Fed. Cir. orders transfer of multi-defendant patent case to N.D. Cal.

Did you think that having several defendants in multiple other districts insulated an E.D. Tex. patent plaintiff from a § 1404(a) transfer? If so, you may want to qualify that thought a bit.

The Federal Circuit today issued a writ of mandamus ordering the transfer of a multi-defendant patent case to the N.D. Cal. The key facts were these:

• The plaintiff was from the N.D. Cal.
  
• 11 of the 12 defendants were headquartered in California, with 6 of those actually headquartered in the N.D. Cal.
  
• Only one defendant (Dell) was headquartered in Texas (but not in the E.D. Tex.).

So the lesson seems to be this: the “multi-defendant defeats § 1404(a) transfer” strategy doesn't necessarily work where the majority of the defendants are from one particular area outside the forum (even if they’re all not from the same federal district).

In re Acer Amer. Corp., Misc. No. 942 (Fed. Cir. Dec. 3, 2010)

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.)

The War of 1404 Continues

The Federal Circuit recently issued two precedential orders concerning transfers under 28 U.S.C. § 1404(a). Both concerned E.D. Tex. cases.

In In re Volkswagen of America, Inc., No. Misc. 897 (Fed. Cir. May 22, 2009), the court denied a writ of mandamus that sought to overturn the E.D.Tex. court's refusal to transfer two patent infringement cases (based on the same patents) brought by a Texas company against many, many auto manufacturers located around the world. In a short order, the court agreed with the district court that it made sense to try such a case in one district. Apparently the Federal Circuit viewed the E.D. Tex. as good as any other district for that purpose.

In In re Genentech Inc. and Biogen, Inc., No. Misc. 901 (Fed. Cir. May 22, 2009), however, the court granted the writ of mandamus and ordered the E.D. Tex. to transfer a patent suit brought by a German company against a San Diego company and a San Francisco company to San Francisco. In a lengthier discussion, the Federal Circuit explained that the district court made several legal errors in its convenience analysis.

5th Circuit's en banc decision on section 1404(a) transfers in In re VW

In this much anticipated decision, the en banc court has directed the E.D. Tex. to transfer this car crash case, which had the barest connection, if any, to that district, to the N.D. Tex., Dallas Division.

For those who don't want to wade through 37 pages of majority and dissenting opinions, it looks to me that this decision will be as relevant to patent cases as the now-vacated prior panel opinion would have been. How the E.D. Tex. judges will APPLY the case, however, will certainly be an interesting question. As with the prior panel's opinion, the en banc decision:

• said that the oft-repeated concept of the "weight given to a plaintiff's choice of forum" simply means that the movant has the burden of proof to show "good cause" for transfer, and no more than that.
• held that under 1404(a), "good cause" for transfer means "when the transferee forum is clearly more convenient, a transfer should be ordered."
• said that a court should NOT completely discount that the documents and physical evidence are located outside the district simply because of "advances in copying technology and information storage."
• re-affirmed the 5th Circuit rule of thumb that where witnesses reside more than 100 miles from the court, the inconvenience to them increases as the distance beyond 100 miles increases.

Perhaps most importantly, the court discounted that the denizens of Marshall may have an interest in the case simply because the product is available there. The en banc court reasoned that such a concept could apply "virtually to any judicial district or division in the United States."