Intellectual Property Alert
January 2009
Authors:
Rick B. Williams
+1.512.482.6880
rick.williams@klgates.com
John J. Cotter
+1.617.261.3178
john.cotter@klgates.com
Patrick J. McElhinny
+1.412.355.6334
patrick.mcelhinny@klgates.com
Gregory F. Wesner
+1.206.370.6746
gregory.wesner@klgates.com
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In a Landmark Decision, the Federal Circuit Nixes
Patent Venue in the Eastern District of Texas
The Eastern District of Texas, a plaintiff friendly forum with generous juries drawn from rural east
Texas, is by far the favorite venue of patent plaintiffs. In addition, the judges steadfastly “hold” cases
filed there even when defendants object to the venue.
All that may have changed on December 29, 2008. Issuing a rare writ of mandamus, the U.S. Court
of Appeals for the Federal Circuit ordered Judge John T. Ward to vacate an order denying patent
defendant TS Tech USA Corp’s motion to transfer to a district court in its home state of Ohio.
In rendering its decision, the Federal Circuit relied upon a recent opinion of the Fifth Circuit, In Re
Volkswagen of Am., Inc., 545 F.3d 304 (5th Cir. 2008)(en banc)(cert petition pending), holding that
a motion to transfer venue should be granted upon a showing that the transferee venue is “clearly
more convenient” than the venue chosen by the plaintiff. In re TS Tech USA Corp., Fed. Cir. Misc.
Docket No. 888. Following the reasoning in Volkswagen, the Federal Circuit concluded that the
district court clearly abused its discretion by failing to correctly weigh “private” and “public” factors
established by the Fifth Circuit.
Background of Lear v. TS Tech Suit in Texas
Plaintiff Lear Corp. (“Lear”), a Delaware corporation, sued defendants TS Tech USA Corp., TS Tech
North Am., Inc. and TS Tech Canada, Inc. (collectively “TS Tech”), Ohio and Canadian corporations,
in the Eastern District of Texas accusing TS Tech’s “pivotable vehicle headrest” of infringing Lear’s
patent. TS Tech filed a motion pursuant to 28 U.S.C. §1404(a) to transfer venue to the Southern
District of Ohio. TS Tech based its motion on the facts that: (1) all of the key witnesses resided in
either Ohio, Canada or Michigan; (2) all of the physical and documentary evidence was located in
Ohio; and (3) none of the parties were incorporated or had offices in Texas. Lear opposed transfer,
citing Texas sales of the allegedly infringing headrest. On September 10, 2008, the district court
denied TS Tech’s motion, deferring to plaintiff’s choice of venue and finding that the citizens of east
Texas had a “substantial interest” in having the case tried locally. TS Tech promptly sought a writ
of mandamus from the Federal Circuit that the September 10th order be vacated and that the Texas
district court be ordered to transfer the case to Ohio.
Federal Circuit TS Tech Decision
The Federal Circuit’s analysis focused on the “public” and “private” factors enunciated by the Fifth
Circuit in Volkswagen.
The “private” interest factors are:
(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 a trial easy, expeditious and inexpensive.
The “public” interest factors are:
(1) the administrative difficulties flowing from court congestion;
(2) the local interest in having localized interests decided at home;
Intellectual Property Alert
(3) the familiarity of the forum with the law that will govern
the case; and
(4) the avoidance of unnecessary problems of conflicts of
laws [or in] the application of foreign law.
The Federal Circuit focused only on four of the eight factors,
i.e. (1) the weight to be afforded a plaintiff’s choice of
forum; (2) the cost of attendance for witnesses; (3) relative
ease of access to sources of proof; and (4) public interest in
having localized interests decided at home. With regard to
these factors, the Federal Circuit held that the district court
had committed a “clear” abuse of discretion resulting in a
“patently erroneous result” because it:
(1) Gave too much weight to plaintiff’s choice of forum
because “Fifth Circuit precedent clearly forbids treating
the plaintiff’s choice of venue as a distinct factor” in the
transfer of venue analysis.
(2) I gnored Fifth Circuit precedent in assessing the
cost of attendance for witnesses. With regard to this
factor, the Fifth Circuit has established a “100-mile”
rule which requires that “[w]hen the distance between
an existing venue for trial of a matter and a proposed
venue under § 1404(a) is more than 100 miles, the
factor of inconvenience to witnesses increases in direct
relationship to the additional distance to be traveled.” All
identified key witnesses were located in Ohio, Michigan
and Canada and would have had to travel 900 more miles
to attend trial in Texas than in Ohio.
(3) E rred in its analysis of the factor regarding the
relative ease of access to sources of proof. The district
court reasoned that since most of the documents were
stored electronically, “the increased ease or storage and
transportation” makes this factor “much less significant.”
Endorsing Volkswagen, the Federal Circuit rejected this
reasoning because “the fact ‘that access to some sources
of proof presents a lesser inconvenience now than it might
have absent recent [technological] developments does not
render this factor superfluous,’” quoting Volkswagen, 545
F.3d at 316; and
(4) Disregarded Fifth Circuit precedent in analyzing the
public interest in having localized interests decided
at home. Here, the district court reasoned that since
vehicles containing the allegedly infringing headrest were
sold in the Texas district, the citizens of the district had a
“substantial interest” in having the case tried locally. The
Federal Circuit stated that the district court’s reasoning
had been “unequivocally rejected” in Volkswagen, where
the Fifth Circuit stated that it “stretches logic” to say the
local interest factor weighed against transfer because such
rationale “could apply virtually to any judicial district or
division in the United States.”. Volkswagen, 545 F.3d
at 318 Because the vehicles containing the allegedly
infringing headrests were sold throughout the United
States, “the citizens of the Eastern District of Texas have
no more or less of a meaningful connection to this case
than any other venue.”
Future Impact
While the TS Tech case has certainly opened the door for
more challenges to venue in the Eastern District of Texas,
and is likely to lead to an increase in motions to transfer
newly filed cases from there, the real question is whether
it ultimately will lead to more cases being transferred from
that District.
Although the Federal Circuit did not emphasize it, one
potentially significant fact in TS Tech was that none of the
parties were incorporated or maintained a place of business in
Texas. While already relatively common, it is likely that this
case will spur plaintiffs seeking to file a patent infringement
suit in the Eastern District of Texas to establish an office
in the district or, to establish a deeper connection, create a
subsidiary that is incorporated in Texas in an effort to hold
venue in the district. The answer will become much clearer
if, or more likely when, the Federal Circuit addresses the
situation where the plaintiff maintains a nominal presence
in the Eastern District of Texas, but the defendant, witnesses
and documentary evidence are all located outside of Texas.
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©2009 K&L Gates LLP. All Rights Reserved.
January 2009