Transfer of Venue in the Eastern District of Texas
February 2009
The Eastern District of Texas
has been the center of much patent litigation in the recent years.
There are several reasons behind its popularity, including the perception
that it has plaintiff-friendly juries, its "rocket docket," and
the knowledgeable and hard-working jurists in the district.
by
Sanford E. Warren Jr.
and Iris Mok
Akin Gump Strauss
Hauer & Feld LLP
In addition, the judges in the Eastern District have traditionally
been reluctant to transfer patent cases out of the district even
though other district courts, as many have suggested, may have been
more suitable to hear the cases on convenience grounds.1
Instead, most judges in the Eastern District have placed a premium
on the plaintiff's choice of forum in deciding motions to transfer
in the past.
Standard of Motion To Transfer
Section 28 of United States Code §1404(a) (2006) provides that
a district court may transfer
any civil action to any other district or division where it might
have been brought for the convenience of parties and witnesses,
in the interest of justice. [Emphasis added.] Under Fifth Circuit
precedent, the burden is on the moving party to show "good cause"
for the transfer. When the factors show the transferee's proposed
forum to be no more convenient than the plaintiff's chosen forum,
it is improper to disturb venue. However, if the transferee's choice
of forum is clearly more convenient,
the transfer should be granted. [Emphasis added.]
In re Volkswagen of Am., Inc., 506
F.3d 376, 384 (5th Cir. 2007).
When determining whether transfer is proper under § 1404(a),
a district court should consider a number of private and public
interest factors, "none of which can be said to be of dispositive
weight."2 The private interest factors
which a court is to consider are:
- the relative ease of access to sources of proof;
- the availability of compulsory process to secure
the attendance of witnesses;
- the cost of attendance for willing witnesses;
and
- all other practical problems that make trial
of a case easy, expeditious and inexpensive.
Id.
The public interest factors are:
- the administrative difficulties flowing from
court congestion;
- the local interest in having localized interests
decided at home;
- the familiarity of the forum with the law that
will govern the case; and
- the avoidance of unnecessary problems of conflict
of laws or in the application of foreign law.
Id.
Recently, both the Fifth Circuit and the Federal Circuit appellate
courts have addressed the Eastern District's handling of motions
to transfer.
In re Volkswagen
In re Volkswagen demonstrated
how the Eastern District of Texas applied the standard in denying
a motion to transfer even when it was more convenient to hear the
case in the Northern District of Texas. In this case, an auto accident
occurred in Dallas, which is located in the Northern District of
Texas. The plaintiff, however, chose to sue Volkswagen under a products
liability theory in the Eastern District of Texas, Marshall Division.
In response, Volkswagen moved to transfer venue to the Northern
District based on the fact that the car was purchased in Dallas
County; the accident occurred in Dallas; witnesses of the accident
were Dallas residents; none of the plaintiffs resided in the Marshall
Division; no party or non-party witness lived in the Marshall Division;
and none of the facts giving rise to the suit occurred in the Marshall
Division.
The district court denied both the motion to transfer and the
motion for reconsideration. The court found that Volkswagen had
not satisfied its burden of showing inconvenience based on four
main factors:
- the relevant ease of access to source of proof
is neutral due to advances in copying technology
and information storage;
- the availability of compulsory process is neutral,
because the court could deny motion to quash and
compel third-party witnesses found in Texas to attend;
- the cost of attendance of willing witnesses
is neutral given the proximity of Dallas and Marshall;
and
- the local interest in having localized interests
decided at home is neutral, because the Marshall
citizens would be interested to know whether there
are defective products offered for sale in close
proximity to Marshall.
In re Volkswagen of America, Inc.,
545 F.3d 304, 316 (5th Cir. 2008),
petition for cert. filed.
In response, Volkswagen filed a petition of a writ of mandamus
to the Fifth Circuit which was denied. Subsequently, a petition
for rehearing en banc was granted
by the Fifth Circuit. In a 10-7 decision, the Fifth Circuit ordered
transfer to the Northern District of Texas based on patently erroneous
errors committed by the district court which warrant the relief
of mandamus.3
According to the Fifth Circuit, the errors committed by the district
court included applying a stricter
forum non conveniens dismissal standard, misconstruing the
weight of the plaintiff's choice of venue, treating choice of venue
as a 1404(a) factor, misapplying the Gilbert
private and public interests factors,4
and disregarding the precedents of the Fifth Circuit in
In re Volkswagen I. In fact, the
Fifth Circuit held that not a single relevant factor favors the
Marshall Division as the venue.
