Patent Trolls and Patent Litigation Reform
Abstract and Keywords
This chapter critically examines recent legislative proposals to reform patent litigation in the United States. It begins by providing background on the dynamics that are driving the calls for reform, including complaints about so-called patent trolls. It then reviews proposed bills that would, among other things, impose heightened pleading standards on plaintiffs, limit discovery, and create a presumption that the loser should pay the winner’s attorneys’ fees. After surveying many recent changes to patent law already made by the courts and by Congress in the America Invents Act, the chapter concludes by arguing that additional legislative reform is largely unnecessary. Rather, Congress should focus on discrete problems in patent litigation that the courts may be unable to solve on their own, such as the unusually heavy concentration of cases in the rural Eastern District of Texas.
Barely five years after Congress passed the landmark America Invents Act, complaints about so-called patent trolls have renewed political interest in reforming U.S. patent law. Congress’s attention has now turned specifically to patent litigation, proposing, among other things, to impose heightened pleading requirements on plaintiffs, to limit discovery, to create a presumption that the losing party should pay the winner’s attorneys’ fees, and to change the venue rules in patent cases.
This chapter provides background on the dynamics that are driving the calls for patent litigation reform, including complaints about patent trolls, and offers an overview of current legislative proposals. Ultimately, the chapter argues that the legislative proposals are largely unnecessary, as the courts are already in the process of fixing several problematic areas of patent litigation that Congress has targeted for reform.
That does not mean Congress should play no role in improving the patent system. But rather than proposing sweeping changes that preempt reforms already occurring in the courts, Congress should focus on issues the courts cannot or will not address themselves. One possible subject for legislative action is the unusual concentration of patent cases in the rural U.S. District Court for the Eastern District of Texas, which hears nearly half of all patent cases filed nationwide. Though a pending case presents the Supreme Court with an opportunity to reform venue law, the arguments for overturning the Federal Circuit’s longstanding interpretation of the venue statute are, as a doctrinal matter, far from lock-tight. Thus, legislative revision of venue law may be worth serious consideration.
The chapter proceeds as follows. Part I explores the meaning of the term “patent troll” and discusses how that sometimes ill-defined concept is spurring calls for legislative changes to patent law. Part II reviews and critiques pending legislative proposals that would substantially change the process of patent litigation. It also examines recent changes to patent law by the courts and by Congress itself in the America Invents Act and argues that the recentness of those changes counsels against further dramatic reform of the patent system, at least for the time being. Finally, Part III discusses legislative changes Congress could make to solve discrete problems in patent law that the courts might not fix on their own.
I. “Patent Trolls” and the Motivation for Patent Litigation Reform
Many observers believe the American patent system is in crisis (see generally Bessen & Meurer 2008; Burk & Lemley 2009). Complaints are often aimed at the U.S. Patent and Trademark Office (PTO), which is said to issue too many “bad patents,” that is, patents on inventions that represent only marginal improvements in the state of the art (see generally Bohannan & Hovenkamp 2012, 61). Moreover, many patents, particularly on computer software, do not clearly articulate their exclusionary scope and can be read very broadly (Federal Trade Commission 2011, 55–56; Lemley 2013, 907). To be sure, any patent holder, not just a “patent troll,” can take advantage of these systemic defects (Sichelman 2014, 548). And some observers question the premise that there is a patent “crisis” to begin with (Risch, Framing the Patent Troll Debate 2014, 128). Yet, for better or worse, many academic and policy discussions have centered on the exploitation of broad patents of seemingly questionable validity by patent trolls, a label usually applied to patent owners whose primary business is not manufacturing a product or providing a service but collecting money from alleged infringers (Lemley & Melamed 2013, 2118).
As a legal matter, the lack of a “working requirement” in U.S. patent law facilitates this non-practicing-entity (NPE) business model. That is, under U.S. law, the owner of a patent has no obligation to actually deploy the technology claimed in its patent (Special Equipment Co. v. Coe 1945, 378–379). By contrast, in many other countries, it is possible to obtain a compulsory license if the invention claimed in the patent is not being practiced (Teegarden 2015, § 1:20). Indeed, available evidence suggests that NPE patent assertions are less frequent in Europe and Asia than in the United States, although non-U.S. NPEs certainly do exist (Sokol 2017, 6).
In the United States, there is actually a long history of inventors not practicing their patented technology. Many noteworthy inventors of the nineteenth century, for instance, made much of their income from licensing or selling their patents, rather than manufacturing their inventions (Kahn 2014, 833–835; see also Lamoreaux et al. 2013; Mossoff 2015). Yet many of those inventors transferred their patent rights to others who did, in fact, exploit the technology (see Kahn 2014, 833–835).
Today, in contrast, controversy has arisen over entities who obtain patents—either from inventors or, as is increasingly common, on the open market (Risch, Licensing Acquired Patents 2014, 979)—but who manufacture nothing at all: NPEs or, more pejoratively, patent trolls. According to one source, the lawyer Paula Natasha Chavez coined the term “patent troll” in a 1994 educational video about the patent system, which described the owners of broad patents as “trolls” because they can use their patents to collect “tolls” from innovators (Frye 2015, 744). Regardless of its precise origins, the term was popularized in the early 2000s by Peter Detkin, then an assistant general counsel for Intel Corporation (and later a founder of the well-known NPE, Intellectual Ventures). At the time, Intel was being sued for patent infringement by numerous NPEs, and then was sued for libel for calling those NPEs “patent extortionists” (Sandburg 2001). Detkin developed the term “patent troll” as an alternative epithet. According to Detkin, “[a] patent troll is somebody who tries to make a lot of money off a patent that they are not practicing and have no intention of practicing and in most cases never practiced” (id.). Detkin eventually disavowed the term, claiming it was “too emotionally charged” and “too often hurled carelessly” at all patent infringement plaintiffs (Detkin 2007, 642). Nevertheless, the term entered the legal lexicon and has expanded into popular use (see, e.g., Last Week Tonight 2015).
