In re Hoffman-La Roche Inc and In re Nintendo Co, Ltd are the latest in a series of Federal Circuit decisions that have shifted the legal landscape regarding patent venue – turning the tide in favor of defendants seeking to transfer cases out of the Eastern District of Texas.1 These cases may be helpful to Taiwanese companies and other defendants who do not have any specific ties to the district.
The Eastern District of Texas (“EDTx”) has developed a reputation for being a plaintifffriendly forum. Until recently, motions to transfer were often denied and many defendants were forced to litigate in EDTx, even if they had little or no connection to the venue.
The Fifth Circuit’s en banc decision in Volkswagen started a significant change in Eastern District of Texas transfer law. In re Volkswagen of America, Inc., 545 F.3d 304 (5th Cir. 2008) (en banc). In Volkswagen, the plaintiff filed an auto injury related suit in the Eastern District of Texas even though virtually all of the witnesses, documents, and physical evidence were located in the Northern District of Texas. Id. at 316-18. The district court denied transfer, discounting the physical location of evidence in view of the fact that modern technology has made it easier to transport certain types of discovery. The appellate court, however, concluded that the district court failed to properly consider the actual location of evidence, the availability of the compulsory process, and the local venue’s interest in deciding the case “at home.” Id. at 317-18. The Fifth Circuit, therefore, granted Volkswagen’s petition for a writ of mandamus and ordered the case transferred to the Northern District of Texas. Id. at 319.
Shortly thereafter, in TS Tech, a defendant in a patent infringement suit filed a similar petition for a writ of mandamus in the Federal Circuit. In re TS Tech USA Corp., 551 F.3d 1315, 1318 (Fed. Cir. 2008). Following Fifth Circuit law, the Federal Circuit held that the district court abused its discretion by: (1) giving too much weight to plaintiff’s choice of venue; (2) ignoring Fifth Circuit precedent requiring an assessment of costs for attendance of witnesses; (3) marginalizing the factor concerning the relative ease of access to sources of proof; and (4) disregarding Fifth Circuit law in analyzing the public interest in having localized decisions decided “at home.” Id. at 1320-21. Accordingly, the Federal Circuit granted TS Tech’s writ and ordered the district court to transfer the case. Id. at 1322-23.
Initial district court rulings following Volkswagen and TS Tech suggested that more cases would be transferred from the Eastern District of Texas, particularly when the physical evidence and witnesses were centralized at or near an alternate forum that was “clearly more convenient.” Id. at 1319. Some district court decisions, however, distinguished these “centralized” cases from “decentralized” cases involving multiple defendants (i.e., cases in which the evidence, witnesses, and parties were located throughout the U.S. and outside the U.S.).
For example, in Genentech, Novartis, a German company, filed suit in the Eastern District of Texas against Genentech (located in the Northern District of California) and Biogen (located in the Southern District of California). Genentech, 566 F.3d at 1340-41. The witnesses and evidence were located in multiple geographic regions, and none were located in Texas. Id. The district court denied transfer on the grounds that the Eastern District of Texas was a central location that was as good a location as any other venue. Id. at 1342.
The Federal Circuit, however, rejected this “central location rationale” and concluded that the district court failed to properly apply Fifth Circuit law. Id. at 1342-49. Among other things, in ruling that Texas is a central location, the district court failed to consider the fact that none of the identified witnesses lived in Texas and the majority of witnesses lived in California. Id. at 1344-45.
The district court also placed too much emphasis on the fact that Texas was closer to the witnesses in Europe, given that those witnesses would be “required to travel a significant distance no matter where they testify.” Id. Therefore, the slight additional time that European witnesses would have to travel was far outweighed by the significant inconvenience that two California parties and multiple California-based witnesses would have had to face if required to travel to Texas. Id. Likewise, while there would be a “significant and unnecessary burden” imposed on defendants if required to transport relevant materials from California to Texas, it would be only “slightly more inconvenient or costly” to transport materials from Europe to California instead of Texas. Id. at 1345-46.