In analyzing the factors, the Fifth Circuit found that it was
less convenient for access to sources of proof, because all of the
documents and physical evidence were located in the Dallas Division,
including the accident site. The Fifth Circuit also found that the
district court disregarded its precedent relating to the 100-mile
rule as the witnesses would have to travel 155 miles from Dallas
to Marshall, which causes the witnesses to suffer not only monetary
but also personal costs.5 All of the
identified potential witnesses, including third-party witnesses,
all reside in Dallas County or in the Dallas area. The plaintiffs
themselves also reside in the Dallas division and conceded that
Dallas Division is a convenient venue. As to local interest, the
Fifth Circuit found that the district court's rationale that Marshall
citizens have an interest in this suit because the product is available
in Marshall stretches logic in a manner that eviscerates the public
interest. The court's rationale could also apply virtually to any
judicial district or division in the United States. Moreover, Marshall
residents have no connection to events giving rise to the suit.
Federal Circuit Application To Transfer of Patent Cases
Prior to In re Volkswagen, the
Federal Circuit had not granted mandamus relief for a motion to
transfer in any patent cases.6 But in
a recent decision on similar facts as In
re Volkswagen, the Federal Circuit granted a petition of
a writ of mandamus and ordered transfer of a patent case from Texas
to Ohio in In re TS Tech USA Corp.,
No. 888, 2008 U.S. App. LEXIS 26409 (Fed. Cir. 2008). The Federal
Circuit found that the Eastern District continued to commit essentially
identical errors as in In re Volkswagen.
For example, the court gave too much weight to the plaintiff's choice
of venue which it continued to treat it as a distinct factor and
weighed against transfer. The court also disregarded the Fifth Circuit's
100-mile rule when key witnesses were located in Michigan, Ohio,
and Canada, which would require them to travel more than 900 miles
to attend trial in Texas. In addition, none of the evidence was
located in Texas. The court further disregarded the Fifth Circuit's
precedent in In re Volkswagen when
it found localized interests even though there is no connection
between the events giving rise to the suit and the Eastern District
of Texas.7 The only connection in this
case is that certain vehicles containing TS Tech's headrest assembly
have been sold in the venue. Much like the Fifth Circuit in
In re Volkswagen, the Federal Circuit
found that just because the infringing headrest assemblies were
sold throughout the United States, including the Eastern District
of Texas, citizens of the Eastern District of Texas have no more
or less connection to this case than any other venue.
Thus, the Federal Circuit favored transfer because the facts
in In re TS Tech are substantially
similar to those of In re Volkswagen:
all identified witnesses are located in an area closer to the transferee
court and all of the physical and documentary evidence are located
in that same area, while none were located in the transferor venue.
In addition, mere availability of infringing product in the transferor
venue does not give it more meaningful connection to the case than
any other venue. It is also noted that even though the Federal Circuit
did not evaluate the principal place of business of respective parties
in the analysis of meaningful connection to the venue, none of the
parties were incorporated in Texas or had offices located in the
Eastern District of Texas. In re TS Tech
makes it easier to transfer a patent case out of the Eastern District
when the only connection to the district is the sale of the infringing
product.
The Eastern District of Texas Application
Since In re Volkswagen and
In re TS Tech, the Eastern District
of Texas has both granted and denied motion to transfer venue based
on distinctive facts. After In re Volkswagen,
Judge John Love of the Tyler division applied the Fifth Circuit
decision and denied transfer of a patent case to California.8
The court found that the Eastern District of Texas is more convenient
than California because it is roughly equidistant between California,
where one nonparty witness inventor resided, and Washington DC,
where the other inventor resided. The court also found no specific
evidence located in California. But the court is indifferent as
to the parties' principal place of business being outside of Texas,
because it presumed that the parties will make their employees available
to testify if necessary. The court also committed similar error
that the district court did in In re Volkswagen
when it presumed that the Eastern District of Texas is more convenient
because the suit was filed there.
As to local interest, the court did not apply the
In re Volkswagen analysis to this
case due to a distinguishable fact pattern—the infringing service
in this case was offered nationwide instead of having comparable
events in a single district. Unlike the Federal Circuit in
In re TS Tech, the court here found
enough distinctive factual differences between selling products
nationwide and events giving rise to the suit being in a single
district to find both the Eastern District of Texas and California
to have equivalent local interests.
Contrast this case with Odom v. Microsoft
Corp., No. 6:08-CV-331 (E.D. Tex. Jan. 30, 2009), in which
Judge Love granted the defendant's motion to transfer a different
patent case to Oregon, because the case is significantly localized
in the Northwest. The court found the cost of attendance of witnesses
weighs in favor of transfer, because similar to
In re TS Tech, a vast majority of
witnesses in this case is located closer to Oregon than Texas. The
defendant identified one nonparty witness in Oregon and a party
witness in Washington. The court distinguished the location of these
witnesses being in the same general geographical area from
Network-1 Sec. Solutions, Inc. v. D-Link
Corp., 433 F. Supp. 2d 795 (Fed. Cir. 2008), in which the
witnesses were spread out all over the country. But the court treated
Oregon and Texas being equally convenient, because the nature of
evidence at issue in this case is different from
In re TS Tech. In this case, the
evidence is software code instead of physical objects or documents,
and the court found that it is not more convenient to transfer to
Oregon when electronic information can be accessed in any locations.