The modern NPE business model emerged around the turn of the twenty-first century, in tandem with the growing information technology industry. NPEs gained notoriety from patent infringement lawsuits involving ubiquitous technology such as wireless email, digital video streaming, and interactive websites (Yeh 2013, 1). Indeed, increasing rates of patent litigation since the beginning of the twenty-first century are often tied to the rise of NPEs. For instance, a study of lawsuits brought in the high-tech sector (defined to include patents relating to computer hardware, software, and financial inventions) showed that the percentage of patent infringement defendants sued by NPEs increased from 22 percent in 2000–2001 to 36 percent in 2006–2008 (Chien 2009, 1571–1572). Looking at a more recent time period, a similar study showed the percentage of patent infringement defendants sued by NPEs to increase from 25 percent in 2006 to 63 percent in 2013 (Scott Morton & Shapiro 2014, 467). Another study concluded that “patent monetization entities” (PMEs) (defined in that study to encompass “entities whose primary focus is deriving income from licensing and litigation, as opposed to making products”) filed 59 percent of all patent cases in 2012, up from 25 percent in 2007 (Jeruss et al. 2012, 361, 388). And a study by RPX Corporation (which makes defensive patent acquisitions and offers litigation insurance, among other services) claims that NPEs filed 63 percent of all patent lawsuits in 2014 (RPX 2014, 3; see also Scott Morton & Shapiro 2014, 466 (finding that NPEs filed 67 percent of patent lawsuits in 2013)).
Some critics contend that these reports of increased NPE litigation are inflated due in part to unduly broad definitions about which litigants should be characterized as NPEs (Cotropia et al. 2014, 694–695). And a 2011 study by the Government Accountability Office concluded that PMEs or likely PMEs brought only 24 percent of patent lawsuits in 2011, up from 17 percent in 2007, suggesting there has been some increase in NPE litigation, but not an explosion (U.S. Gov’t Accountability Off. 2013, 17).
Taking a broader view, it is important to note that a dramatic overall rise in patent litigation has indisputably occurred in recent years. That increase began in the 1990s, however, about a decade before concerns about patent trolls began to be voiced. Specifically, the number of patent lawsuits filed annually increased roughly threefold from less than 1,000 per year in 1982 to approximately 2,500 per year by 2000 (Bessen & Meurer 2008, 122). (Today, the number of patent cases filed annually is between 5,000 and 6,000, but that number is skewed upward by statutory limits on the joinder of multiple defendants in a single suit, which were included in the America Invents Act. In 2010, the last year before those limitations took effect, 3,358 patent cases were filed (Docket Navigator 2014, 5).) Some scholars have linked this overall rise in litigation to the creation of the U.S. Court of Appeals for the Federal Circuit, a semi-specialized court that hears all appeals in patent cases (see generally Gugliuzza, Federal Circuit Jurisdiction 2012, 1461–1464), as opposed to the advent of patent trolls or, more broadly, any changes in the characteristics of litigants or litigated patents (Bessen & Meurer, 2013, 428–429). Other scholars, however, have relied upon increases in the number of defendants being sued by NPEs (Scott Morton & Shapiro 2014, 467 (reporting an increase from 1,235 in 2006 to 4,843 in 2013)) and the increased concentration of cases in districts favored by NPEs to conclude that there has, in fact, been “a significant troll-fueled increase in patent litigation” (Sag 2016, 121). Still others have asserted that current rates of patent litigation, once normalized by metrics of commercial activity such as the number of patents issued, overall litigation rates, and GDP, are not much different than they were at many points in the twentieth century (Katznelson 2014, 4; see also Kahn 2014, 837, 861 (asserting that per-patent rates of litigation were higher during parts of the nineteenth century than they are today)).
Still, it is indisputable that, in the past thirty-five years, the raw amount of patent litigation has increased considerably. That increase, and its perceived link to NPE activity, has spurred robust debates about who, exactly, should be labeled a “patent troll” and about the social costs of those entities. Questions about labeling arise because the term “patent troll,” according to its critics, is sometimes used as “a catch-all … that means ‘any patent holder that asserts patents against someone who complains about it,’” including practicing entities who assert patents outside of their core area of operation or who purchase their patents from others (Risch, Framing the Patent Troll Debate 2014, 127). More commonly, however, the label “patent troll” is applied to entities that assert patents but do not make any products or provide any services. This common definition, though narrower, still encompasses many entities that would not usually be considered to be engaging in socially harmful conduct. Research universities, for instance, often cannot commercialize patented technology developed by their faculty, yet they often assert those patents in litigation (Lemley 2008). And NPEs can, at least in theory, facilitate innovation by helping individuals or small companies monetize their inventions by obtaining licenses or successfully asserting the patents in litigation (Risch 2012, 459–461; see also Risch, Licensing Acquired Patents 2014 (exploring how different types of patent licenses affect commercialization)).
To clarify the vocabulary used to describe entities that assert patents, scholars have tried to classify patent-holder litigants into more granular categories (see, e.g., Allison et al. 2009, 10). For example, one recent study classified patent-holder litigants in one of eight categories: operating company, university, individual inventor, patent aggregator, technology development company, failed startup, IP holding subsidiary of an operating company, or patent holding company (Cotropia et al. 2014, 654). Based on this taxonomy, the study concluded that reports of an “explosion” of NPE litigation, such as that reported in the RPX study mentioned above, are overblown (id. at 655).
Related to this taxonomy of litigant types is a question of tactics. Another recent study described three different business models employed by NPEs (Lemley & Melamed 2013, 2126–2127). The first and most traditional model is the “lottery ticket” model. Patent holders deploying this model assert patents they believe to cover a significant area of technology, such as a component of a widely adopted computer software program, and hope to win large damage awards in court (id. at 2126). The second model, the “bottom feeder” model, is deployed by patent holders who seek numerous, quick, low-value settlements. These patent holders do not want to go to trial, for their patents are often of dubious validity (id.), covering things such as the use of conventional office scanners or wireless Internet routers (Gugliuzza, Patent Trolls and Preemption 2015, 1580–1581). The final NPE model is of patent holders who are in the business of patent aggregation. Not all patent aggregators are NPEs, however. In recent years, large practicing companies such as Microsoft, Apple, and Google, as well as consortia controlled by those companies, have begun to acquire large portfolios of patents mainly for defensive purposes (Risch 2013, 100–102). NPEs, by contrast, aggregate patents for offensive purposes, collecting hundreds or thousands of patents and then demanding royalties for licenses to their entire portfolio (Lemley & Melamed 2013, 2126–2127).
This taxonomy of tactics highlights how different types of NPEs “differ greatly in their attitude toward the patents they assert” (id. at 2128). Lottery ticket trolls, for instance, tend to assert patents they think a court will hold to be valid. Bottom feeders and NPE patent aggregators, by contrast, are less concerned about patent validity because they plan to settle before any court ruling.
