On December 29, the Federal Circuit issued an Order in In re TS Tech USA Corp. granting the extraordinary relief of a writ of mandamus ordering a case transferred from the Eastern District of Texas to the Southern District of Ohio. This Order refutes the notion that a plaintiff can force litigation into a district that has no connection with the underlying lawsuit other than some sales of an accused product by a defendant.
This represents the first time the Federal Circuit interpreted the recent Fifth Circuit en banc decision in In re Volkswagen of Am., Inc., 545 F.3d 304, 315 (5th Cir. 2008) concerning motions for transfer pursuant to 28 U.S.C. § 1404(a). While the facts of the case were compelling in favor of transfer, this Order represents a statement against forum shopping in districts located within the Fifth Circuit, including the Eastern District of Texas.
The case involves a patent dispute between Lear Corporation (Lear) and TS Tech USA Corp., TS Tech North America, Inc. and TS Tech Canada, Inc. (collectively "TS Tech") concerning a patent directed to headrest assemblies incorporated into Honda vehicles that are sold throughout the United States, including in the Eastern District of Texas.
Lear filed this action in the Eastern District of Texas on September 14, 2007. TS Tech filed a motion to transfer pursuant to 28 U.S.C. § 1404(a) seeking transfer to the Southern District of Ohio. TS Tech argued that Ohio was a more convenient forum because: (1) all of the key witnesses lived in Ohio, Michigan and Canada; (2) the physical documentary evidence was in mainly in Ohio; and (3) none of the parties were incorporated in Texas or had a place of business in the Eastern District of Texas. Lear argued that several Honda vehicles incorporating the allegedly infringing headrests were sold in Texas and that TS Tech had not met its burden to overcome Lear's choice of forum.
The District Court refused to transfer, finding that TS Tech had failed to demonstrate that the inconvenience to the parties and witnesses clearly outweighed the deference entitled to Lear's choice of bringing suit in the Eastern District of Texas. The District Court further found that because "several" vehicles with the allegedly infringing headrests had been sold in the Eastern District, there was a "substantial interest" in having the case tried locally. In applying the factors and analysis set forth in Volkswagen, the Federal Circuit held that TS Tech had established a "clear" abuse of discretion by the District Court entitling it to the extraordinary relief sought.
The Federal Circuit noted the following errors in the District Court's analysis:
- The District Court gave too much weight to choice of forum. "Fifth Circuit precedent clearly forbids treating the plaintiff's choice of venue as a distinct factor in the § 1404(a) analysis. Rather, the plaintiff's choice of venue corresponds to the burden that a moving party must meet in order to demonstrate that the transferee venue is a clearly more convenient venue."
- The District Court "completely disregarded the Fifth Circuit's "100-mile rule" which requires that "[w]hen the distance between an existing venue for trial of a matter and a proposed venue under § 1404(a) is more than 100 miles, the factor of inconvenience to witnesses increases in direct relationship to the additional distance to be traveled."
- The District Court erred finding the relative ease of access to sources of proof as "neutral" when it acknowledged that the vast majority of physical and documentary evidence was in Ohio, Michigan and Canada (none being in Texas).
- The District Court should not have relied heavily on the public interest in having localized interests decided at home (based on sales of "several" allegedly infringing products in the Eastern District); such analysis "stretches logic" because such rationale "could apply virtually to any judicial district or division in the United States."
This Order is likely to breathe life into many Defendants' efforts in the Eastern District of Texas (and other districts prone to forum shopping efforts) to transfer their cases to a more convenient forum, where the facts warrant. It also implies that more will be required to keep a case in the Eastern District than some sales in the District and choice of forum.