Fed. Cir. Overturns Yet Another E.D. Tex. “No Transfer” Order

The Federal Circuit yesterday rejected a plaintiff’s attorney’s attempt to “game the system” by arranging to have its client open up what appeared to be a sham office in the E.D. Tex. before filing a patent suit there against an Indiana company.

In In re Zimmer Holdings, Inc., No. 2010-M938 (Fed. Cir. June 24, 2010), the evidence showed that the plaintiff's Longview, Texas, office was shared with another of plaintiff’s counsel’s clients. The plaintiff was not registered to do business in Texas, had no employees in Texas, and actually has deeper ties to Michigan, where it conducts its R&D, where its two officers reside, and where its patent prosecution is done. But the district court denied a section 1404(a) transfer.

The Federal Circuit granted the defendant's petition for mandamus. It chastised the district court for admittedly refusing to “scrutinize litigants’ business decisions to determine whether opening an office in a particular location has a legitimate business purpose or is merely a tactic to manipulate venue.” Citing Hertz Corp. v. Friend, 130 S. Ct. 1181, 1195 (2010), the Federal Circuit urged district courts to do just that. Calling the Longview office "a legal fiction" (slip op. at 8), the court held that manipulation is precisely what transpired in this case: “This is a classic case where the plaintiff is attempting to game the system by artificially seeking to establish venue by sharing office space with another of the trial counsel’s clients.” (Id. at 6.)