In addition to questions about who, exactly, should be considered a patent troll is the question of the social costs of those entities. One widely cited study, based in part on data from a survey of firms targeted by NPEs, concluded that, in 2011 alone, the “direct, accrued costs of NPE patent assertions totaled $29 billion” (Bessen & Meurer 2014, 389). Other scholars, however, have critiqued that study for its broad definition of NPEs and for counting settlements, licensing fees, and judgments as costs rather than the “transfers” to patent holders that “are the contemplated rewards of the patent system” (Schwartz & Kesan 2014, 433). The authors of the original study point out in response that about 70 percent of the payments made by defendants in NPE suits go to the legal expenses of the parties and to the operating expenses of the NPE (Bessen & Meurer 2014, 417). Consequently, they argue, only a small fraction of those payments actually go to the inventors or innovators whose patents are being asserted (id. at 416–417).
Defending their finding that the direct costs of NPE assertions are $29 billion annually, the authors also point to an earlier analysis they performed, based on an event study of changes in a defendant’s stock price when sued by an NPE, which concluded that the aggregate total cost associated with NPE lawsuits is over $80 billion per year (Bessen & Meurer 2014, 413; see Bessen et al. 2011–2012, 26). That $80 billion figure, it should be noted, covers all NPE lawsuits regardless of their merit, so it is important to emphasize that at least some of the lost market value is due to defendants’ actual infringement of valid patents. Moreover, some observers have argued that such event studies do not accurately estimate the cost of patent litigation because they treat a loss in market capitalization (that is, a loss to stockholders) as a loss to the firm itself (see Lunney 2008, 36–37). Although event studies, to be sure, should be read and interpreted carefully (see Bessen & Meurer 2014, 414), that particular critique seems to question the theory of efficient capital markets (see id. at 413 n.112), which holds that a firm’s stock price reflects all available information. Other observers have criticized the study for measuring the effects on stock price only upon lawsuit filing (thus not capturing corrections that may occur upon final disposition) and omitting potential social gains from patent enforcement (such as increases in the value of related patents and the social value from efforts to “design around” patent claims) (Katznelson 2016, 16–18). As this discussion illustrates, although research on the social costs of patent trolls is emerging, consensus has been extremely elusive.
For additional clues about the social welfare impact of NPEs, several recent studies have examined the outcomes of NPE litigation. For instance, one analysis of the most-litigated patents and a sample of once-litigated patents found that NPEs overwhelmingly lose cases that are litigated to judgment, reporting a win rate of 50 percent for product-producing companies but only 9.2 percent for NPEs (Allison et al. 2011, 693). Another recent study found that owners of patents in the computer industry, where NPE activity is most prevalent, lose dispositive litigation rulings far more frequently than owners of patents in other industries, most notably pharmaceuticals, where NPE activity is almost nonexistent (Allison et al. 2015, 82). Similarly, a study based on a sample of cases filed in the 1990s and 2000s, suggests that the patents asserted by the most litigious NPEs are invalidated roughly twice as frequently as patents asserted by practicing entities and that NPE patents are found not to be infringed roughly twice as frequently as patents asserted by practicing entities (Risch 2015, 107, 124). In addition, some data suggests that the U.S. District Court for the Eastern District of Texas, which is the district in which NPEs most prefer to litigate, is significantly more likely to rule in the patentee’s favor than other districts with large dockets of patent cases (Allison et al. 2014, 1792–1793).
Though this data suggests that patents asserted by NPEs are relatively weak and that NPEs win primarily when they litigate in their favored venue (Sokol 2017, 5), it should be noted that the vast majority of patent cases settle regardless of the identity of the litigant (see generally, Kesan & Ball 2006, 259). Thus, data on outcomes must be viewed cautiously because it represents only a small fraction of patents asserted in court and does not at all reflect enforcement activities that occur entirely outside of court.
As this (inevitability underinclusive) survey of the literature illustrates, the debate over the social costs of patent trolls is many-sided, highly complex, very contentious, and likely to continue for some time (see generally Risch 2016, 1577). There is little debate, however, that worries about patent trolls are driving the current legislative interest in reforming patent litigation (Reilly 2015, 181). For instance, on a Google Hangout in February 2013, President Obama was asked a question about the fear of patent trolls among high-tech startups. The president responded by saying that patent trolls—who, in his words, “essentially leverage and hijack somebody else’s idea and see if they can extort some money out of them”—are a “classic example” of problems with the patent system that are still in need of reform, even after the America Invents Act (Masnick 2013). Likewise, the Federal Trade Commission has begun to use its subpoena power to investigate patent trolls (Federal Trade Commission 2016) and has filed at least one case charging an NPE with deceptive trade practices in violation of the Federal Trade Commission Act (Wyatt 2013; Wyatt 2014). Numerous members of Congress have also decried patent trolls’ abuse of the patent system and the purportedly frivolous lawsuits they have filed (e.g., Leahy & Lee 2013).
Although frivolous lawsuits should certainly be discouraged, it is important that reform efforts not be driven by pejorative labels or focus only on particular types of litigants (Osenga 2015, 1014). Indeed, as mentioned above, many practicing companies enforce patents they do not practice themselves (Risch, Framing the Patent Troll Debate 2014, 127). Rather, reform should focus on deterring bad behavior in patent enforcement by all types of patent holders and on eliminating the unwarranted and overly broad patents that facilitate dubious assertions of infringement. Fortunately, as discussed next, the courts are already making several reforms to help achieve those goals.
II. Recent Reforms
Congress has considered numerous bills to reform patent law in the past few years. Most notably, in 2011, Congress passed the America Invents Act (AIA), the most significant revision to the patent statute in sixty years. Among other changes, the AIA adopted the first-to-file priority rule that is the norm in most other countries and created new proceedings that allow anyone to challenge a patent’s validity in a streamlined administrative process at the PTO.
More recently, Congress has considered additional reforms specifically directed at patent litigation in court. One proposal, the Innovation Act, passed the House of Representatives by an overwhelming margin in 2013, only to languish in the Senate. Past proposals have been extensively reviewed in the literature (see, e.g., Gugliuzza, Patent Litigation Reform 2015), so this chapter will focus initially on the two wide-ranging proposals that have made some progress in each house: an updated version of the Innovation Act in the House of Representatives and the Protecting American Talent and Entrepreneurship (PATENT) Act in the Senate. In 2015, both the Innovation Act and the PATENT Act were approved by the House and Senate Judiciary Committees, respectively, but neither bill saw further action in the full chamber.
