Appeals Court Tells Patent Trolls' Favorite Judge He Can't Just Ignore The Supreme Court To Keep Patent Cases In Texas

from the not-how-it-works dept

Mon, Sep 25th 2017 1:31pm — Mike Masnick

A few weeks ago, we noted that Judge Rodney Gilstrap, a judge in East Texas who is infamous for handling approximately 25% of all patent cases in the entire country, appeared to be ignoring the Supreme Court in an effort to keep all those patent cases in his own docket. You see, earlier this year, in an important case, the Supreme Court said that the proper venue for a patent lawsuit to be brought should be where the defendant "resides" rather than just wherever they "do business." Previously, patent trolls had said that the lawsuits could be brought wherever a company did business -- which, with internet firms, meant anywhere -- allowing them to file in their favorite court in East Texas. The Supreme Court said "that's not what the law says."

But Gilstrap tried, somewhat creatively, to twist himself around those rules, by arguing that all sorts of other factors could be used to determine "residence" -- basically including (again) if you had any connection to that jurisdiction at all -- and thus continue to allow East Texas to be an acceptable venue. We listed out those factors in the earlier post, but don't need to do so again, because the Court of Appeals for the Federal Circuit has already weighed in and said "nope, that's not how it works."

The ruling is pretty straightforward. Basically, it says "when we say a defendant has to reside in that venue, we mean it."

As discussed in greater detail below, our analysis of the case law and statute reveal three general requirements relevant to the inquiry: (1) there must be a physical place in the district; (2) it must be a regular and established place of business; and (3) it must be the place of the defendant. If any statutory requirement is not satisfied, venue is improper...

The court then points out that words have meaning, and making up a "test" that is untethered to the meaning of the words in the statute is simply not acceptable.

The statutory language we need to interpret is “where the defendant . . . has a regular and established place of business.” 28 U.S.C. § 1400(b). The noun in this phrase is “place,” and “regular” and “established” are adjectives modifying the noun “place.” The following words, “of business,” indicate the nature and purpose of the “place,” and the preceding words, “the defendant,” indicate that it must be that of the defendant. Thus, § 1400(b) requires that “a defendant has” a “place of business” that is “regular” and “established.” All of these requirements must be present. The district court’s four-factor test is not sufficiently tethered to this statutory language and thus it fails to inform each of the necessary requirements of the statute.

And thus, Gilstrap's argument that a "virtual" presence in the district is enough... is not, in fact, enough:

As noted above, when determining venue, the first requirement is that there “must be a physical place in the district.” The district court erred as a matter of law in holding that “a fixed physical location in the district is not a prerequisite to proper venue.” ... This interpretation impermissibly expands the statute. The statute requires a “place,” i.e., “[a] building or a part of a building set apart for any purpose” or “quarters of any kind” from which business is conducted. William Dwight Whitney, The Century Dictionary, 732 (Benjamin E. Smith, ed. 1911); see also Place, Black’s Law Dictionary (1st ed. 1891) (defining place as a “locality, limited by boundaries”). The statute thus cannot be read to refer merely to a virtual space or to electronic communications from one person to another. But such “places” would seemingly be authorized under the district court’s test.

The court dings the other prongs of Gilstrap's test as well, showing that each is insufficient and then sends it back to the lower court to determine which other court the case should be transferred to, but making it clear that "East Texas" is not one of the options.

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Filed Under: cafc, east texas, patent trolls, patents, rodney gilstrap, venue, venue shopping
Companies: cray, raytheon

37 Comments

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Vidiot (profile), 25 Sep 2017 @ 1:30pm

Predicting a big sales slump at "Judge Gilstrap's Courthouse Lemonade and Fireworks Stand"...
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Anonymous Anonymous Coward (profile), 25 Sep 2017 @ 1:33pm

Smackdown
And it only took 20 pages. Goes to show how wrong Judge Gilstrap if his wrist slap was so simple.
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radix (profile), 25 Sep 2017 @ 1:44pm

And you thought your junior high experience of diagramming sentences in grammar class would have no real world application.

Turns out it's a prerequisite to becoming an appellate judge.
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David, 25 Sep 2017 @ 1:46pm

Goodbye East Texas
What prospective defendant would want to set up office here now? Patent trolling in East Texas now has become a zero-sum game. Everybody with an interest in doing other business will draw out as fast as possible, and the rest will cannibalize each other.

Then tumbleweeds.
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Annonymouse, 25 Sep 2017 @ 1:52pm

So when will the Supreme Court drop the hammer on his pointy little head for not only breaking the law but showing contempt for the Supreme Court?

Never?
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ShadowNinja (profile), 25 Sep 2017 @ 2:00pm

Re:
I don't think the SCOTUS can do anything to bad judges.

