A recent U.S. Court of Appeals for the Federal Circuit transfer of venue decision, In re Link_A_Media Devices Corp., 662 F.3d 1221 (Fed. Cir. 2011), may impact the many technology companies that have incorporated in Delaware and signal further development of the increasingly complex matter of choosing venue for patent disputes.
In Link_A_Media, the Federal Circuit held that the U.S. District Court for the District of Delaware erred when denying defendant Link_A_Media Devices Corp.’s (LAMD) motion to transfer a patent infringement case to the U.S. District Court for the Northern District of California. The only reasons for not transferring the case had been the defendant’s incorporation in Delaware and the plaintiff’s decision to sue there. The District of Delaware, considered by many to be a plaintiff-friendly forum, had also generally been viewed as being a forum out of which it was difficult to transfer a case. An important factor in many unsuccessful motions to transfer was the weight given to a defendant’s incorporation in the state of Delaware. The Federal Circuit decision in Link_A_Media makes clear that it is not a dispositive fact, with a likely result that Delaware may lose some of its appeal to plaintiffs as a choice of forum.
Background of the Case
In Link_A_Media, the plaintiff, Marvell International Ltd. (Marvell), asserted four patents against LAMD in the District of Delaware. LAMD is headquartered in the Northern District of California, where nearly all of its employees work. Marvell is a holding company headquartered in Bermuda that is the assignee and sole owner of the four asserted patents. Marvell Semiconductor, Inc., which is headquartered in the Northern District of California and employs the named inventors, is Marvell’s affiliate. LAMD moved to transfer the case to the Northern District of California under 28 U.S.C. § 1404(a); Marvell opposed, and the district court denied the motion to transfer.
The district court reasoned that because LAMD was incorporated in Delaware, it had no reason to complain about being sued in that forum. It distinguished other cases in which transfers were granted and the defendant was a “regional entity,” noting “LAMD has offices not only in California, but also in Minnesota, the United Kingdom, and Japan” and therefore is “not only a national player, but more of an international one, displacing it from regional enterprise status.”
The district court rejected LAMD’s argument that it would have been more convenient to litigate the case in California because LAMD’s witnesses and records were located there. The district court reasoned, “In this electronic age, there are no substantial burdens associated with discovery or witness availability that support the need for transfer” because “documents generally are stored, transferred and reviewed electronically,” and because depositions are generally taken where witnesses are located and only a handful of witnesses will actually testify live at trial. Finally, the district court found that California and Delaware have equal public interest in having the case litigated locally because “[e]ven if the parties may be considered to be California residents, LAMD is a corporate citizen of Delaware.”
The Federal Circuit’s Transfer Ruling
The Federal Circuit held that the district court abused its discretion when denying LAMD’s motion to transfer venue. Applying the law of the regional (Third) circuit, the Federal Circuit began by considering the various private and public interest factors outlined in Jumara v. State Farm Insurance Co., 55 F.3d 873 (3d Cir. 1995) and determined that “the district court failed to balance those factors fairly and instead elevated two considerations to overriding importance.” In particular, the Federal Circuit held that the district court erred by “making Marvell’s choice of forum and the fact of LAMD’s incorporation in Delaware effectively dispositive of the transfer inquiry.”
With respect to Marvell’s choice of forum, the Federal Circuit found that the deference courts generally are allowed to give to the plaintiff’s chosen forum during the transfer analysis applies much less forcefully where the plaintiff files suit someplace other than in its home forum.
With respect to LAMD’s incorporation in Delaware, the Federal Circuit pointed out that, “Neither § 1404 nor Jumara list a party’s state of incorporation as a factor for a venue inquiry” and noted further, “It is certainly not a dispositive fact in the venue transfer analysis, as the district court in this case seemed to believe.” The Federal Circuit therefore found it was inappropriate for the district court to have relied so heavily on this fact.
The Federal Circuit also noted the district court gave too little consideration to private interest factors relating to the convenience of the witnesses and the location of the parties’ books and records. It held that, “While advances in technology may alter the weight given to these factors, it is improper to ignore them entirely.”
