Don’t Give Up on Venue Reform
Dear Sen. Chuck Grassley,
I work at the Electronic Frontier Foundation (EFF), an organization that fights for digital rights in the U.S. and abroad. Like you, my colleagues and I are deeply concerned about the U.S. patent system and the strain that patent trolls impose on American businesses. We think that as a respected senior senator and chair of the Judiciary Committee, you’re perfectly positioned to bring comprehensive change in the remaining months of this congressional session.
We’ve watched over the past few years as the momentum in Congress on patent reform has ebbed and flowed, and sometimes it seems that there’s no end in sight. Here at EFF, we know that patent reform is on Americans’ minds. When we encourage our supporters to write to their members of Congress about patent bills, we reliably inspire thousands of emails and phone calls.
Yet, every time it’s appeared that a patent reform bill might finally be ready for a vote in Congress, it suddenly vanishes from the agenda. Meanwhile, patent trolls continue to chill American innovation. We can’t keep waiting for a time when reform becomes politically convenient.
You know this better than anyone: patent trolls are not an academic issue for Iowa businesses. They’re a serious threat. In the words of Ames businessman and repeat troll target, Al Meyers, “The harm is real, as it reduces the investments that can be made to make Iowa’s and the nation’s products more competitive in the world market.”
We were glad when you told Politico that fighting trolls is still a top priority for you. EFF has a great deal of admiration for the Protecting American Talent and Entrepreneurship Act (PATENT Act), a bill that you shepherded into the Senate. But we were puzzled to hear that you’re not planning for the Senate Judiciary Committee to move forward with the Venue Equity and Non-Uniformity Elimination Act (VENUE Act), a bill whose reforms complement those in the PATENT Act perfectly.
You’ve said that you don’t want a venue reform bill to compromise the chances of passing a more comprehensive patent reform bill. But more than anyone else in Congress, you have the power to make sure that doesn’t happen.
The VENUE Act addresses one root cause of many of the patent system’s shortcomings: the fact that patent owners can file litigation in whatever forum they think will give them the greatest advantage. Forum shopping lets patent owners exploit any differences between districts in their favor. Savvy patent trolls know that, and that’s why they overwhelmingly file in just a few districts.
The VENUE Act would require the patent owner to file in a district where it makes sense — for example, where the defendant’s principal place of business is, where the patent owner has a working manufacturing facility, or where the invention was developed.
Since the VENUE Act was introduced, it’s earned numerous endorsements from civil society organizations and the tech industry. These groups represent a wide range of perspectives and interests, but we all recognize that Congress needs to address forum shopping in patent litigation head-on.
The VENUE Act shouldn’t be in competition with the PATENT Act. Indeed, its provisions would enhance each of the important reforms in the PATENT Act. Without legislation addressing the venue problem, the reforms in the more comprehensive bill could be compromised.
For example, the PATENT Act would require plaintiffs in patent suits to disclose what parties have financial interests in the outcome of the case and to report every complaint they’ve filed on the same patent in the three years prior. That’s a great reform. All too often, patent litigation suffers an extreme imbalance of information. Defendants are required to provide a great deal of information about their own business practices, but in the shadowy world of patent assertion entities, it can be very difficult for a defendant to determine who’s actually behind a lawsuit and who stands to benefit from it.
Unfortunately, courts vary widely in their own transparency practices. A few districts routinely let litigants seal substantial portions of the documents filed in patent cases, sometimes even sealing their own rulings. It’s great to require plaintiffs to disclose their financial interests and prior litigation, but in jurisdictions that seal more documents than necessary, those disclosure requirements will do very little to equip future defendants with information about the plaintiffs’ histories.
The PATENT Act has a provision intended to give defendants more leverage to ask the court for a fees award in cases where the plaintiff was clearly in the wrong. But it’s unlikely that courts will apply new fee-shifting standards consistently. Today, judges in the notoriously patent-owner-friendly Eastern District of Texas almost never grant motions for fees. Since fee shifting is largely within the judge’s discretion, improved fee-shifting provisions could give plaintiffs even more incentive to sue in sympathetic jurisdictions.
Another factor that can often give patent trolls an unfair advantage is the cost of discovery, the process whereby litigants request information and documents from each other that will be relevant to the case. Discovery can be very expensive for defendants in patent suits; often, victims of patent trolling opt to pay the demanded licensing fee rather than continue with the discovery process.
The PATENT Act wisely addresses this problem. It delays discovery until after certain initial trial motions, including motions to dismiss the case. That way, in cases in which the patent holder is clearly and factually wrong, the defendant would be able to file a motion to dismiss before undergoing discovery. Once again, though, this reform could be less effective in trolls’ preferred districts, given the Eastern District of Texas’ well-documented reluctance to dismiss cases and costly discovery process.
And on it goes. When the PATENT Act goes into effect, differences will naturally emerge in the ways that courts implement its provisions. Predictable patterns in judges’ perspectives aren’t necessarily a bad thing, but current venue laws let patent owners turn those differences into unfair advantages. Without venue reform, other measures designed to protect innovators from patent trolls can backfire, simply giving trolls further incentive to sue in the most troll-friendly courts.
Sen. Grassley, with your leadership, Congress can finally pass a truly comprehensive patent reform package that includes venue reform. Thousands of Americans who care about bringing fairness to a broken patent system will stand with you.
Electronic Frontier Foundation
Letter also appears on Electronic Frontier Foundation.