The Effect of the Federal Circuit’s Order In Re TS Tech on Motions to Transfer Venue in the Eastern District of Texas: Business as Usual
By: LORA MITCHELL FRIEDEMANN & JOSHUA R. WILLIAMS
March 2009
Many patent attorneys predict that the Federal Circuit’s decision In re TS Tech to order an Eastern District of Texas (E.D. Texas), Marshall Division court to transfer a case—where neither party had meaningful connections to the E.D. Texas—will result in a dramatic decline in the number of patent cases filed in that court. The E.D. Texas’ post-TS Tech decisions, however, indicate that the Federal Circuit’s order may only minimally alter the landscape.
I. A Brief History of the Eastern District’s Patent Litigation “Rocket Docket.”
When the Eastern District of Texas adopted local patent rules aimed at streamlining patent litigation matters by establishing fast and firm trial settings (i.e., a “rocket docket”), it became an appealing venue for patent plaintiffs looking to minimize litigation costs and reduce the amount of time defendants had to prepare their defenses. See The Eastern District Of Texas—No Longer The Venue Of Choice? The Metropolitan Corporate Counsel, February 2009. The success rate of patent plaintiffs (from 1995 to 2007 patent plaintiffs prevailed in 71.9% of patent cases, and the median damage award for those prevailing plaintiffs was $19.7 million, one of the highest averages in the land) contributed to the notion that the E.D. Texas was a favorable venue for plaintiffs. See A closer look—2008 Patent Litigation Study: Damages awards, success rates and time-to-trial. PricewaterhouseCoopers, 2008. A third reason why the E.D. Texas gained popularity with patent plaintiffs was the court’s reluctance to transfer cases out of the E.D. Texas, even when the parties’ connections to the E.D. Texas were minimal. By 2007, the E.D. Texas was by far the most popular venue for patent plaintiffs to file cases—for the 12‑month period ending September 30, 2008, plaintiffs filed 322 patent cases in the E.D. Texas, 78 more than in the Central District of California, where patent plaintiffs filed the second most cases—and the economy of Marshall, Texas, surged as litigants, attorneys, and witnesses from around the world traveled to the small town near the Louisiana border to argue patents. See A.O. Statistical Division.
II. The Federal Circuit Ordered the Eastern District of Texas to Transfer Venue In re TS Tech.
The Federal Circuit Court of Appeals issued a rare writ of mandamus on December 29, 2008, ordering the E.D. Texas to transfer a case to the defendant’s backyard, the Southern District of Ohio (S.D. Ohio). In re TS Tech, 551 F.3d 1315 (Fed. Cir. 2008). Applying Fifth Circuit law (In Re Volkswagen of America, Inc., 545 F.3d 304 (5th Cir. 2008)), the TS Tech court determined that the E.D. Texas abused its discretion when it denied a motion to transfer the case to the S.D. Ohio, where none of the parties had meaningful connections to the E.D. Texas, the physical and documentary evidence was located mainly in the S.D. Ohio, and the key witnesses all lived in Ohio, Michigan, and Canada. Scholars and practitioners predicted that TS Tech would herald the end of the E.D. Texas’ reign as the most popular venue for patent case filings, as plaintiffs would conclude that the court was now substantially more likely to grant defendants’ motions to transfer venue out of the E.D. Texas, where neither party had meaningful connections to the E.D. Texas. An analysis of post-TS Tech decisions in which the E.D. Texas considered motions to transfer venue, however, suggests that the prognosticators’ predictions were inaccurate.
III. The E.D. Texas Denied Three of the Six Post-TS Tech Motions to Transfer Venue.
Through the end of February, there have been six published, post-TS Tech patent infringement decisions in which the E.D. Texas considered motions to transfer venue. The court granted three motions and denied the other three. In the three motions it granted, the parties did not merely lack meaningful connections to the E.D. Texas, but also had meaningful connections to the proposed transfer district.
In Gary Odom v. Microsoft Corp., No. 6:08‑cv‑331 (E.D. Texas, Love, J., filed January 30, 2009), the ED granted defendant Microsoft’s motion to transfer to the District of Oregon, where all relevant contracts were signed in Oregon by parties residing in Oregon, the patent was prosecuted in Oregon, the vast majority of potential witnesses resided in Oregon, contract issues under Oregon law might arise, and the parties signed a contract containing a clause designating Oregon as the forum for litigation arising out of the contract.