Although the proposals in the Innovation Act and the PATENT Act would change patent litigation in many ways, the courts have already addressed several of the problems the legislative proposals seek to solve, and in a more nuanced and effective fashion. Courts are also making other beneficial changes to patent law that will likely improve patent quality, such as limiting the patent eligibility of computer software. Complementing the courts’ tightening of patent-eligibility criteria, the new administrative proceedings created by the AIA have proven to be effective at invalidating unwarranted patents. All of these developments suggest that further legislative intervention is unnecessary at this time.
Patent litigation had been partly immunized from the pleading revolution wrought by the Supreme Court’s decisions in Bell Atlantic Corp. v. Twombly (2007) and Ashcroft v. Iqbal (2009), which held that, to avoid dismissal for failure to state a claim, a plaintiff’s complaint must contain “factual allegations” that “plausibly give rise to an entitlement to relief” (Iqbal 2009, 679). Even after those decisions, the Federal Circuit held that a complaint stated a claim for direct patent infringement so long as the complaint complied with a form complaint (Form 18) that, until December 2015, could be found in the Appendix to the Federal Rules of Civil Procedure (In re Bill of Lading Transmission & Processing Sys. Patent Litig. 2012, 1334). As the Federal Circuit explained, that form required only an allegation of jurisdiction; a demand for relief; and statements that the plaintiff owned the patent, that the defendant had been infringing the patent, and that the plaintiff had given the defendant notice of its infringement (McZeal v. Sprint Nextel Corp. 2007, 1356–1357). Thus, a plaintiff could avoid dismissal for failure to state a claim without pleading facts about how the defendant practices each element of the asserted patent claim, even though the plaintiff would be required to prove those facts to prevail in the infringement case.
By contrast, because the Federal Rules provided no form complaint for indirect infringement (that is, contributory infringement or induced infringement), those claims were governed (and continue to be governed) by the pleading requirements articulated in Twombly and Iqbal. Thus, a patent holder pleading a claim of contributory infringement must plead facts permitting plausible inferences that the defendant was selling components that had no substantial noninfringing uses and that the defendant knew the components were infringing (see Bill of Lading 2012, 1337). Likewise, a patent holder pleading a claim of induced infringement must plead facts plausibly indicating that the defendant intended its customers to infringe the patent and knew that the customers’ acts constituted infringement (id. at 1339).
Unlike the more rigorous standards for pleading indirect infringement, the lax pleading standard for direct infringement was criticized for allowing plaintiffs to subject defendants to the costs of discovery and litigation preparation while providing little or no notice about the patent holder’s theory of infringement (U.S. House of Representatives 2015, 30–31). The Innovation Act, consequently, would require parties alleging patent infringement—whether direct or indirect—to recite in their complaint, “with detailed specificity,” how each limitation of the asserted patent is infringed by the accused product or process (Innovation Act § 3(a)). The PATENT Act takes a more measured approach, requiring only that the plaintiff provide a “description” of how each limitation of the asserted patent is infringed (PATENT Act § 3(b)).
That legislation, however, is not necessary to achieve the goal of providing defendants with better notice about the nature of their alleged infringement. In December 2015, the Supreme Court, acting on the recommendation of the drafters of the Federal Rules of Civil Procedure, eliminated the forms from the Appendix to the Federal Rules of Civil Procedure, including the form complaint for direct patent infringement (Amendments to the Federal Rules of Civil Procedure 2015, 29). The Court also deleted Rule 84, which indicated that a filing that contains the information required by a form satisfies the requirements of the Federal Rules (id. at 28).
The elimination of the form complaint and of Rule 84 should make it unnecessary to legislatively raise pleading standards. With the changes to the Federal Rules, all patent cases are now governed by the Twombly/Iqbal requirement that a complaint contain factual allegations that plausibly create an entitlement to relief. In contrast to the Federal Circuit’s prior case law, that standard will likely require the patent holder to identify at least some of the patent claims it is asserting and to provide information about how the defendant infringes those claims—similar to the “description” of how the patent infringes that would be required by the proposed PATENT Act.
To be sure, it will take some time for the courts to articulate precisely what is required in a complaint for direct patent infringement under Twombly and Iqbal. Moreover, the advisory committee note to the 2015 deletion of Rule 84 states that the rule’s abrogation “does not alter existing pleading standards,” which at least one district court has read to mean that, even after the removal of Form 18, a complaint that complies with Form 18 remains sufficient to avoid dismissal (Hologram USA, Inc. v. Pulse Evolution Corp. 2016, 4 n.1). That seems to be a clear minority view, however (see, e.g., Incom Corp. v. Walt Disney Co. 2016, 4; Rembrandt Patent Innovations LLC v. Apple Inc. 2015, *2 (both concluding that compliance with Form 18 is no longer sufficient to state a claim for direct patent infringement)).
In any case, Congress should allow these issues to first play out in the courts rather than immediately imposing the unfamiliar “detailed specificity” standard of the Innovation Act, or even the less rigorous but still novel requirements of the PATENT Act. It seems simpler to have judges evaluate complaints for patent infringement by simply doing what they already do in all other types of cases under Twombly and Iqbal: evaluate the plausibility of the infringement allegations drawing on “judicial experience and common sense” (Iqbal 2009, 679).
In patent law, as in other areas of civil litigation, complaints about “litigation abuse” often focus on the costs of discovery. Not surprisingly, then, Congress is considering legislative proposals ostensibly aimed to reduce discovery costs. In previous iterations of legislative proposals, Congress considered hard limits on discovery, such as forbidding discovery about matters other than claim construction until the judge entered the claim construction order. (The claim construction order is the decision in which the judge decides what the claims of the patent actually mean. It is therefore critically important to determining both validity and infringement.) Congress had also considered shifting the costs of some discovery from the producing party to the requesting party (Gugliuzza, Patent Litigation Reform 2015, 285).
Rather than mandate sweeping changes to the discovery process, however, the most recent iterations of the reform bills simply provide that certain district courts will be designated to adopt experimental proposals to “address the asymmetries in discovery burdens and costs” in patent cases (Innovation Act § 6(a); accord PATENT Act § 6(a)). In adopting their experimental proposals, the courts are required to consider whether discovery costs (other than the costs of producing “core documentary evidence”—a term that is defined by neither bill) should be borne by the requesting party, rather than, as is normally the case, by the producing party (Innovation Act § 6(a)(4); PATENT Act § 6(a)(2)(C)(i)).