More recently, in Hoffmann-La Roche, the Federal Circuit has extended this shift in transfer law. 2009 WL 4281965, at *4. In Hoffmann-La Roche, Novartis, a California company, brought suit in the Eastern District of Texas against Hoffmann-La Roche Inc., Roche Laboratories Inc., Roche Colorado Corp., and Trimeris, Inc. Id. at *1. The accused product was developed at Trimeris’ labs in North Carolina where certain documents were maintained. Id. Roche’s manufacturing and processing facilities were located in Colorado, Michigan, and Switzerland. Id. The company packaged the drug at its New Jersey headquarters and marketed the accused product nationwide. Id. Only a handful of 25 potential witnesses lived in North Carolina. Id.
Defendants moved to transfer, contending that there were no witnesses or evidence within 100 miles of the Eastern District of Texas. Id. Additionally, defendants argued that most of the relevant evidence, a number of Trimeris’ employee witnesses, and four non-employee witnesses were located in North Carolina. Id. The plaintiff argued that because the case involved multiple parties from across the country, and sources of proof and witnesses were located throughout the United States, transferring the case to North Carolina would merely rearrange the inconveniences. Id.
The district court denied the motion to transfer, finding that: (1) four non-party witnesses in North Carolina did not constitute a substantial number of witnesses; (2) Novartis’s documents had been transferred to Texas; and (3) the district court had subpoena power over one of the witnesses who lived in Houston. Id. at *2. The district court concluded that “the Eastern District of North Carolina had no more of a local interest in deciding this matter than the Eastern District of Texas” because the accused product was offered for sale nationwide. Id. at *4. Defendants petitioned the Federal Circuit for a writ of mandamus. Id. at *2.
The Federal Circuit compared the case’s connection to the Eastern District of Texas and its connection to the Eastern District of North Carolina and held that there was “a stark contrast in relevance, convenience, and fairness between the two venues.” Id. The appellate court held that the district court abused its discretion by failing to give proper weight to the meaningful connection that the patent infringement dispute had to North Carolina but did not have to the Eastern District of Texas. Id. at *4. Accordingly, the Federal Circuit granted the defendants’ petition and ordered the case to be transferred to the Eastern District of North Carolina. Id. at *4.
An even more recent Federal Circuit decision further confirms this ongoing shift in the law. See Nintendo, 2009 WL 4842589, at *4-5. In Nintendo, Nintendo sought transfer to the Western District of Washington, where it was incorporated and had its principal place of business. Id. at *1. Motiva opposed transfer, arguing that Eastern District of Texas was the proper venue for the decentralized case. Id. The Federal Circuit again rejected the “decentralized” argument for maintaining a case in Texas that lacks any connection to the venue and reminded the district court that it had “already questioned this type of reasoning in another case involving the Eastern District of Texas.” Id. at *4 (citing Genentech, 566 F.3d at 1344).
In holding that the district court abused its discretion in denying transfer from a venue “with no meaningful ties to the case,” the Federal Circuit concluded that: (1) the district court gave the plaintiff’s choice of venue too much deference, (2) the district court failed to give proper weight to the fact that all of the identified key witnesses were in Washington, Japan, Ohio, and New York and no witnesses lived in Texas, (3) the fact that Nintendo’s products are sold nationally did not justify keeping the case in Texas as the “Fifth Circuit has unequivocally rejected the argument that citizens of the venue chosen by the plaintiff have a ‘substantial interest’ in adjudicating a case locally because some allegedly infringing products found their way into the Texas market,” and (4) the district court “glossed over a record without a single relevant factor favoring the plaintiff’s chosen venue” and incorrectly “hypothesized that the Eastern District of Texas could serve as a centralized location” despite the fact that neither party had evidence in Texas and the majority of Nintendo’s evidence was located in Washington. Id. at *3-5.
These recent Federal Circuit decisions indicate that the tide continues to turn in favor of parties seeking to transfer cases out of the Eastern District of Texas. Genentech and Nintendo indicate that transfer is appropriate in decentralized cases if there are no witnesses in the district where the case is filed and a significant number of witnesses would benefit from a change of venue. Hoffman-La Roche and Nintendo suggest that district courts evaluate whether the patent dispute’s connection to a plaintiff’s selected venue is more meaningful than the connection to any one alternative local venue. All of these cases highlight the importance of witness convenience, location of evidence, and a connection between the dispute and the district. Additionally, the fact that a case involves a product that is sold nationwide does not mean that any venue in the country is appropriate. Consequently, even decentralized cases now appear to have a high probability of being transferred if the dispute does not have any meaningful connection to the Eastern District of Texas and an alternate jurisdiction with such a connection exists.