As to local interests, the court found other events giving rise
to the suit support transfer of this case to Oregon even though
the infringing product is sold all over the country. No party resides
in Texas nor was Texas state law at issue. In addition, the contract
at issue was signed in Oregon by parties residing in Oregon, the
consultation underlying the contract occurred in Oregon, the access
of confidential information while the plaintiff prosecuted the patent
at issue was in Oregon, and a vast majority of witnesses were located
in Oregon. Furthermore, the possibility for application of Oregon
law to interpret contracts weighs slightly in favor of transfer.
Thus, the Eastern District of Texas ordered a transfer to Oregon
based on the concentration of identified witnesses and localized
interest in the Northwest, even though there was no physical evidence
located there.
Judge David Folsom of the Marshall Division have also followed
In re TS Tech and ordered transfer
of a patent case, PortsRiver, Inc. v. Shopzilla,
Inc., No. 2:07-CV-00440-DF (E.D. Tex. Jan. 30, 2009), because
the overall nature of the case is regional to California. The court
found it more convenient for California to handle this case, because
the witnesses are located in California or Washington and a majority
of documentary evidence is located in California. Unlike
In re TS Tech and
Odom, the court found localized interests
because the infringing websites are located in California, even
though it is accessible nationwide. The court also found that plaintiff
and six defendants having principal place of business in California
and the original patent owner being a California-based company relevant
in convenience analysis.
In contrast with the regional nature in
PortsRiver, Judge Folsom denied transfer
of a patent case that is nationwide in scope in
Novartis Vaccines & Diagnostics, Inc. v.
Hoffman-La Roche, Inc., No. 2:07-CV-507 (E.D. Tex. Feb. 3,
2009) The court distinguished it from In
re Volkswagen and In re TS Tech
in that the physical evidence in this case is not confined to a
limited region. The bulk of the documentary evidence is spread throughout
the nation, including important evidence relating to the development
of the invention in California. As to compulsory process, the court
found that neither the North Carolina nor the Eastern District of
Texas has absolute subpoena power over all possible witnesses because
these witnesses reside in four different states. This differs from
In re Volkswagen, where the Dallas
Division had absolute subpoena power over all possible witnesses,
and from In re TS Tech, where both
possible venues enjoy absolute subpoena power over all the witnesses.
The court further emphasized that the national character of this
case prevents either venue to have absolute subpoena power over
all nonparty witnesses.
The court also found that the central location of the Eastern
District of Texas is a more convenient location than North Carolina
for witnesses because they are decentralized. There are equal number
of witnesses who will travel either less or more if the case is
transferred, as the witnesses were located in both the West and
East coasts. This is different from In re
Volkswagen, where witness resided in Dallas and had to travel
to Marshall, and from In re TS Tech,
where the witnesses resided in the same geographical region. Based
on the national scope of the evidence at issue and decentralized
witnesses throughout the nation, Judge Folsom refused to transfer
this case to North Carolina.
Conclusion
Since In re Volkswagen and
In re TS Tech, the Eastern District
of Texas has ordered transfer of venue based mostly on the concentration
of identified witnesses in the same geographical area as the transferee
venue, the physical evidence being located close to the transferee
venue, and events giving rise to the suit occurred in the transferee
venue more than mere sale of infringing product or offering of services.
When evaluating concentration of witnesses, the court is more likely
to transfer if a majority of the witnesses are located in same general
area, such as the Northwest in the case of
Odom. But if a majority of the witnesses
are spread out across the country, like
PortsRiver and Novartis, the
court will most likely deny transfer because the case is nationwide
in scope. It is also important that physical—not electronic—evidence
is located close to the transferee venue for the court to grant
transfer. For a transferee venue to have sufficient meaningful connection
to the case warranting a transfer, the transferee venue must have
ties to events giving rise to the suit more than mere sale of products
or offering of services nationwide. Like
Odom, events giving rise to the case occurring in the Northwest
and the possibility of applying law other than Texas state law led
to a transfer from Texas to Oregon. The mere sale or offering of
products or services in the Eastern District of Texas is not sufficient
for the court to deny a transfer.
Based on these decisions, the Eastern District of Texas is likely
to transfer cases to other venues in the future unless a majority
of witnesses are located closer to the Eastern District of Texas
than the transferee venue or the Eastern District has connections
to events of the case more than mere sale or offering of infringing
products or services in the venue. These decisions also made it
easier for defendants to transfer to a more convenient venue, such
as where the defendants reside. As a result of these decisions,
fewer cases may be filed in the Eastern District of Texas and more
motions to transfer venue may be granted.
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