The U.S. District Court for the Eastern District of Texas (“E.D. of Texas”) has become a popular venue for patent litigation over the last ten years. Perhaps this is because the plaintiffs more often than not make out better than defendants in this jurisdiction. That’s why many defendant’s first move is to move for a change of venue to a more favorable federal district court. The problem is that the judges in the E.D. of Texas reject these transfer motions on a regular basis. Apparently they feel that their court is the ideal jurisdiction to handle these patent claims. This rejection of a transfer motion leaves less wealthy patent defendants in a tight spot. Faced with the likelihood of loosing to the plaintiff in this jurisdiction, the less wealthy defendant may be better off settling out of court.
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More and more large corporate defendants have been seeking help from the U.S. Court of Appeals for the Federal Circuit. They do this through a writ of mandamus. This is not an easy thing to do. The defendant must show that their is a “clear abuse of discretion or usurpation of judicial power” in order to get the rejection of their transfer motion overturned. Perhaps, it is easier to prove this abuse of judicial power and discretion about the E.D. of Texas than it is about other jurisdictions, though. Because in the past two years seven E.D. of Texas rejections of transfer motions have bee unanimously overturned by the Federal Circuit. These transfer patent cases include In re Nintendo, In re Hoffmann-La Roche, In re Genetech, In re Zimmer Holdings Inc, In re Volkswagen of America, In re TS Tech USA Corp and most recently In re Microsoft.
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On November 8 in In re Microsoft the Federal Circuit decided to reverse the E.D. of Texas’s denial of Microsoft’s transfer motion. Allvoice, a patent licensing company, had an infringement claim against Microsoft and Microsoft wanted to move the claim case to the Western District of Washington. Microsoft wanted to move the case because all of their witnesses were in Washington and only two of Allvoices’ witnesses lived in Texas. Allvoice argued that they had a “presence” in the E.D. of Texas. It turns out that Allvoices presence in the Eastern District consisted of an office in Tyler with no employees in it and an incorporation in Texas which was filed only sixteen days prior to suing Microsoft. The Federal Circuit sided with Microsoft and dismissed Allvoices recent incorporation and employee-less office as “recent, ephemeral, and an artifact of litigation appear[ing] to exist for no other purpose than to manipulate venue.” The Federal Circuit appeals court found that the E.D. of Texas abused its discretion by failing to properly weigh the interests of justice and the convenience to the parties and witnesses involved.
Like Allvoice, other plaintiffs have sought to manipulate circumstances so they could get their case tried in the E.D. of Texas. In Hoffmann-La documents were transferred to the plaintiff’s lawyer to so they would be established as “Texas Documents” so the E.D. of Texas would be seen as a convenient venue. The appeals court did not fall for this. In In re Zimmer, the plaintiff claimed to have local ties. Their evidence? They had an empty office within the district court’s jurisdiction at the same time as another of it’s lawyer’s clients. The Federal District described this as ” a classic case where the plaintiff is attempting to game the system.” The plaintiffs in In re Genetech and In re TS Tech did not even attempt to back up their claim of having a presence in Texas with transferred documents or empty offices.
It is important that the Eastern District of Texas begins to listen to the message that is clearly being sent by the Federal Circuit in case after case. What’s at stake? Well, justice for one thing and the ability to get a fair hearing against people who are trying to manipulate the system. The Eastern District of Texas needs to stop treating these cases like they are part of a turf war. When a defendant asks for a transfer of venue the E.D. of Texas judges need to closely investigate the claims of the plaintiffs and make sure they are not providing sham evidence just to ensure a hearing in a certain venue. What else is at stake – money. Every time a defendant is forced to spend additional money appealing a denial of venue transfer they lose money that could be spent on building their business and providing jobs.
