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:

1. the relative ease of access to sources of proof;
2. the availability of compulsory process to secure the attendance of witnesses;
3. the cost of attendance for willing witnesses; and
4. all other practical problems that make trial of a case easy, expeditious and inexpensive.

Id.

The public interest factors are:

1. the administrative difficulties flowing from court congestion;
2. the local interest in having localized interests decided at home;
3. the familiarity of the forum with the law that will govern the case; and
4. 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:

1. the relevant ease of access to source of proof is neutral due to advances in copying technology and information storage;
2. 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;
3. the cost of attendance of willing witnesses is neutral given the proximity of Dallas and Marshall; and
4. 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 Web sites 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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¹Brief for American Intellectual Property Law Association as Amicus Curiae Supporting Petitioners at 2, In re Volkswagen AG, No. 07-40058 (5th Cir. March 26, 2008) ("[t]he routine filing of patent infringement complaints in the Eastern District of Texas that have essentially no connection to that district has been encouraged by the seeming reluctance of courts in that district to transfer cases under §1404(a)").

²In re Volkswagen, 506 F.3d at 380.

³In re Volkswagen, 545 F.3d at 309.

⁴In re Volkswagen, 545 F.3d at 315 (citing Gulf Oil Corp. v. Gilbert, 330 U.S. 501 (1947)).

⁵In re Volkswagen, 545 F.3d at 317 ("[w]hen the distance between an existing venue for trial of a matter and a proposed venue under §1404(a) is more than 100 miles, the factor of inconvenience increases in direct relationship to additional distance to be traveled.") (citing In re Volkswagen AG, 371 F.3d 201, 204-205 (5th Cir. 2004)).

⁶In re Volkswagen of America, Inc., No. 880, 2008 U.S. App. LEXIS 21726 (Fed. Cir. 2008) (non-precedential order) (denying petition of a writ of mandamus to avoid transfer from Michigan to Texas, because Volkswagen only made general assertions regarding convenience and falls short of showing clear and indisputable right for the issuance of a writ).

⁷In re TS Tech USA Corp., 2008 U.S. App. LEXIS 26409 at *10 ("there is no relevant connection between the actions giving rise to this case and the Eastern District of Texas except that certain vehicles containing TS Tech's headrest assembly have been sold in the venue. None of the companies have an office in the Eastern District of Texas; no identified witnesses reside in the Eastern District of Texas; and no evidence is located within the venue. Instead, the vast majority of identified witnesses, evidence, and events leading to this case involve Ohio or its neighboring state of Michigan").

⁸J2 Global Commc'ns. Inc. v. Protus IP Solutions, Inc., Nos. 6:08-CV-211, 6:08-CV-262, 6:08-CV-275, 2008 WL 5378010 (E.D. Tex. Dec. 23, 2008).

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