Federal Judiciary

Federal Circuit Denies Mandamus of Venue Ruling in Personal Audio v. Apple

By Michael C. Smith

In Personal Audio v. Apple, 9:09cv011 (February 11, 2010) Judge Clark denied the defendant?s motion to transfer, and yesterday, the Federal Circuit affirmed that decision.  The facts of the decision are important to understand the significance of the Federal Circuit's ruling.

    Personal Audio is a Texas company with an office in the Eastern District of Texas where it keeps many of its original documents.  Transfer was requested to Massachusetts, but none of the defendants had their principal places of business there.  Two of the defendants? offices are in New York, but another two defendants have principal places of business which are closer to Lufkin, Texas.  Judge Clark concluded that many witnesses, documents and evidence would have to travel a significant distance to trial regardless of which forum and held that, at most, defendants could show that there may be some non-party interest in the District of Massachusetts which he held did not meet the defendants? burden of showing that Massachusetts is clearly more convenient than the Eastern District of Texas.

    A major issue in this case was that Personal Audio, LLC became a legal valid entity upon its incorporation, which was shortly before filing of the suit.  Judge Clark wrote that ?[t]he court has found neither statute that states, nor case that holds, that there is a mandatory waiting period in which a plaintiff cannot file suit in a judicial district after incorporating in that district.?  Judge Clark also noted that while the plaintiff?s only office, located in Beaumont, contained the originals of many of its corporate documents, including most of those relating to prosecution and assignment of the patents in suit, the original assignment history of the patents, and the remaining documents from the prior plaintiff?s predecessor company, neither the plaintiff nor any defendant has any contact with, or documents in, the proposed transferee venue of Massachusetts.

    Judge Clark also pointed out that, ?it is common, for example, for a business to incorporate in the State of Delaware in order to take advantage of that state?s corporate tax laws and its courts experience in corporate matters.  The court has not found any case holding that such a ?strategic? incorporation should be held against a corporation when analyzing venue or jurisdiction.? 

    On mandamus review, the Federal Circuit, in a brief order, held that "the status of Personal Audio, LLC, as a Texas corporation is not entitled to significant weight, inasmuch as the company?s presence in Texas appears to be both recent and ephemeral?its office is apparently the office of its Texas litigation counsel, and it appears not to have any employees in Texas. Nonetheless," it continued, "the petitioners have not made a compelling showing that Massachusetts is a more convenient forum, particularly in light of the fact that none of the defendants is headquartered there. . . . In sum, the petitioners have failed to satisfy the demanding standard required to justify the issuance of a writ of mandamus."

Full post as published by Eastern District of Texas Federal Court Practice on May 13, 2010 (boomark / email).