In a another decision concerning a motion to transfer a case out of the Eastern District of Texas, In re Zimmer Holdings, Inc., No. 2010-M938 (Fed. Cir. June 24, 2010), the Federal Circuit issued a writ of mandamus ordering the transfer of a patent infringement case out of the Eastern District of Texas to the Northern District of Indiana. This is yet another case ordering transfer out of what has become one of the most desirable forums for patent infringement plaintiffs.
In the last decade, many defendants found themselves in the Eastern District of Texas defending allegations of patent infringement. Since motions to transfer were routinely denied in this district, defendants had little hope of having their cases heard in a more convenient location, even when they had virtually no ties or connection to Texas. However, the sands began to shift in 2008 when the Fifth Circuit issued its en banc decision regarding case transfers. In re Volkswagen of America, Inc., 545 F.3d 304 (5th Cir. 2008) (en banc). The en banc court provided new guidance on the standard for transferring cases. Based on Volkswagen, the Federal Circuit began to grant one mandamus petition after another, forcing the Eastern District of Texas to transfer cases out of that district.1 In re Zimmer Holdings provides further guidance regarding the circumstances that warrant a transfer of venue out of the Eastern District of Texas.
In the underlying case, the plaintiff, MedIdea, filed a patent infringement action against various Zimmer entities (collectively, Zimmer) in the Eastern District of Texas. Zimmer asked the district court to transfer the case to either the Northern District of Indiana or the Eastern District of Michigan pursuant to 28 U.S.C. § 1404(a), which authorizes transfer “for the convenience of parties and witnesses, in the interest of justice.” Zimmer sought transfer of the case to Indiana as a more convenient forum because of three factors that it alleged favored transfer: (i) Zimmer’s principal place of business is in Indiana; (ii) MedIdea had extensive ties to the adjacent state of Michigan (Media was incorporated in Michigan, had a registered office in Michigan, and both of MedIdea’s officers reside in Michigan); and (iii) the vast majority of the evidence would come from either Michigan or Indiana.
MedIdea asserted that venue was proper in the Eastern District of Texas because MedIdea’s principal place of business is in the Eastern District of Texas. The Eastern District denied the motion to transfer based largely on MedIdea’s corporate presence in the Eastern District of Texas, and the fact that a related co-pending case in the Eastern District of Texas would not result in judicial efficiencies.
The Federal Circuit disagreed with the district court. It found that MedIdea’s presence in the Eastern District of Texas was “recent, ephemeral, and an artifact of litigation” because MedIdea simply transported copies of relevant documents from Michigan to a Texas office space that MedIdea shared with another of its trial counsel’s clients. The Federal Circuit held that MedIdea’s significant ties with Michigan and artificial ties with Texas illustrate a classic case where a plaintiff is attempting to “game the system” by seeking to establish venue in an improper forum. The Federal Circuit further noted that transferring the case to Indiana would result in substantial conveniences for both parties. Lastly, the Federal Circuit noted that there was little overlap between the two co-pending actions in the Eastern District of Texas, which would likely result in significantly different discovery, evidence, proceedings, and trial.
The In re Zimmer Holdings decision is another important reference point for companies that find themselves as defendants in the Eastern District of Texas. Where the plaintiff has no legitimate ties to that district and a more convenient forum exists, there is now a higher probability that the case can be successfully transferred to the more convenient forum.
A copy of the opinion can be found at http://www.cafc.uscourts.gov/images/stories/opinionsorders/ 2010-M938.6-24-10.1.PDF.