Finally, the Federal Circuit rejected Marvell’s argument that, because the “District of Delaware’s judges are highly experienced in patent infringement litigation,” the case should remain there. It noted that Marvell’s argument did not appear to be a factor under the Third Circuit standard, which considers the public interest factor favoring the forum having familiarity with “applicable state law,” not Federal patent law.
There are several implications from the evolving set of venue issues of which In re Link_A_Media is a part. One closely linked implication to the case is that the District of Delaware may, in the future, see fewer cases filed in that court as companies whose only connection to that forum is incorporation may seek a change of venue based on Link_A_Media. Like cases in recent years involving transfer of venue from the U.S. District Court for the Eastern District of Texas, Link_A_Media can be seen as part of an increased concern by the Federal Circuit that patent infringement cases be heard in a forum that has a logical connection with the merits of the dispute and that “forum shopping” not be enabled by rigid rules effectively barring transfer. Because many technology companies’ main connection to Delaware is incorporation, and because it is a district that historically has been viewed by some as a plaintiff-friendly forum, such increased concern may be welcomed.
Another implication is that there likely will be greater diversity in the fora in which patent cases are brought. If, as some expect, the law of patent venue continues to evolve to emphasize a logical connection between the forum and the parties’ dispute, the choice of fora available for plaintiffs may be constrained. Federal Circuit cases discount a plaintiff’s recent incorporation in the forum, so non- practicing patent-assertion entities will obtain few additional options by establishing themselves in a desired forum. Alternatives which often will exist are the defendant’s home forum, the forum where the inventors reside, and the forum where the invention was made (i.e., fora with an arguable connection to sources of proof about the invention and an arguable “local interest” in its adjudication). Because plaintiffs often may be reluctant to choose a defendant’s “home forum,” increasingly suits may be brought in fora connected with the inventors. Certainly, some of these will be the locales historically associated with technology companies, such as the Northern District of California, but many will not. Counsel doing an effective early assessment of patent infringement cases will need to draw on familiarity with a wider variety of jurisdictions and, of course, evaluate the benefits of seeking transfer of each particular case.
Two venues in which patent litigants increasingly may find themselves are in the International Trade Commission (ITC) and before the Judicial Panel on Multidistrict Litigation (MDL Panel). The ITC’s ability to provide an “injunctive” remedy, even when one would be unavailable in a district court, will likely continue to draw an increased number of filings from certain patent-assertion entities. In addition, one consequence of the interplay of the recent Federal Circuit transfer of venue decisions, and the America Invents Act provision on joinder, is that a dispute which in the past might have been brought and litigated as a multi- defendant case, now may be structured at the early stages of the case as multiple suits in different venues. In these circumstances, the MDL Panel can decide whether the cases should be consolidated and where to transfer them. The interplay of the venue and joinder law place a premium on coordination among defendants at the early stages of litigation to make effective use of available venue and other case management options.
Those considering where to bring a suit face more nuanced choices than they did a few years ago. As noted above, different venues may have different remedies available. Those desiring the benefits of selecting the ITC may have to forego, in the short run, a damages remedy since co-pending district court litigation may be stayed at the respondent’s request. Given the particular goals of the litigation, this may be a deciding factor for the choice of venue. In addition, some courts, such as the Northern District of California, have both a solid track record for litigating patent infringement disputes, and are a local venue to many technology companies. A desire to validate an important portfolio via litigation in one of these jurisdictions because of their experience and reputation with patent issues may outweigh a preference to litigate some place other than the defendant’s home forum.
In any event, Link_A_Media and other recent decisions increasingly place limits on where a case may practically be filed without significant risk of a successful venue challenge. For defendants haled to defend a case outside of their home forum in a venue without logical connection to the dispute, Link_A_Media and other transfer of venue decisions from recent years often will provide grounds to transfer the case. As the Eastern District of Texas, and now Delaware, become increasingly unavailable to plaintiffs, other jurisdictions take their place and transfer of venue presumably will be litigated there. As with many other patent law issues in the recent past, one should not be surprised to see efforts in the legislature (particularly related to the ITC) or petitions for certiorari in the U.S. Supreme Court to bring change to the law.