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Intellectual Property Law

: IP Blawg

Federal Circuit's New Decision - In re Tech Decision

By Farella Braun + Martel LLP


 On December 29, 2008, the United States Federal Circuit Court of Appeals issued the extraordinary remedy of a writ of mandamus in In re TS Tech USA Corp. et al. (?TS Tech USA?) (Misc. Dkt. No. 888) to reverse the denial of a motion to transfer a patent infringement action from the Eastern District of Texas to the Southern District of Ohio.  The decision is significant in that the Federal Circuit?s ruling weakens several of the arguments that have previously been used by plaintiffs to oppose motions to transfer venue and keep patent cases in the Eastern District of Texas.  While the full implications of this decision remain to be seen, it does appear that that it will at a minimum greatly improve the chances of defendants being able to transfer patent cases out of the Eastern District of Texas where there is no meaningful connection to that district.  Depending on future developments, the decision may ultimately decrease the number of new case filings in that district. This decision will clearly be viewed as good news by accused patent infringers.


In recent years, the Eastern District of Texas has become a very popular choice of venue for patent holders suing for infringement.  Global corporations of all stripes have been hailed into the small Texas towns of Marshall, Texarkana and Tyler to defend their products against claims of patent infringement.  Once sued in the Eastern District of Texas, defendants have typically found themselves stuck.  Though 28 U.S.C. §1404(a) of the United States Code allows for venue transfers based on ?the convenience of the parties and witnesses? and ?the interest of justice,? transfers are within the discretion of the district judge and post judgment appellate review is limited and generally ineffective.  According to the research firm Legal Metric's analysis of 17 years of rulings on contested transfer motions in patent cases, the Eastern District of Texas has had the second-lowest rate of granting transfer motions in the nation ? it has granted only 33.1 percent of those motions.  In the proposed patent reform legislation that stalled last year in Congress, reform of the venue provisions for patent cases was a very hot topic.

As previously reported on the Farella IP Blawg, in October 2008 the Fifth Circuit issued an en banc ruling in In re Volkswagen of Am., Inc. 545 F.3d 404, 315 (5th Cir. 2008) (?Volkswagen II?) in which it granted a writ of mandamus to reverse the denial of motion to transfer venue from the Eastern District of Texas in a products liability case where the auto accident at issue had occurred in another district of Texas.  District Court Judge John Ward had denied defendants? motion to transfer venue in that case, giving deference to the plaintiff?s choice of forum and finding that because Volkswagen automobiles were sold in the Eastern District this established a sufficient local interest in the case.  The en banc Fifth Circuit overruled, holding that the plaintiff?s choice of venue was not to be given independent weight under 28 U.S.C. §1404(a), but that deference was already given by virtue of the burden placed on the party seeking a transfer.  The Fifth Circuit further held the mere fact that the product at issue was also sold in the Eastern District did not establish a sufficient local interest in the subject matter of the case to justify venue.  It had been anticipated that the Fifth Circuit?s decision in this product liability case might be extended to patent cases by the Federal Circuit ? which is exactly what has now happened in the Federal Circuit?s decision in TS Tech USA.


In TS Tech USA, the defendants were sued by Lear Corporation for patent infringement over pivoting headrests installed in automobiles.  The case was assigned to Judge John Ward.  Defendants moved to transfer venue to the Southern District of Ohio arguing that: (1) the Eastern District of Texas had no meaningful connection to the case, because the plaintiffs and defendants were all from out of state; and (2) the evidence was primarily located in Ohio and the key witnesses were in Ohio, Michigan and Canada, making Ohio a more convenient forum for the litigation. 


In a ruling issued prior to the Fifth Circuit?s en banc decision in Volkswagen, Judge Ward denied the motion to transfer.  His ruling was based on:  (1) the fact that several vehicles with allegedly infringing product were sold in Texas, which, he reasoned, was sufficient to establish that the citizens of the Eastern District had a ?substantial interest? in the case; (2) deference to the plaintiff?s choice of forum; (3) a finding that much of the documentary evidence was electronic and therefore it was easily transported; and (4) the rationale that the inconvenience to the parties and witnesses of having the case venued in the Eastern District was outweighed by deference owed to the choice of forum by the Plaintiff. 


Defendants sought a writ of mandamus before the Federal Circuit, the court with exclusive appellate authority in patent matters.  Because writs of mandamus are a form of extraordinary interlocutory relief, they require the heightened showing of a clear abuse of discretion and a patently erroneous result. Further, the party seeking a writ must demonstrate it has no other means of obtaining the relief desired.  Applying Volkswagen, the Federal Circuit held the standard for mandamus was met and then reversed Judge Ward?s district court ruling and directed a transfer of the case to Ohio.    

The Federal Circuit found several ?key errors? in Judge Ward?s analysis. First, the Federal Circuit held that Judge Ward gave too much weight to the plaintiff?s choice of forum. Applying the Volkswagen analysis, the Federal Circuit ruled that the weight accorded to a plaintiff?s choice of forum for his or her lawsuit is implicit in the burden placed on the party requesting a venue transfer.  It is not an independent factor.


Next the Court found that Judge Ward had also incorrectly disregarded the standard in venue transfer cases applied by the Fifth Circuit for analyzing the cost for attendance of out-of-forum witnesses.  The Federal Circuit noted that Judge Ward had disregarded the ?100 mile rule? ? that where the distance between witnesses and a venue is greater than 100 miles, the factor of inconvenience to witnesses increases in direct relationship to the additional distance to be traveled.  Since the key witnesses in the case were located in Michigan, Ohio and Canada, this would result in them having to travel an extra 900 miles to attend trial in the Eastern District of Texas as compared to Ohio, a factor ignored by Judge Ward which strongly favored transfer to Ohio. 

The Federal Circuit also held that Judge Ward had erred by reading out of the §1404(a) analysis the factor regarding relative ease of access to sources of proof based on the reasoning that documents would be stored in electronic form.  The Federal Circuit held that it was erroneous to conclude that the ease of access to proof factor was neutral since the vast majority of the physical evidence and documentary evidence would be found in Ohio, Michigan and Canada, with none of the evidence in Texas . 

Finally, the Federal Circuit also found that Judge Ward incorrectly applied the public interest factor in concluding that this favored having the case be decided locally.  The Court held that the fact that some vehicles containing the allegedly infringing product were sold in the Eastern District of Texas did not weigh in favor of venue in the Eastern District of Texas.  The Federal Circuit noted instead that because such vehicles were sold throughout the United States the citizens of the Eastern District of Texas had no more or less of a meaningful connection to the case than any other venue.


Based on these errors the Federal Circuit found that Judge Ward had erred and that the errors were sufficient to meet the ?clear? abuse of discretion standard for issuance of a writ of mandamus.  Accordingly, it issued the writ, reversed the denial of the transfer motion and directed transfer of the case to the Southern District of Ohio. The actual extent to which defendants in patent cases seeking transfers out of the Eastern District of Texas meet with increased success remains to be seen, but the TS Tech USA decision appears to portend a significant shift. 


Today?s Bloggers:  James W. Morando and Deepak Gupta

Full post as published by IP Blawg on December 31, 2008 (boomark / email).

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