A recent Federal Circuit decision explains that a transfer motion is to be decided "based on the situation which existed when suit was instituted...Any subsequent familiarity gained by the district court is therefore irrelevant." In re EMC Corp., No. 13-142 (Fed. Cir. Jan. 29, 2013) (citation omitted). The district court denied defendants' motions to transfer, in part, because judicial economy weighed heavily against transfer. The court found that other courts "would have to spend significant resources to familiarize [themselves] with the patents, prosecution history, claim construction, and other issues in th[ese] case[s]." The district court's decision on the motions to transfer came more than two years after the complaint was filed, causing the Federal Circuit to observe that "[t]his case is a prime example of the importance of addressing motions to transfer at the outset of litigation."
In August 2010, Oasis Research LLC filed a complaint in the Eastern District of Texas against 18 defendants for allegedly infringing its online backup and storage patents. Defendants moved to sever and transfer the claims to various venues shortly thereafter in November 2010. In May 2011, Magistrate Judge Amos Mazzant issued a Report and Recommendations denying the motions. Judge Mazzant found that Rule 20 of the Federal Rules of Civil Procedure was not met because "the Defendants' allegedly infringing products are not dramatically different" and therefore determining liability would involve substantially overlapping questions of law and fact. The Report and Recommendations were adopted by the district court in July 2011. Defendants then petitioned for a writ of mandamus in September 2011. The Federal Circuit granted mandamus and, in an order issued in May 2012, rejected Judge Mazzant's test for severance. The Federal Circuit held that, in pre-AIA cases such as this one, claims against independent defendants could not be joined under the transaction-or-occurrence test of FRCP 20 "unless the facts underlying the claim of infringement asserted against each defendant share an aggregate of operative facts." The court did not express an opinion on the issue of venue and remanded to the district court.
Judge Mazzant severed the matter into four separate cases and consolidated the cases for pretrial proceedings. The motions to transfer were denied in separate orders in August 2012, on the basis that the defendants had failed to show that the transferee venues were clearly more convenient, and that judicial economy weighed heavily against transfer. By this time the court had already held a Markman hearing. Defendants sought mandamus again, this time asking the Federal Circuit to consider the district court's decision to deny transfer in part on consideration of judicial economy. Defendants argued that there was no "legitimate judicial economy factor" in this case because the district court's familiarity with the case was based on its earlier decision to deny severance, a decision which was found to be in error.
The Federal Circuit agreed that "subsequent familiarity gained by the district court" is irrelevant, but was also careful to note that "any judicial economy benefits which would have been apparent at the time the suit was filed" were proper for the district court to consider (emphasis added). For example, courts can "properly consider the benefits to judicial economy" where the same judge is already handling a case involving the same patents and technology for which a transfer is not sought.
Defendants in the Eastern District of Texas have become accustomed to a lengthy delay between submitting a motion to transfer and receiving an order. In an order issued last year, Judge Davis noted that he had approximately 40 pending motions to transfer venue. See Norman IP Holdings, LLC v. Lexmark Int'l, Inc., No. 6:12cv508, 2012 WL 3307942 (E.D. Tex. Aug. 10, 2012) (Davis, J.) ("Venue motions are important, but not any more important than everything else this court has to do. The court rules on these motions as soon as it can.") The Federal Circuit's decision may not shorten the time it takes a district court to rule on a motion to transfer, but it does place some limits on the factors the court can use in weighing judicial economy. A court cannot put off a ruling on a motion to transfer and subsequently cite its own familiarity with the case as a reason to deny transfer. However, in the post-AIA landscape of severed and consolidated cases involving multiple defendants, any effect this new guidance will have remains to be seen. In the meantime, contrary to Judge Davis' wishes (and no doubt the other judges in the Eastern District of Texas), defendants will continue to challenge venue and engage in this "extremely expensive and time-consuming matter, not only for the Court but for the parties as well."
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