Even this more limited proposal, however, is arguably unnecessary given recent changes in the procedural rules governing discovery. In brief, Federal Rule of Civil Procedure 26(b)(1), which is the rule that outlines the general scope of discovery, was amended in December 2015 to make clear that requested discovery in all civil cases must be “proportional to the needs of the case.” Proportionality, in turn, is determined with reference to “the importance of the issues at stake in the action, the amount in controversy, the parties’ relative access to relevant information, the parties’ resources, the importance of the discovery in resolving the issues, and whether the burden or expense of the proposed discovery outweighs its likely benefit.” In addition, Rule 26(c)(1)(B) was recently amended to clarify district courts’ authority to depart from the usual rule that the producing party bears the costs of production and to enter a protective order allocating the expenses of discovery among the parties. These amendments make clear that district courts have wide discretion to address the asymmetry in discovery costs that is ostensibly driving legislative proposals for reform. Indeed, courts have already begun to invoke these amended rules to limit the scope of discovery in patent cases (see, e.g., Gilead Sci., Inc. v. Merck & Co. 2016, 3 (relying on the proportionality requirement to bar discovery into two pharmaceutical compounds similar to the patented compound); see generally Healy & Fanning 2016 (noting that “comments by Chief Justice John Roberts in the 2015 Year-End Report on the Federal Judiciary and subsequent decisions in federal district courts demonstrate that the amendments represent a sea change in how federal courts are to approach discovery issues,” citing examples)).
The current legislative proposals also provide, with some exceptions, that discovery in patent cases should be automatically stayed until the court decides any pending motion to dismiss, motion to transfer venue, or motion to sever accused infringers for improper joinder (Innovation Act § 3; PATENT Act § 5(a)). Although one can certainly see the rationale for staying discovery while the court decides these preliminary motions, the discovery rules have always given the courts discretion to sequence discovery in any way that furthers the speedy and inexpensive resolution of the case (see generally 8A Wright et al. § 2047). Indeed, under existing law, it is not unheard of for courts to grant stays pending resolution of the types of preliminary motions cited in the proposed legislation (see, e.g., Disc Disease Solutions, Inc. v. VGH Solutions, Inc. 2016 (granting stay pending motion to dismiss for lack of personal jurisdiction); Kaavo Inc. v. Cognizant Tech. Solutions Corp. 2015 (granting stay pending motion to dismiss for failure to state a claim)). That said, the decision to stay is a discretionary one, and many judges with heavy dockets of patent cases—particularly Judge Rodney Gilstrap of the Eastern District of Texas, who hears nearly one-third of all patent cases filed nationwide (Davis 2016)—do not often stay cases pending resolution of preliminary motions. This judicial reluctance to stay could be argued to weigh in favor of legislatively mandated automatic stays (see Love & Yoon 2016, 32) or perhaps a presumption in favor of staying litigation that can be overcome by the plaintiff’s showing of good cause.
As a mechanism for deterring and punishing frivolous litigation, courts hearing patent disputes have long been authorized to award attorneys’ fees to the prevailing party in “exceptional cases” (35 U.S.C. § 285). Unfortunately, for many years the Federal Circuit made it nearly impossible for prevailing defendants to recover fees, requiring a defendant to prove both that the plaintiff filed its lawsuit in “subjective bad faith” and that the lawsuit was “objectively baseless” (Brooks Furniture Mfg. v. Dutailier Int’l, Inc. 2005, 1381). That standard was very hard to satisfy, in large part because of the difficulty of showing that a patent lawsuit is objectively baseless. Patents are presumed to be valid (35 U.S.C. § 282(a)), meaning that invalidity must be proved by clear and convincing evidence (Microsoft Corp. v. i4i Ltd. P’ship 2011, 2242). Also, patent claim construction, which is often dispositive of infringement, is notoriously unpredictable (Burk & Lemley 2009, 1744–1746). These factors make it reasonable for a patent holder to have some hope of success—and to avoid having its claim of infringement found to be baseless—even when it brings a weak case.
In 2014, however, the Supreme Court abrogated the Federal Circuit’s two-element test and increased the discretion of district courts to award fees. In Octane Fitness, LLC v. ICON Health & Fitness, Inc., the Court held that “an ‘exceptional’ case” in which attorneys’ fees may be awarded under the Patent Act “is simply one that stands out from others with respect to the substantive strength of a party’s litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated” (Octane Fitness 2014, 1756). The Supreme Court instructed district courts, when making the exceptional case determination, to consider a “nonexclusive” list of factors such as “frivolousness, motivation, objective unreasonableness (both in the factual and legal components of the case) and the need in particular circumstances to advance considerations of compensation and deterrence” (id. at 1756 n.6).
Also, before 2014, the Federal Circuit reviewed the “objective baselessness” requirement of the “exceptional case” determination de novo on appeal (Highmark, Inc. v. Allcare Health Mgmt. Sys., Inc. 2012, 1309). In a companion case to Octane Fitness, however, the Court held that, because the exceptional case determination is to be made “‘in the case-by-case exercise of … discretion, considering the totality of the circumstances,’” it is reviewed on appeal only for abuse of discretion (Highmark Inc. v. Allcare Health Mgmt. Sys., Inc. 2014, 1748).
Despite the increased freedom district courts now have to award fees in patent litigation, Congress is considering amendments to the Patent Act that would mandate fee awards in a broad swath of cases. The Innovation Act, for instance, states that the court “shall award” attorneys’ fees to the prevailing party in a patent case unless the court determines that the losing party’s “position and conduct … were reasonably justified in law” or that “special circumstances (such as severe economic hardship to a named inventor) make an award unjust” (Innovation Act § 3(b)). The PATENT Act similarly provides that the court “shall award” fees to the prevailing party “[i]f the court finds that the position of the non-prevailing party was not objectively reasonable in law or fact or that the conduct of the non-prevailing party was not objectively reasonable … unless special circumstances, such as undue economic hardship to a named inventor or an institution of higher education …, would make an award unjust” (PATENT Act § 7(b)). In addition, another recent bill, the Saving High-Tech Innovators from Egregious Legal Disputes (SHIELD) Act, would mandate attorneys’ fee awards to prevailing defendants in most NPE suits and require most NPEs, at the outset of the case, to post a bond to cover any future fee award (SHIELD Act § 2(a)).
