Recent Decisions Alter Venue Strategy In Eastern District of Texas Patent Litigation

In the wake of two recent federal appeals cases -- In re Volkswagen of America Inc., 545 F.3d 304 (5th Cir. 2008) and In re TS Tech USA Corp., 551 F.3d 1315 (Fed. Cir. 2008) – the Eastern District of Texas has lost some of its steam as the most notable “rocket docket” of patent infringement litigation. However, even though the Eastern District of Texas is likely to grant more transfer motions than before, it continues to show a determination to hang on to patent cases when possible.

Background

The “Rocket Docket” has long been a favorite patent bar nickname for the United States District Court for the Eastern District of Texas. Since Judge T. John Ward arrived in the Marshall, Texas court in the late 1990’s, he has turned the Eastern District into a hotbed of patent litigation by implementing fast and strict schedules for patent cases.

This has made for efficient movement of patent cases and helped the Eastern District earn a reputation as plaintiff-friendly for patent infringement litigation. The Eastern District’s fast-moving schedules require defendants, who may have been surprised by the lawsuit, to prepare for early trial dates and burdensome discovery obligations quickly in the case. This is often overwhelming and challenging for unprepared defendants and gives plaintiffs a decided edge from the start. Plaintiffs also benefit from Eastern District of Texas juries’ reputation as plaintiff-friendly, based on some enormous damages awards and very few instances where patents at issue have been found invalid. Among federal district courts, the Eastern District has second highest success rate in the country for patent plaintiffs, at 71.9%. PricewaterhouseCoopers, A Closer Look * 2008 Patent Litigation Study: Damages, awards, success rates and time-to-trial (2008). Moreover, Eastern District judges are rarely reversed; in 2007, the two judges who handle more than half of the district’s patent cases were not reversed once.

As a result, patent infringement plaintiffs flock to the Eastern District of Texas to file their lawsuits, even if the parties’ connections to the court are tenuous at best.  In 2007, plaintiffs filed 369 patent cases in the Eastern District of Texas, a fifteen-fold increase from 2000, when only 24 patent cases were filed in the district.  In 2007, the Eastern District of Texas surpassed the Central District of California to become the top patent venue in the country. One in every eight patent cases filed in the entire country is filed in Marshall, Texas; more patent cases were filed in Marshall in 2007 that in New York City, San Francisco and Boston combined.

Even though there is often no meaningful connection between the Eastern District and the parties or the infringing activity in these cases, the judges there have typically denied motions to transfer venue. Until now – the tide is changing, thanks to In re TS Tech USA Corp. 551 F.3d 1315 (Fed. Cir. 2008), a Federal Circuit decision issued in the last week of 2008.

Volkswagen and TS Tech – Taking the Steam Out of the Rocket Docket

Federal courts in Texas are required to apply a multi-factor test to determine whether venue transfer is appropriate; the test includes both “private factors” and “public factors.” The “private factors” are: 1) ease of access to sources of proof; 2) availability of compulsory process to secure the attendance of witnesses; 3) cost of attendance for willing witnesses; and 4) all other practical problems that make a trial easy, expeditious, and inexpensive. “Public factors” include: 1) administrative difficulties flowing from court congestion; 2) the interest in having local issues decided at home; 3) familiarity of the forum with the law that will govern the case; and 4) avoidance of unnecessary problems of conflicts of laws [or in] the application of foreign law. In re Volkswagen of America Inc., 545 F.3d 304, 315 (5th Cir. 2008), cert. den. Singleton v. Volkswagen of America Inc., 2009 WL 425117, No. 08-754 (U.S. Feb. 23, 2009).

Volkswagen was the precursor to TS Tech— Volkswagen was decided only a couple of months prior to TS Tech. Volkswagen, a product liability lawsuit, also dealt with a motion to transfer venue from the Eastern District of Texas. The Fifth Circuit ordered the Eastern District to transfer the case to another district in Texas because “not a single relevant factor” favored keeping the case in the Eastern District. 545 F.3d at 318.

TS Tech was a patent infringement lawsuit filed by Lear, a Michigan corporation, against a company based in Ohio and Ontario, Canada. Lear alleged that TS Tech infringed Lear’s patent for vehicle headrests, and claimed that the Eastern District of Texas was an appropriate forum because some vehicles containing the allegedly infringing headrests had been sold in Texas. TS Tech moved to transfer venue, which the district court denied. The Federal Circuit looked to the Volkswagen holding and held that the district court “clearly abused its discretion in denying transfer from a venue with no meaningful ties to the case.” 551 F.3d at 1321. The Federal Circuit issued a writ of mandamus ordering the Eastern District to grant the motion to transfer the case to Ohio.

In its TS Tech opinion, the Federal Circuit stated that the district court had given far too much weight to the plaintiff’s choice of venue, inappropriately treating it as an independent factor in the forum non conveniens analysis. Id. at 1320. The district court had also ignored the Fifth Circuit’s “100-mile rule,” holding that when the proposed venue is more than 100 miles away from the existing venue, “the factor of inconvenience to witnesses increases in direct relationship to the additional distance to be traveled.” Id. Finally, because cars with the infringing headrests were sold throughout the country, the Eastern District could not claim a unique interest in the case compared to other states and other venues. Id. at 1321.

