The Federal Circuit Puts a Damper on Forum Shopping

The Eastern District of Texas has the reputation of being a favorable forum for filing patent infringement suits.  For the year ending September 31, 2007, more patent cases were filed in the Eastern District than in any other district in the nation.  The Central District of California, despite having a substantially greater population of businesses, trailed the Eastern District’s 359 filings by 25. 

Historically, a patent owner has been able to file suit against infringers in the Eastern District of Texas without fear of having the case transferred to another district so long as the court had personal jurisdiction over the alleged infringers.

Plaintiffs will now have a more difficult time maintaining venue in the Eastern District of Texas in many patent cases filed there and elsewhere in the Fifth Circuit in light of the Federal Circuit’s recent In re TS Tech USA decision handed down December 29, 2008.

venuecartoon

In that case, TS Tech filed a motion to transfer venue arguing that the Southern District of Ohio was a far more convenient venue to try the case.  The physical and documentary evidence was mainly located in Ohio, and the key witnesses all lived in Ohio, Michigan, and Canada. The only connection to Texas was that several Honda vehicles with the allegedly infringing headrest assembly had been sold in Texas.

Because a motion to transfer venue relates to a procedural matter rather than substantive patent law, the Federal Circuit looked to the Fifth Circuit’s recent In re Volkswagen of America, Inc. decision in deciding In re TS Tech.  In re Volkswagen involved an automobile accident that occurred in Dallas.  An injured motorist, a passenger, and the mother of a deceased passenger sued Volkswagen in the Eastern District of Texas.  Volkswagen moved to transfer venue to the Northern District of Texas on the grounds that all of the sources of proof were located in the Northern District of Texas.  The trial court denied the motion to transfer and Volkswagen filed a mandamus petition. 

Mandamus is an extraordinary remedy designed to be used only in those situations where a trial court “clearly” abused its discretion such that refusing transfer would produce a “patently erroneous result.”  The Fifth Circuit, finding that the case had no connection with the Eastern District, held that the trial court clearly abused its discretion in refusing to transfer the case to the Northern District of Texas. 

Following In re Volkswagen, the Federal Circuit in In re TS Tech held that the trial court abused its discretion in refusing to transfer the case to a venue with a more substantial connection to the case.  The Federal Circuit held that the fact that some infringing products were sold in the Eastern District is not enough to prevent transfer of the case to a venue where the physical and documentary evidence was mainly located and where the location of the court was more central to key witnesses.

Although In re TS Tech is different from In re Volkswagen in that infringing activity took place in the Eastern District, the Federal Circuit found that “the 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 factor weigh against transfer.”  The court reasoned that the Eastern District’s connection with the case was no more significant than any other district because the infringing products were sold throughout the United States.

Thus, at least as to cases that have no connection with the Eastern District other than the fact that some of the infringing products are sold there, potential plaintiffs might want to consider filing in another district with a more substantial connection to the case.  Otherwise, there is a risk of having the alleged infringer choose where the case should be transferred.  Based on the risk involved in filing in the Eastern District, districts such as the Northern District of Texas, with its relatively new patent rules, could see an increase in the number of patent cases filed.

Proponents of legislative reform of venue statutes may have achieved the desired effect judicially, at least in part, with the In re TS Tech decision.  Defendants who find themselves in plaintiff-friendly venues now have another weapon to fight the plaintiff’s choice of venue in many cases. 

However, judges in the Eastern District will likely remain resistant to transferring cases, and thus the effect of the decision should be limited to those cases having no other contact with the Eastern District except that infringing activity took place there.  Additionally, the facts of many cases will not be the same as the facts of In re TS Tech, particularly in cases involving multiple defendants.  In a typical multiple-defendant case, defendants are located all over the country and there is no one location that is more convenient to try the case.

In conclusion, much more thought should be given to convenience transfer motions.  The likelihood of success of a convenience transfer motion should be considered by plaintiff’s counsel before the lawsuit is filed so as to maximize the chances of keeping a case in the plaintiff’s choice of venue.  Likewise, defense counsel should consider whether a transfer motion might be used to transfer the case to a more favorable venue for the defendant.

By Vincent J. Allen

Comments

  1. Hope you enjoy.

Trackbacks

  1. […] previously reported on the In re TS Tech case in which the Federal Circuit followed In re Volkswagen and ordered the […]

Speak Your Mind