Given the recent judicial changes to the law governing the award of attorneys’ fees, legislative change seems premature. The Supreme Court’s decision in Octane Fitness emphatically rejected the Federal Circuit’s restrictive standard for awarding fees, and the discretionary standard embraced by the Supreme Court has made it easier for district courts to award fees. Specifically, the percentage of fee motions granted has increased from about 15 to 20 percent before Octane Fitness to over 30 percent today (Desai and Johnson 2016). Unlike the Innovation Act, however, Octane Fitness does not suggest that fees must be awarded absent special circumstances. Given the usual American rule that each party pays its own attorneys—and the potential harm that fee shifting might impose on less wealthy litigants, such as startup companies—it seems advisable to first experiment with the discretionary Octane Fitness standard before adopting any presumption in favor of fee shifting. If Congress feels it must adopt a new fee shifting statute, the PATENT Act is preferable, as it makes clear that there is no presumption in favor of fee shifting; rather, the prevailing party bears the burden of proving its entitlement to fees (PATENT Act § 7(b)), as is the case under current law. Likewise, unlike the SHIELD Act, the PATENT Act does not single out particular types of litigants for special treatment—it encourages the award of fees to any prevailing party who defeats an opponent who raised unreasonable arguments or engaged in unreasonable conduct, not only to prevailing parties who defeat NPEs.
Software and business method patents.
Complaints about the “bad patents” being issued by the PTO often focus on software and business methods, which are the types of patents NPEs often assert (Bessen & Meurer 2014, 413). Yet proposals pending in Congress do little to address the problem of broad or vague software and method patents. The courts, by contrast, are making important changes in this area. Most notably, in Alice Corp. v. CLS Bank International (2014), the Supreme Court strongly suggested that most software and business method patents claim “abstract ideas” that are not patent eligible simply because they are implemented on a computer (Alice Corp. 2014, 2352). The decision in Alice cast doubt on the patent eligibility of many software and business method patents and, since the Supreme Court issued its opinion, accused infringers have been very successful at invalidating those patents early in litigation by filing motions to dismiss under Federal Rule of Civil Procedure 12(b)(6) or motions for judgment on the pleadings under Rule 12(c) (Lee 2014).
Likewise, in 2015, the Federal Circuit in Williamson v. Citrix Online, LLC expanded the class of patent claims that are deemed to be means-plus-function claims under § 112(f) of the Patent Act. Means-plus-function claims are limited to the structures specifically described in the patent’s specification. And if the specification does not disclose any corresponding structures, the patent is invalid as indefinite. The Federal Circuit in Williamson eliminated the “strong” presumption that patent claims that do not use the word “means” are not means-plus-function claims and are therefore not subject to the limitations of § 112(f) (Williamson 2015, 1349). Under Williamson, software patents are more likely to be deemed to be means-plus-function claims and therefore either limited in scope or, if they do not disclosure particular algorithms to perform the claimed functions, invalid for indefiniteness (see, e.g., Ex Parte Sebastian 2015, *5).
Streamlined challenges to patent validity.
As noted above, the America Invents Act, which Congress passed in 2011, created several new proceedings at the PTO for reassessing patent validity. These proceedings have proved to be very popular, and have been used effectively by defendants in infringement litigation to invalidate patents.
The AIA created three new proceedings. The first proceeding, post-grant review, is available only for patents with a filing date on or after March 16, 2013 (America Invents Act § 6(f)(2)(A)). A petition for post-grant review must be filed within nine months after the patent issues (35 U.S.C. § 321(c)). A challenger in post-grant review can raise any invalidity argument it could raise as a defense in an infringement suit (id. § 321(b)). The AIA sets a relatively high bar for initiating post-grant review, providing that the Patent Trial and Appeal Board (PTAB) may institute proceedings only if it is “more likely than not” that a challenged claim is unpatentable (id. § 324(a)). (The PTAB is a group of roughly 250 administrative patent judges that operates in panels of three to hear and decide AIA proceedings.) Because the PTO has yet to issue many patents with filing dates on or after March 16, 2013, few post-grant review petitions have been filed to date (see U.S. Patent & Trademark Off., Patent Trial & Appeal Bd., Statistics 2016, 2). Furthermore, because of an estoppel provision (35 U.S.C. § 325(e)(2)) that limits challengers from raising, in later litigation, any argument they raised or could have raised in post-grant review (recall that in post-grant review challengers may raise any ground for invalidity), it is not clear that post-grant review, in its current form, will ever become popular. Indeed, those close to the process of drafting the AIA have reported that the “could have raised” estoppel provision was added erroneously by staff making technical corrections to the bill (Matal 2012, 617–618). Accordingly, both the Innovation Act and the PATENT Act would amend the post-grant review statute to impose estoppel only on arguments that the petitioner actually raised at the PTO (Innovation Act § 9(a); PATENT Act § 15(a)).
The second new proceeding, inter partes review, is currently the most popular post-issuance proceeding at the PTO. In 2015, the PTO received 1737 petitions for inter partes review (U.S. Patent & Trademark Off., Patent Trial & Appeal Bd., Statistics 2016, 3). Inter partes review can be sought for any patent for which post-grant review is not available, meaning patents that either have a filing date before March 16, 2013, or have a filing date on or after March 16, 2013, but for which the nine-month window for post-grant review has expired (35 U.S.C. § 311(c)). The prior art in inter partes review is limited to prior patents and printed publications, and the only grounds for invalidity the petitioner may argue are anticipation and obviousness (id. § 311(b)). (Because of the limited grounds on which validity may be challenged in inter partes review, the estoppel provision prohibiting a petitioner from raising in later litigation any argument it could have raised at the PTO (id. § 315(e)(2)) is less of a deterrent to the use of inter partes review than it is to the use of post-grant review.) Also, if the petitioner in inter partes review is a defendant in a patent infringement lawsuit, the petitioner must seek review of the allegedly infringed patent within one year of service of the complaint (id. § 315(b)). The standard for instituting inter partes review is lower than the “more likely than not” unpatentable standard of post-grant review. Specifically, the PTAB will institute inter partes review if it determines “there is a reasonable likelihood that the petitioner would prevail” with respect to at least one of the challenged patent claims (id. § 314(a)).
The PTAB has, as of July 31, 2016, granted just over half of all requests to institute inter partes review (1738 of 3410), with another 18 percent of petitions (599 of 3410) settling before the PTAB decided whether to institute proceedings (U.S. Patent & Trademark Off., Patent Trial & Appeal Bd., Statistics 2016, 10). The PTAB has held all of the instituted patent claims unpatentable in over 70 percent of proceedings that have reached a final decision (764 of 1086) (id.).