Congress can impeach and remove bad judges from the bench however, though it's very rare (I think only a dozen or so have ever been removed from the bench by congress).
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TechDescartes (profile), 25 Sep 2017 @ 2:14pm

Short-Form Citation
In Re Cray-Cray
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Paul Brinker, 25 Sep 2017 @ 2:20pm

Re: Goodbye East Texas
Obviously no business will even have a satellite office in the district. This is a very bad strategy for East Texas Business development.
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AnonCow, 25 Sep 2017 @ 2:21pm

Isn't it ironic...
This decision will cause businesses that have operations in East Texas to shut them down just to avoid being considered under jurisdiction of this court.

I would assume that all major corporations will be closing their non-essential East Texas offices as quickly as possible. And corporations will be very reluctant to locate future operations in East Texas.
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orbitalinsertion (profile), 25 Sep 2017 @ 2:57pm

Re: Isn't it ironic...
This would also all the trolls who purposely bought an address there in the past. I would not be surprised if Gilstrap and friends complain of tortious interference with a business model.
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That One Guy (profile), 25 Sep 2017 @ 2:58pm

Moff Gilstrap
"The more you tighten your grip Gilstrap, the more companies that will slip through your fingers."

With an active incentive by the name of Gilstrap to remove any real presence from east texas, and Gilstrap's desperate attempt to undermine the Supreme Court and keep jurisdiction shot down, I can only imagine the exodus of every non-troll company as soon as they realize that shutting down local offices will be enough to protect them from the parasites that have set up shop in the area, and good luck getting any new companies to start up there with that lot just waiting for any prey to show up they can rip apart.
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TKnarr (profile), 25 Sep 2017 @ 2:59pm

Re: Re:
No, impeachment isn't the sole way to remove judges from office. They hold tenure only on "good behavior", and the only rule is that there has to be a judicial proceeding with the opportunity for the accused judge to confront his accusers and refute the evidence against him before he can be removed for violating the terms of his tenure. SCOTUS or the CAFC or even the Federal judiciary itself could find that deliberately ignoring and willfully failing to abide by the law as laid down by the Supreme Court constitutes a violation of "good behavior" and proceed to try, convict if proven and remove Judge Gilstrap from office (subject of course to his appeal of the judgement to SCOTUS, I'm sure that'd be highly amusing to observe).

The independence of Federal judges isn't absolute nor unlimited (see http://www.yalelawjournal.org/forum/removing-federal-judges-without-impeachment for the arguments). Congress and the executive branch can call judges to account for criminal actions, and the judicial branch itself can call judges to account for misbehavior that doesn't necessarily reach the level of criminal (independence is of the judicial branch from the legislative and executive branches, not of individual judges from the judicial branch).
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Anonymous Coward, 25 Sep 2017 @ 3:03pm

Re: Re: Isn't it ironic...
I would not be surprised if Gilstrap and friends have been financially benefiting from the increase in small office rentals in the area.
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Mason Wheeler (profile), 25 Sep 2017 @ 3:06pm

Wait, wait... what?

CAFC got an important patent issue right?!?

What's next? Mass hysteria? Human sacrifice? Cats and dogs living together in peace?
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That One Guy (profile), 25 Sep 2017 @ 3:32pm

Re:
Make enough rulings and eventually they'll get one or two right purely by accident if nothing else.
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Toom1275 (profile), 25 Sep 2017 @ 3:40pm

Re: Re:
A broken clock...
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Anonymous Coward, 25 Sep 2017 @ 3:50pm

Saving Work for Themselves
So this judge perpetrates 25% of all U.S. patent suits; the real questions are: what percentage of all patent appeals come from his handiwork? and then, how much work could the Federal Circuit judges save themselves by reining in this onager?
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ryuugami, 25 Sep 2017 @ 3:54pm

Re: Re: Re:
CAFC is more like a broken digital clock, with the display showing 88:88. Well, it's now officially 88:88 hours, mf'ers :D
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afn29129 (profile), 25 Sep 2017 @ 4:18pm

Re: Re: Re:
That's good to know. When we clearly smell a judge who is sitting there in his back robe farting out his ridiculous rulings, sniffing it up (Ah! I smell great), while everyone else is being asphyxiated. Giltrap fancies himself a smart feller but he's actually a fart smeller.
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Docrailgun, 25 Sep 2017 @ 4:50pm

If only this sort of argument could be used to revisit Heller we could have sane gun control laws in this country again.
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Pixelation, 25 Sep 2017 @ 5:13pm

Crawl back under, judge
Rodney Gilstrap says, "If you have talked about East Texas, your business is located here."
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Anonymous Coward, 25 Sep 2017 @ 5:37pm

