit in the defendant’s home venue. You will typically have several choices of venue, including the plaintiff’s home district or the district in which the events took place.
- Be cautious in sending demand letters that warn the defendant of your intent to sue. These letters entitle a defendant to preempt your lawsuit by filing a declaratory-judgment action in another venue, thereby depriving you of your choice of venue.
- Instead of sending a demand letter, a useful tactic is to file a complaint in the venue of your choosing, but not serve the complaint. Instead, inform the defendant that you have filed the complaint and suggest that the parties discuss settlement. Tell the defendant that you agree not to serve the complaint as long as the defendant is negotiating in good faith.
- In federal court, a defendant may move for a change of venue based on the convenience of parties and witnesses, or in the interest of justice. These motions are not readily granted, so the moving defendant should be well prepared and able to demonstrate its position to the court.
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