The third and final proceeding created by the America Invents Act is covered business method review, which is available for patents that claim “a method or corresponding apparatus for performing data processing or other operations used in the practice, administration, or management of a financial product or service” (America Invents Act § 18(d)(1)). The House Judiciary Committee report on the AIA makes plain that the purpose of this proceeding is to address the perceived problem of patent trolls, stating that the proceeding is a response to the abundance of “poor business-method patents” issued during the late 1990s and early 2000s that fueled a rise in “patent ‘troll’ lawsuits” (U.S. House of Representatives 2011, 54). A petition for covered business method review can be filed at any time during the patent’s term and can raise any ground for invalidity, including lack of patentable subject matter under § 101 of the Patent Act and the Supreme Court’s decision in Alice, discussed above (America Invents Act § 18(a)(1)). The petitioner must, however, be the defendant in a lawsuit for infringement (id.). (Estoppel in covered business method review, unlike in post-grant review and inter partes review, is limited to grounds actually raised at the PTO (id. § 18(a)(1)(D)).) As with post-grant review, the PTAB may institute covered business method review if it is more likely than not that a claim is unpatentable (id. § 18(a)(1)). Covered business method review is a temporary program that, as it currently stands, will be available only until September 15, 2020 (id. § 18(a)(3)).
As of July 31, 2016, the PTAB has granted just over half of all requests to institute covered business method review (206 of 372), with another 13 percent of petitions (49 of 372) settling before the PTAB decided whether to institute review (U.S. Patent & Trademark Off., Patent Trial & Appeal Bd., Statistics 2016, 10). An instituted covered business method review is even more likely to end with a ruling of invalidity than inter partes review. The PTAB has held all of the instituted patent claims unpatentable in over 80 percent of covered business method review proceedings that have reached a final decision (108 of 134) (id.).
The new post-issuance proceedings at the PTO have, in brief, proved to be an effective, popular, quick, and relatively inexpensive alternative to patent litigation in court. The PTAB has invalidated well over half of the claims that have made it to a final decision. PTAB proceedings are by no means cheap, but they tend to be less expensive than litigation in court. Although estimates vary, the American Intellectual Property Law Association reports that an inter partes review, pursued through an appeal, costs about $350,000 on average (AIPLA 2015, 38). That same organization estimates that a patent infringement lawsuit in which $1 million to $10 million is at stake, pursued through appeal, costs about $2 million on average (id. at 37).
In terms of speed, the AIA requires PTAB proceedings to conclude within one year of the decision to institute (see, e.g., 35 U.S.C. § 316(a)(11)). On average, including the initial period during which the PTAB decides whether to institute proceedings, inter partes review takes about fifteen months, start to finish (Love & Ambwani 2014, 99). By comparison, the duration of patent litigation from filing to disposition via trial or summary judgment is usually over two-and-a-half years (Ashtor 2016, 8). Inter partes review is thus substantially quicker than litigating a case to a final judgment after trial, particularly when post-trial motions are taken into account.
To be sure, AIA proceedings are not perfect. The vast majority of patents in inter partes review are also in litigation between the same parties (Love & Ambwani 2014, 103; Vishnubhakat et al. 2016, 69). Concurrent disputes threaten to negate the cost savings and efficiency of administrative review. Courts have generally addressed this problem by staying litigation pending PTO review, but stay motions are not always granted, which presents the specter of not just concurrent proceedings, but inconsistent validity decisions between the courts and the PTO (Gugliuzza 2016, 273). Finally, observers have noted how some challengers have deployed the new proceedings in ways that could be considered “abusive,” such as through seriatim challenges to patent validity, challenges designed largely to lower the patent holder’s stock price, and the use of post-issuance proceedings to gain leverage in unrelated litigation (Dolin 2015, 932–947).
Those shortcomings aside, Congress, by enacting the AIA, seems to have found a way to allow questionable patents to be easily and cheaply invalidated. Given the additional changes currently transpiring in the courts, further legislative reform seems unnecessary at this time. Rather, Congress should first observe the consequences of these recent changes before performing another major overhaul of the patent system (see generally Taylor 2015, 346–347).
III. Better Reforms
Just because major legislative changes are unwarranted does not mean that Congress should do nothing.
Spurring Judicial Reform.
To begin with, a demonstration of interest by Congress in a particular area of law can spur the Federal Circuit (or the Supreme Court) to take a hard look at judge-made doctrine in the area in question. This has occurred several times in the past decade. For instance, from roughly 2005 to 2009, Congress was considering proposals to limit damages in patent cases (see, e.g., Patent Reform Act of 2007, § 4). While those proposals were pending, the Federal Circuit issued several decisions increasing its scrutiny of damages awards (e.g., Uniloc USA, Inc. v. Microsoft Corp. 2011, 1315; Lucent Techs., Inc. v. Gateway, Inc. 2009, 1324–1326). Likewise, at the same time, Congress was considering legislation that would have made it more difficult for NPEs to obtain injunctions against patent infringement (see, e.g., Patent Reform Act of 2005, § 7). While that legislation was pending, the Supreme Court decided eBay Inc. v. MercExchange, L.L.C. (2006), which overturned the Federal Circuit’s “general rule” that all patent holders who prove infringement are entitled to an injunction. In the wake of eBay, it has become much more difficult for NPEs to obtain injunctions (Chien & Lemley 2012, 10; Seaman 2016, 1952–1953; see also Holte 2015, 732–733 (criticizing the conventional interpretation of eBay as justifying the denial of injunctions to NPEs in most circumstances)).
Thus, one valuable thing Congress can do is simply express interest, whether through hearings or proposed legislation, in areas of patent law in which judicial case law has been criticized. One potential area for reform, as noted above, concerns the ways in which courts manage the discovery process. Currently, courts hesitate to stay discovery pending certain preliminary motions, such as motions to dismiss or transfer. Courts also could do more to ensure that parties enter the most expensive stages of discovery only when the case presents a potentially meritorious claim for infringement (see Reilly 2015, 184). Congressional interest could catalyze the courts to reform those areas of law (Anderson 2014, 1000), without the danger of legislation that might have unintended consequences (Gugliuzza, Patent Litigation Reform 2015, 299).
Another area in which Congress might effectively help reform patent law is venue. Under current law, there are no meaningful restrictions on where a patent infringement case may be filed within the federal court system (Fromer 2010, 1451). Rather, under the Federal Circuit’s interpretation of the venue statute, venue is proper in any judicial district in which the defendant is subject to personal jurisdiction (VE Holding Corp. v. Johnson Gas Appliance Co. 1990, 1584). Because defendants in patent infringement suits are subject to personal jurisdiction in practically any state in which their products are sold (Beverly Hills Fan Co. v. Royal Sovereign Corp. 1994, 1556), patent holders can choose to file suit almost anywhere.