Is there a financial crimes unit that investigates judges with suspected financial conflicts on interest? I suspect this judge is not handling these cases from the goodness of his heart.
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madasahatter (profile), 25 Sep 2017 @ 5:42pm

Re:
Plus, they been slapped around by the Supremes rather regularly that it most really hurt.
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Pixelation, 25 Sep 2017 @ 7:35pm

Re:
Some of the companies that have lost cases under judge Gilstrap should get together to hire an investigator. What a fitting end if they found kickbacks.
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Anonymous Coward, 25 Sep 2017 @ 11:33pm

Re: Re:
Maybe, but considering that Jim Hood was found to be the MPAA's patsy and received effectively no punishment for it, how much penalty do you expect Gilstrap to suffer - assuming the companies who lost under Gilstrap pool together their meager resources and spend them all trying to drag something, anything out of him?
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That One Guy (profile), 26 Sep 2017 @ 2:47am

Re: Crawl back under, judge
"If you have breathed the air of East Texas, your business is located here, and since air travels over the globe..."
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John E Cressman, 26 Sep 2017 @ 4:59am

You have to wonder...
You have to wonder if the judge was getting kick backs or something. Otherwise, why bend (break?) the law by keeping cases that would otherwise not be in your jurisdiction on your docket?
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Jeremy2020 (profile), 26 Sep 2017 @ 5:32am

Re: You have to wonder...
It's certain there was some personal benefit to him for his actions.
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Anonymous Coward, 26 Sep 2017 @ 6:06am

Re: Re: Re: Re:
Well, we've certainly had a big enough buffer overflow to cause that 88:88 read out.... Now the entire "clock" that is East Texas is broken due to the overwrite of it's program text by those hackers at the SC.

All's well that ends well.
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Jack R, 26 Sep 2017 @ 6:25am

next steps
Time to disbar the judge, move the court out of East Texas, and salt the earth.
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Anonymous Coward, 26 Sep 2017 @ 7:11am

From East Texas...
... to Delaware. Out of the frying pan... back into the frying pan. Many corporations are incorporated in Delaware and have a records keeping office there to have a presence to justify the very business friendly tax incentives there. So while East Texas will be in the wane, all of these troll lawsuits will just move to Delaware. Course, no one will mourn the hit Marshal & East Texas will take when businesses pull out to avoid Judge Gilstrap's court. So... who ends up with the moniker of "the new Judge Gilstrap" over in Delaware?
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Michael, 26 Sep 2017 @ 7:42am

Re:
True, but a huge sales boon at the Gilstrap office rental complex.
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Michael, 26 Sep 2017 @ 7:49am

Re:
Yes, but the bar to get anyone to go after a judge is pretty high. There is little chance of that kind of investigation to ever get started without some pretty blatant money changing hands.

Also, it is much more likely that he is not being financially motivated. It is human nature to want to make yourself important. I'd guess that he really thinks he is the best person to preside over these cases.

From his perspective, he:
1) Has more experience than anyone on this subject
2) Is intimately familiar with the law like no other judge because of this experience
3) Knows the people bringing these cases better than anyone else
4) Has so obviously been right all this time

In my opinion, it is much more likely that he is delusional than he is being paid.
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JustMe (profile), 26 Sep 2017 @ 8:45am

Re: Saving Work for Themselves
The real question is if this dude has been getting kickbacks or quid pro quo from all of this. Seems like the local paper should look in to the finances of this public servant.
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Anon, 26 Sep 2017 @ 10:31am

Grade 5
I like how the appeals court gets down to grade 5 level grammar parsing and dictionary definitions to explain to Hangin' Roy why he is 180 degrees wrong in interpreting black as white.

"Do we have to explain it like you're 5? Obviously we do..."
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Toom1275 (profile), 28 Sep 2017 @ 5:00pm

Re: Re:
"Has more experience than anyone on this subject
2) Is intimately familiar with the law like no other judge because of this experience"

If only quantity was more important than than quality.
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Anonymous Coward, 12 Oct 2017 @ 6:35pm

Re: From East Texas...
... to justify the very business friendly tax incentives there.

No. Businesses are taxed by the states in which they do business, based on the amount of business they do in that state; and each state defines the way "amount of business" is calculated. It doesn't matter to any state where the business is incorporated. (This is from personal experience. I have spent significant time with the state business tax forms.)

It is the legal system--Delaware has stronger separation of fiscal liability between personal and corporate assets, which has attracted many multinational corporations; then, there's a separate court for business cases, with a significant body of case law because ... so many duelling corporations end up litigating according to Delaware law.

Tax has nothing to do with it.
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