Motions to Transfer Venue After Volkswagen and TS Tech

The twin decisions of Volkswagen and TS Tech have dramatically changed the status quo of patent litigation in the Eastern District of Texas. Defense attorneys now shouldn’t hesitate to file motions for venue transfers – a recent report on Bloomberg.com found that twice as many transfer motions have been filed in the Eastern District thus far in 2009 than were filed in all of 2008. Similarly, plaintiffs’ lawyers are reconsidering the Eastern District as their first choice of forum – the same Bloomberg.com item reported a 33% decline in the number of cases filed in the Eastern District since TS Tech.

The Volkswagen and TS Tech cases have had an impact on the Eastern District of Texas bench as well, as seen by the court’s slightly increased willingness to grant transfer motions. On January 20, 2009, Eastern District Magistrate Judge John Love granted the first motion to transfer venue in a patent case in Odom v. Microsoft,  ___ F. Supp. 2d ____, 2009 WL 279968, No. 6:08-CV-331 (E.D. Tex. Jan. 30. 2009); the opinion provides a thorough application of Volkswagen and TS Tech to patent cases. Slip Op., p. 2. Judge Love noted that while there was some dispute as to the identity of the key witnesses, it was undisputed that they were located in the Washington/ Oregon area. Slip op., pp. 4-5. Judge Love further noted that the allegedly infringing products are sold all over the country, but that due to Oregon’s extensive ties to the case via contracts, Oregon had far more of a local interest than Texas. Slip op. p. 6.

In ordering the transfer to the District of Oregon, the court wrote that: “Under the circumstances presented here, the convenience of the witnesses and localized interests weigh in favor of transfer with the other factors neutral or weighing slightly in favor of transfer….[t]here is little convenience to the parties for this case to remain in Texas, while there are several reasons why it would be more convenient for the parties to litigate this case in Oregon.” Slip op., p. 7.

The same day that Judge Love granted the transfer for Odom, the Eastern District’s Judge David Folsom transferred PartsRiver Inc. v. Shopzilla, 2009 WL 279110, No. 2:07-CV-440 (E.D. Tex. Jan. 30, 2009) to California, pointing to the fact that the California patent owner was filing the suit against six California defendants (with a sixth in Washington). Judge Folsom wrote: “based on the regional nature of this case, [] the Northern District of California is clearly more convenient to the parties and the potential witnesses.” Slip op., p.2.

On February 9, 2009, Judge Love transferred another case to Maryland because “a Maryland court has had extensive involvement with three of the six patents at issue and a settlement agreement was entered into in the Maryland litigation that forms the basis of Defendant’s patent exhaustion defense.” Invitrogen Corp. v. General Electric Co., 2009 WL 331889, No. 6-08-CV-00112, slip op. p. 6 (E.D. Texas,Feb. 9, 2009).

But even in the wake of TS Tech, the district court is not doling out transfers as some pundits might have expected. Despite the transfer in Invitrogen cited above, the court denied a transfer request and retained venue in a twin case filed the same day between the same parties (but dealing with a different patent) because in that case, “only two factors weigh slightly in favor of transfer – the convenience of the witnesses, and the potential need for compulsory process with regard to three nonparty witnesses – all other factors are neutral.” Invitrogen Corp. v. General Electric Co., 2009 WL 331889, No. 6-08-CV-00113, slip op. p. 5 (E.D. Tex. February 9, 2009).

Ditto with the case of Novartis Vaccines & Diagnostics v. Hoffman-La Roche, ___ F. Supp. 2d ___, 2009 WL 349760, No. 2:07-CV-507 (E.D. Tex. Feb. 3, 2009), in which Judge Folsom denied a motion to transfer venue to North Carolina. In Novartis, the plaintiffs persuaded Judge Folsom that a change of venue would actually increase the inconvenience to the West Coast witnesses in this nationwide case, and that about 750,000 pages of documents relevant to the case were then located in Marshall, Texas. Judge Folsom wrote that “(b)ecause this case is nationwide in scope, each factor is either neutral or does not weigh in favor of transfer as demonstrated above. As such, Defendants have not clearly demonstrated that transfer is appropriate.” Slip. Op. p. 6

CONCLUSION

It hasn’t been long since the Volkswagen and TS Tech cases were decided, but they’ve clearly changed the way both plaintiff and defense counsel think about venue in the Eastern District of Texas. Before 2008, transferring a patent case out of the Eastern District was tough at best. The decisions in the wake of Volkswagen and TS Tech show that this is no longer the case. Although it’s too early to predict a significant shift to a more fashionable jurisdiction for patent infringement litigation, it’s clear that Volkswagen and TS Tech have made counsel think twice before filing there.  These cases have also given defense lawyers a huge weapon in fighting off costly litigation in what often is a far-flung forum for most patent defendants.

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