Some districts with large numbers of patent cases, such as the Central District of California, the Northern District of California, and the District of New Jersey, make sense because they contain large population centers, are centers of innovative industries, or both. The district with by far the largest patent docket, however, is likely surprising to anyone unfamiliar with patent law: the Eastern District of Texas. That district, headquartered in Marshall, Texas (population 23,523), now hears over 40 percent of all patent cases filed nationwide (Crouch 2015). As noted above, a single judge in that district, Judge Rodney Gilstrap, heard nearly one-third of all patent cases filed in the United States in 2015. Some commentators have argued that the judges of the Eastern District have actively tried to attract patent cases to their district by, among other things, adopting local rules favorable to patent holders, being hostile to summary judgment and to transfer of venue, and refusing to stay patent cases pending post-issuance review at the PTO (Anderson 2015, 651–654; Klerman & Reilly 2016, 250–270).
The Federal Circuit, at least for a time, appeared interested in thwarting the consolidation of patent cases in the Eastern District. In 2008, the Federal Circuit issued a writ of mandamus ordering the court to transfer a patent case to a more convenient venue (In re TS Tech 2008), the first time the Federal Circuit had ever issued a writ of mandamus for that purpose. After that decision, the Federal Circuit, in the next three years, ordered the Eastern District to transfer a case on ten separate occasions (see generally Gugliuzza, Federal Circuit Mandamus 2012, 346). Although the Federal Circuit has continued to order transfer of cases out of the Eastern District (see, e.g., In re Apple, Inc. 2014; In re Nintendo of Am., Inc. 2014), the sheer number of patent cases now pending there (over 1,600 were filed in the Eastern District in 2014 alone (Admin. Off. of the U.S. Courts 2014, tbl. C-7)) may make it impossible for the Federal Circuit to effect reform on a case-by-case basis.
To that end, a proposal recently introduced in Congress, the Venue Equity and Non-Uniformity Elimination (VENUE) Act provides a starting point for targeted legislative reform. It lists several places in which venue is proper in a patent case, including “where the defendant has committed an act of infringement … and has a regular and established physical facility that gives rise to the act of infringement” (VENUE Act § 2(a)). Unlike under current law, this statute would impose some meaningful restrictions on venue. Depending on how courts interpret the phrase “regular and established physical facility” and what it means for that facility to “give rise” to infringement, the number of permissible venues would probably remain quite large because selling or using patented technology constitutes “an act of infringement” (35 U.S.C. § 271(a)). But the proposed statute would at least prevent venue from lying in relatively remote districts, such as the Eastern District of Texas, in cases with no connection to the district besides some products having been sold there by someone other than the defendant.
That said, there are at least two ways in which the courts themselves could revise forum selection law in patent cases. First, the courts could reconsider the interpretation of the venue statute that allows venue to lie in any district in which the defendant is subject to personal jurisdiction. The Supreme Court recently granted certiorari in a case (TC Heartland 2016) in which the defendant argues that venue should be proper in patent infringement suits only (a) in the defendant’s place of incorporation and (b) where the defendant has committed acts of infringement and has a regular and established place of business (see Petition for a Writ of Certiorari, TC Heartland LLC v. Kraft Food Brands Grp. LLC 2016).
Though that position has some appeal as a policy matter, as a doctrinal matter, it is difficult to reconcile with the plain language of the venue statute. Other work elaborates on this point (Gugliuzza and La Belle 2017), but, to briefly summarize: The patent venue statute, 28 U.S.C. § 1400(b), provides that infringement suits may be filed in, among other places, “the district in which the defendant … resides.” Another provision of the same statutory chapter, 28 U.S.C. § 1391(c), states that “[f]or all venue purposes,” a corporation “reside[s]” in any district in which it is subject to personal jurisdiction. These two provisions, read in combination, strongly support the Federal Circuit’s rule that venue is proper in an infringement case against a corporate defendant in any district in which that defendant is subject to personal jurisdiction. The defendant in the Heartland litigation relies on a Supreme Court decision holding that § 1400(b) is the “exclusive” provision governing venue in patent cases to assert that § 1391(c)’s definition of corporate residence should be ignored (Fourco 1957). But that case involved an older version of the venue statute, which was ambigious about whether its general definition of corporate residence should apply to the patent-specific venue provision. The current version of the venue statute, by contrast, makes clear that its definition of corporate residence applies “[f]or all venue purposes.” Thus, although the Supreme Court could engage in judicial reform of venue law, the doctrinal basis for doing so seems questionable, and venue reform might more appropriately come from Congress rather than the courts.
A second and perhaps more doctrinally justifiable way the courts could reform forum-selection law would be for the Federal Circuit to retreat from its expansive view of personal jurisdiction in patent infringement lawsuits. The Supreme Court has made clear that, for specific personal jurisdiction to exist, a claim must “arise out of or relate to” the defendant’s contacts with the forum state (Helicopteros Nacionales de Colombia S.A. v. Hall 1984, 414). Yet the Federal Circuit has held that, once a defendant makes infringing sales in one state, that state has personal jurisdiction over infringement claims based on sales that occurred anywhere in the United States. However, in a suit filed in, say, Delaware, it seems difficult to argue that infringing sales made in, say, Texas, “arise out of” the defendant’s contacts with Delaware. That said, the Supreme Court has never decided a significant case defining the contours of this so-called nexus requirement for personal jurisdiction (Rhodes & Robertson 2014, 230), and one might reasonably argue that the Texas claims at least “relate to” the Delaware contacts insofar as the defendant is selling the same infringing product in both states. In any event, the nexus requirement provides an obvious hook for judicial reform of forum-selection law in patent cases. Current Federal Circuit doctrine, however, renders that requirement basically a nullity.
Patent law has undergone dramatic change in the past decade, both in Congress in the form of the America Invents Act and in the courts. Based on those changes, many perceived problems in patent law appear closer to being solved today than they were a decade ago. Given that progress, Congress might usefully focus its efforts on areas, such as forum selection, in which the courts are unable to effect change on their own, rather than enacting sweeping reforms of patent litigation that could harm less wealthy patent holders and have numerous unintended consequences.
Thanks to Mike Meurer for comments and to Ben Greene for research assistance.
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