United States: Rejecting Pendency Of Related Cases As A Dominant Factor, Federal Circuit Orders ED Texas To Transfer Patent Infringement Case To ND California

In re Google, Inc., Case No. 2017-107 (Fed. Cir. Feb. 23, 2017) (non-precedential).

The U.S. Court of Appeals for the Federal Circuit issued a writ of mandamus ordering the U.S. District Court for the Eastern District of Texas to transfer a patent infringement action to the Northern District of California. The Federal Circuit ruled in an unpublished decision that the Texas court misapplied the transfer factors because it gave too much weight to the plaintiff's other pending actions involving the same patent.

Eolas Technologies, Inc. filed separate lawsuits in the Eastern District of Texas against Google, Inc., Wal-Mart Stores, Inc. and Amazon.com, Inc., asserting U.S. Patent No. 9,195,507, titled "Distributed hypermedia method and system for automatically invoking external application providing interaction and display of embedded objects within a hypermedia document." All three defendants moved to transfer venue under 28 U.S.C. § 1404(a) to the Northern District of California. The district court denied the motions, and Google petitioned the Federal Circuit for a writ of mandamus.

In an order by Chief Judge Prost and Circuit Judge Lourie, the court granted the writ and ordered the case transferred. Although mandamus is an extraordinary writ, the court noted that it is available to "correct a patently erroneous denial of transfer in appropriate circumstances." Slip op. at 3.

Under Fifth Circuit law, a court considering a motion to transfer venue must consider both "private-interest" and "public-interest" factors:

The private-interest factors include: (1) the relative ease of access to sources of proof; (2) the availability of compulsory process to secure the attendance of witnesses; (3) the cost of attendance for willing witnesses; and (4) all other practical problems that make trial of a case easy, expeditious and inexpensive. The public-interest factors include: (1) the administrative difficulties flowing from court congestion; (2) the local interest in having localized interests decided at home; (3) the familiarity of the forum with the law that will govern the case; and (4) the avoidance of unnecessary problems of conflict of laws of the application of foreign law.

In re Volkswagen AG, 371 F.3d 201, 203 (5th Cir. 2004). The district court found that only one factor supported retaining jurisdiction: practical considerations that make trial of a case easy, expeditious and inexpensive. Based on that factor alone the district court denied the motion. The Federal Circuit ruled that the district court's decision was erroneous for two reasons.

First, Federal Circuit held that the district court had erroneously based its decision on the pendency of other cases in the district asserting the same patent. The court had already denied Walmart's motion to transfer, and then used the pendency of that action to rule that practical considerations of judicial efficiency weighed in favor of denying Google's transfer motion:

Based on the district court's rationale, therefore, the mere co-pendency of related suits in a particular district would automatically tip the balance in non-movant's favor regardless of the existence of copending transfer motions and their underlying merits. This cannot be correct. See, e.g., In re Toyota Motor Corp., 747 F.3d 1338, 1340–41 (Fed. Cir. 2014) (ordering transfer despite the presence of co-pending litigation in the transferor district). If it were, at best, the outcome of the transfer analysis could simply depend on the order in which the district court rules on each of the respective pending motions. At worst, it means that no matter what the order decided, all motions would be doomed to failure.

Slip op. at 4 (footnotes omitted).

Although conceding that judicial economy may be an important factor in some cases, the Federal Circuit criticized the district court for allowing the factor to dominate the transfer analysis, especially when Google had a strong presence in the transferee forum. In essence, the Federal Circuit explained that the district court improperly allowed the filing of multiple actions to preclude any chance of transfer:

[W]e observe that it is improper for a district court to weigh the judicial economy factor in a plaintiff's favor solely based on the existence of multiple co-pending suits, while the remaining defendants have similar transfer motions pending seeking transfer to a common transferee district. This is particularly important here where the district court concluded that only one factor slightly favored transfer and that the remaining factors were neutral. To hold otherwise, we would be effectively inoculating a plaintiff against convenience transfer under § 1404(a) simply because it filed related suits against multiple defendants in the transferor district. This is not the law under the Fifth Circuit.

Slip op. at 7 (emphasis added).

Second, the Federal Circuit ruled that the district court erred in finding that the location and sources of proof transfer factor only slightly favored transfer even though Google had essentially no presence in the Eastern District of Texas:

Yet the evidence overwhelmingly supports a conclusion that this factor weighs strongly in Google's favor. For example, the vast majority of Google's employees—in particular those responsible for projects relating to the accused products—work and reside in the Northern District of California. In contrast, Eolas has a single employee currently residing in the Eastern District of Texas. When fairly weighed against one another, this factor tips significantly in Google's favor. In addition to overemphasizing the extent to which Eolas has a presence in Texas, the district court did not properly accord this factor its appropriate weight under the law. See In re Genentech, Inc., 566 F.3d 1338, 1343 (Fed. Cir. 2009) ("The convenience of the witnesses is probably the single most important factor in a transfer analysis." (quoting Neil Bros. Ltd. v. World Wide Lines, Inc., 425 F. Supp.2d 325, 329 (E.D.N.Y. 2006)). Had the district court properly weighed these considerations, it should have identified the Northern District of California as the clearly more convenient forum.

Slip op. at 5-6 (citation omitted).

Thus, the court granted a writ of mandamus and ordered the Texas district court to transfer the case to the California district court.

Circuit Judge Linn filed a dissent, arguing that mandamus was not appropriate because the Texas district court applied the correct standard for transfer and discussed each factor. "At best, the majority believes the district court should have weighed these factors differently. Such reweighing, however, is not the task before the court on mandamus review." Dissent at 4.

The Google decision comes as companies sued for patent infringement in the Eastern District of Texas and some commentators have criticized the disproportionate number of patent actions filed in that district (approximately 40 percent of all patent cases filed in 2016). The decision casts doubt on one frequent argument for denying transfer motions – the presence of other pending actions filed by the same plaintiff against multiple defendants. This argument is particularly weakened where members of a joint defense group coordinate their motions to transfer so that all co-defendants have copending transfer motions before the court to a common transferee district. The decision also reinforces an argument often made by defendants seeking transfer; specifically, that the defendant's lack of presence, including any relevant evidence the defendant possesses, in the district heavily favors transfer. On March 27, the Supreme Court will hear argument in TC Heartland LLC v. Kraft Foods Group Brands LLC, concerning the application of the venue statute for patent cases. In the meantime, the Google decision is likely to cause an increase in motions to transfer out of the Eastern District of Texas, including a likely increase in mandamus petitions to the Federal Circuit.

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David A. Randall
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