Plaintiff’s Choice Of Forum and Local Sale Of Nationally Available Product Insufficient Given Geographic Location Of Witnesses and Physical Evidence
Darin Snyder,
Mark S. Davies
In an opinion issued yesterday,
In re TS Tech USA Corporation et al., Misc. Docket. No. 888, the Federal Circuit significantly altered the practical considerations governing where to file and how to defend against a patent infringement law suit. In brief, the court of appeals has made it far more likely that a patent infringement suit filed in the Eastern District of Texas will be transferred to another jurisdiction. Over the past seven years, the Eastern District of Texas has seen a significant rise in the number of patent cases. In 2000, only 23 patent cases were filed but by 2007 the number had increased to 368 –more than any other district in the country. Given the importance of forum selection in patent litigation, and the popularity of the Eastern District of Texas among patent plaintiffs, yesterday’s decision will have a significant impact on current and future patent litigation strategy.
The Federal Circuit acted in response to a petition for a writ of mandamus filed by infringement defendant TS Tech. Plaintiff Lear Corporation had sued TS Tech in the Eastern District of Texas for infringement related to pivotally attached vehicle headrest assemblies. TS Tech moved under 28 U.S.C. § 1404(a) to transfer the case to the United States District Court for the Southern District of Ohio. TS Tech argued that the Southern District of Ohio was clearly a more convenient venue to try the case and that the Eastern District of Texas had no meaningful connection to the dispute. The district court denied the motion. In a unanimous opinion (Chief Judge Michel, and Judges
Rader and Prost), the Federal Circuit granted TS Tech’s petition for a writ of mandamus.
The Federal Circuit’s opinion begins by stating that its decision is a direct application of the Fifth Circuit’s recent en banc decision,
In re Volkswagen of Am., Inc., 545 F.3d 304, 315 (5th Cir. 2008) (“
Volkswagen II”). The inquiry was governed by Fifth Circuit law, the court explained, because the petition “does not involve substantive issues of patent law.” Reviewing the district court’s ruling in light of
Volkswagen II, the Federal Circuit found several errors. Most importantly, “the district court gave too much weight to Lear’s choice of venue.”
Volkswagen II explains that requiring a defendant to establish that another forum is “clearly” more convenient already reflects deference to a plaintiff’s choice of venue. Thus, “Fifth Circuit precedent clearly forbids treating the plaintiff’s choice of venue as a distinct factor in the § 1404(a) analysis.”
The Federal Circuit also found that the district court ignored the Fifth Circuit’s “100-mile” rule, pursuant to which after 100 miles “the factor of inconvenience to witnesses increases in direct relationship to the additional distance to be traveled.” All of the witnesses were in Ohio, Michigan, and Canada, and would need to travel 900 more miles to attend trial in Texas than Ohio. Indeed, “because the identified witnesses would need to travel a significantly further distance from home to attend trial in Texas than Ohio, the district court’s refusal to considerably weigh this factor in favor of transfer was erroneous.” The Federal Circuit also found error in the district court’s consideration of the location of the physical and documentary evidence. Even though many of the documents were stored electronically, all of the physical evidence, including the headrests and the documentary evidence, were located near the Ohio venue.The district court erred in not weighing this factor in favor of transfer.
More generally, the Federal Circuit ruled that the district court “disregarded Fifth Circuit precedent in analyzing the public interest in having localized interests decided at home.” The district court had relied heavily on the theory that local interests were implicated because vehicles containing TS Tech’s headrest assembly were sold in the venue. But the Federal Circuit explained that
Volkswagen II “unequivocally rejected” this rationale because it “could apply virtually to any judicial district or division in the United States.” The Federal Circuit did not distinguish between a patent infringement suit (in which the allegedly infringing product was sold in the Eastern District of Texas and conduct giving rise to the patentee’s claim therefore arguably occurred in that venue) and the products liability suit in
Volkswagen II (in which the manufacture of the allegedly defective product, the accident, and the resulting injuries all occurred outside of that venue). Instead, the Federal Circuit simply stated that “[t]he fact that this is a patent case as opposed to another type of civil case does not in any way make the district court’s rationale more logical or make the [local interest] factor weigh against transfer.”
After finding that the district court should have granted the transfer motion, the Federal Circuit determined that the error was so clear as to warrant mandamus. Under
Volkswagen II, a writ should issue if the denial of a transfer motion led to a “patently erroneous result.” The Federal Circuit explained that “the district court’s errors here are essentially identical” to the errors that the Fifth Circuit found warranted mandamus in
Volkswagen II. Moreover, the Federal Circuit explained that
Volkswagen II holds that “mandamus is an appropriate means to review a district court’s ruling on a venue transfer motion.”
TS Tech may directly affect the viability of transfer motions in the numerous pending patent cases in the Eastern District of Texas that have no greater connection to the venue than the dispute in
TS Tech. In
TS Tech, the court noted that “[n]one of the companies have an office in the Eastern District of Texas; no identified witnesses reside in the Eastern District of Texas; and no evidence is located within the venue.”
TS Tech finds that two of the principal reasons for allowing cases like this to proceed in Texas, i.e., respect for the plaintiff’s venue choice and the local sale of a nationally available product, are insufficient to defeat a motion to transfer in the absence of any geographic reason to keep a case in the Eastern District.
Even for cases with some connection to the Eastern District other than the national sale of a product,
TS Tech suggests that motions to transfer are now more likely to succeed. Under
TS Tech, district courts are instructed to put renewed emphasis on the factors of witness inconvenience, especially where witnesses must travel more than 100 miles, and the location of physical exhibits. Those seeking to oppose such a motion may want to point to factors, such as court congestion, that were not dispositive in
TS Tech.
TS Tech is also likely to affect the venue of patent cases outside of the Eastern District of Texas. Because
TS Tech is driven by Fifth Circuit case law, it is precedent for how the Federal Circuit will treat transfer decisions by district courts in Texas, Mississippi, and Louisiana. Whether the decision will have consequences for patent litigation in jurisdictions beyond the Fifth Circuit is harder to predict. To the extent that the relevant circuit case law matches that of the Fifth Circuit’s, however,
TS Tech indicates that it will look skeptically at a plaintiff’s choice of forum if relevant witnesses and documents are located far away.
All attorneys with cases pending in the Eastern District of Texas should review the factors by which venue was established. For those who wish to transfer a case out of Texas, a renewed motion to transfer should be considered. Even if venue has already been ruled on,
TS Tech confirms that an erroneous venue decision is a basis for an ordinary appeal. For those who wish to maintain venue in Texas, factors other than plaintiff’s choice and local sales need to be studied.
One last cautionary note. The
Volkswagen II matter is not yet final. A petition for a writ of certiorari is currently pending (No. 08-754). Should the Supreme Court grant the petition, the precedential impact of TS Tech could be reduced. The Supreme Court is likely to consider the petition at its private conference on February 20, 2009.
Darin Snyder is a partner in the San Francisco office of O’Melveny & Myers and chairman of the firm’s intellectual property and technology practice. Mark Davies is a counsel in the D.C. office and author of
Patent Appeals: The Elements of Effective Advocacy in the Federal Circuit (2008).
This memorandum is a summary for general information and discussion only and may be considered an advertisement for certain purposes. It is not a full analysis of the matters presented, may not be relied upon as legal advice, and does not purport to represent the views of our clients or the Firm. Darin Snyder, an O'Melveny Partner licensed to practice law in California, and Mark Davies, an O'Melveny Counsel licensed to practice law in Washington DC, contributed to the content of this newsletter. The views expressed in this newsletter are the views of the authors except as otherwise noted.
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