In PartsRiver, Inc. v. Shopzilla, Inc., No. 2:07‑cv‑440 (E.D. Texas, Folsom, J., filed January 30, 2009), the E.D. Texas granted defendant Shopzilla’s motion to transfer to the Northern District of California, where six of the seven named defendants had their principal places of business in California (the remaining defendant’s place of business was in Washington), the original patent owner was a California-based company, and many potential witnesses resided in California.
In Invitrogen Corp. v. General Electric Co., No. 6:08‑cv‑112 (E.D. Texas, Love, J., filed February 9, 2009), the E.D. Texas—although neither party had meaningful connections to the E.D. Texas and the case was national in scope (i.e., witnesses and evidence were located throughout the country)—granted defendant General Electric’s motion to transfer venue to the District of Maryland, where the parties had already litigated three of the six patents at issue. The court reasoned that prior litigation weighed strongly in favor of transfer to preserve judicial economy. The court noted that the District of Maryland was “intimately familiar with the technology at issue, having already issued claim constructions, conducted a jury trial on infringement, and entered a settlement agreement between the parties,” and reasoned that this “intimate familiarity” gave the District of Maryland a local interest favoring transfer.
In Invitrogen Corp. v. General Electric Co., No. 6:08‑cv‑113 (E.D. Texas, Love, J., filed February 9, 2009), the E.D. Texas denied defendant General Electric’s motion to transfer venue where the case involved the same plaintiff and same defendants as Invitrogen Corp. v. General Electric Co. (cv‑112) but different patents. Because there were few similarities between the patents in the 113 case and the 112 case and the parties had not previously litigated the 113 patents in the District of Maryland, the E.D. Texas reasoned that the factors supporting transfer in the 112 case (i.e., judicial economy and local interest) were not present in the 113 case.
In Novartis Vaccines and Diagnostics, Inc. v. Hoffman-La Roche Inc., No. 2:07‑cv‑507 (DF) (E.D. Texas, Folsom, J., filed February 3, 2009), the E.D. Texas denied defendant Hoffman-La Roche’s motion to transfer venue to the Eastern District of North Carolina even though the parties’ only connection to the E.D. Texas was the sale of defendant’s products there. The court reasoned that because the case was nationwide in scope the proposed forum was no less inconvenient than the E.D. Texas. The court distinguished this case from In re TS Tech, noting that in the latter case the evidence and witnesses were confined to a limited geographic region.
Finally, in MHL Tek, LLC v. Nissan Motor Co., No. 2:07‑cv‑289 (E.D. Texas, Ward, J., filed February 23, 2009) the E.D. Texas responded to defendants’ motion to reconsider its denial of a motion to transfer venue in light of TS Tech by denying defendants’ motion to transfer to the Eastern District of Michigan a second time. Using the same analysis it applied in Novartis, the E.D. Texas reasoned that although the parties’ only connection to the E.D. Texas was the sale of defendants’ products there, transfer was not appropriate because the case was nationwide in scope (four of the defendants resided in Germany, three in California, two in Japan, two in South Korea, two in New Jersey, and one each in Michigan, Tennessee, Alabama, Georgia, South Carolina, Indiana, and Virginia; potential witnesses were not concentrated in one part of the country; and there was no evidence in Michigan that could not’ be produced electronically).
IV. The Eastern District Is Likely to Remain Popular With Patent Plaintiffs.
Post-TS Tech cases demonstrate that the E.D. Texas is unlikely to grant motions to transfer venue unless the case falls squarely within the jurisprudence set forth In re TS Tech—moving parties must show that (1) the parties do not have meaningful connections to the E.D. Texas; and (2) the parties have meaningful connections to the proposed transfer venue, which movants can show if the case is truly regional in nature or the parties have already litigated the patents-at-issue in the proposed transfer district. Thus, in most multidefendant cases, plaintiffs can continue to file patent claims in the E.D. Texas where the parties’ only connection to the E.D. Texas is the sale there of the product accused of infringement without apprehension of the court granting motions to transfer. Although In re TS Tech may have changed the landscape somewhat, the E.D. Texas is likely to remain popular with patent plaintiffs for the foreseeable future.
Note - Patent reform legislation has been introduced in both the House and the Senate that, if passed, would dramatically alter the patent litigation landscape. Patent Reform Act of 2009, S. 515, 111th Cong. § 8. Under the proposed legislation, “[V]enue is only proper where (a) defendant is incorporated; (b) defendant has its principal place of business; (c) where the defendant is permanently located and has committed substantial acts of infringement; or (d) where the plaintiff resides if the plaintiff is a nonprofit or individual inventor.” Id.