In re TS Tech: The Aftermath

*All court statistics cited herein were compiled from PACER.

Vito J. DeBari is a partner in the Intellectual Property group of Kramer Levin Naftalis & Frankel, where his practice focuses primarily on intellectual property litigation, counseling, and transactional matters. He may be contacted at [email protected]. Henry J. Cittone is an associate in the firm's Intellectual Property group, where his practice focuses on intellectual property litigation and patent procurement. He may be contacted at [email protected].

On Dec. 29, 2008, in In re TS Tech, the U.S. Court of Appeals for the Federal Circuit (“CAFC”) issued a rare writ of mandamus ordering the Eastern District of Texas (“EDTX”) to transfer a patent case to the defendants' venue choice. 551 F.3d 1315 (Fed. Cir. 2008) (“TS Tech“). Many patent attorneys and commentators immediately predicted that this decision would be the “death knell” for patent litigation in the EDTX, while a minority of others foresaw the case having little impact. Now that some time has passed since the TS Tech decision, it appears that neither prediction was entirely accurate. While the EDTX remains today one of the busiest patent litigation venues in the country, it is clear that TS Tech has led to an increase in the percentage of cases being transferred out of the EDTX and a significant decrease in the number of new patent cases being filed there. Indeed, as of the end of April this year, the EDTX no longer reigns as the most popular U.S. venue for patent litigation, a distinction it has held for the last two years.

Background

A number of years ago, after the EDTX adopted local patent rules aimed at streamlining and expediting patent cases, it became the venue of choice for patent plaintiffs seeking to minimize litigation costs and reduce the amount of time defendants had to prepare their defenses. The EDTX consequently gained a reputation as a “plaintiff friendly” patent litigation venue in which plaintiffs could get to trial quickly (at one point in as short a period as a little over a year) and prevailed in the majority of cases. The popularity of the EDTX was soon greatly enhanced when it became apparent that defendants enjoyed little success in getting cases transferred out of the district, even in cases having no meaningful connection to that venue. Indeed, prior to TS Tech, the EDTX denied more than 60% of motions to transfer brought before it in patent cases. By 2007, the EDTX was by far the busiest patent venue in the country, with a docket of 368 patent cases, 32 more than the next most active patent venue, the Central District of California.

Then, late last year, in TS Tech, the CAFC applied Fifth Circuit law in granting the defendants' petition for mandamus ordering the EDTX to transfer the case to the Southern District of Ohio. Relying upon the Fifth Circuit's decision in In Re Volkswagen of America, Inc., 545 F.3d 304 (en banc) (5th Cir. 2008), the CAFC ruled that the EDTX had clearly abused its discretion in denying defendants' motion to transfer venue inasmuch as the parties had no meaningful connection to the EDTX, the key witnesses resided in Ohio, Michigan and Canada, and the physical and documentary evidence were located primarily in Ohio.

Post-TS Tech Venue Decisions By the EDTX

Through April 2009, there have been 17 post-TS Tech EDTX rulings on motions to transfer venue. EDTX courts have granted such motions in approximately 56% of these cases, as compared with a rate of less than 40% prior to the TS Tech decision.

The most important factor favoring transfer in these decisions has been the concentration of the parties and witnesses within a location in or near the transferee venue. ( Odom v. Microsoft , 596 F. Supp. 2d 995 (E.D. Tex. 2009), Partsriver v. Shopzilla (E.D. Tex. Jan. 30, 2009), Invitrogen v. General Electric (E.D. Tex. Feb. 9, 2009), and Fifth Generation Computer v. IBM (E.D. Tex. Feb. 13, 2009)). The concentration of relevant evidence in or near the transferee venue has similarly made the courts within the EDTX more inclined to transfer venue in some (but not all) cases. (Partsriver and Fifth Generation Computer).

Another key factor in these post-TS Tech decisions is the prior litigation of the patents-in-suit in the transferee forum. (Invitrogen, Jackson v. Intel (E.D. Tex. Mar. 19, 2009), Shire LLC v. Actavis (E.D. Tex. Dec. 30, 2008) and Shire LLC v. Apotex (E.D. Tex. Dec. 30, 2008)). In such cases, judicial economy ' namely, the transferee court's familiarity with, and previous Markman rulings on, the patent claims ' has weighed heavily in favor of transfer.

Conversely, in cases where the parties, witnesses, and evidence were not concentrated in or near the transferee venue, EDTX courts have tended to deem these cases “national” in scope and deny transfer. (Konami Digital v. Harmonix Music (E.D. Tex. Mar. 23, 2009), Realtime Data v. Packeteer (E.D.Tex. Mar. 5, 2009), and Novartis Vaccines v. Hoffman La Roche , 597 F. Supp. 2d 706 (E.D. Tex. 2009)). These courts have denied transfer of cases featuring multiple defendants who were not all located in or near a particular venue, reasoning that the transferee venue is not clearly more convenient to all the defendants. In denying transfer in many of these “national” cases, the EDTX has relied on the fact that it is “centrally located” and, thus, more convenient than the transferee venue. (Konami, Realtime, Sanofi-Aventis v. Genentech (E.D. Tex. Mar. 19, 2009), MHL TEK v. Nissan (E.D. Tex. Feb. 23, 2009), and Novartis). The EDTX has adopted this reasoning even in cases where a significant number of witnesses were located in or near the transferee venue ' and all of the witnesses would have to travel great distances to the EDTX ' but not all the identified witnesses were so located and some would have to travel farther if the case was transferred. (See Konami, Realtime, and Sanofi (denying motion to transfer)).

Similarly, in cases where much, but not all, of the evidence was located within the transferee venue, the EDTX courts have considered this factor “neutral.” In denying transfer, these courts have recognized, but frequently downplayed, the significance of the location of evidence in light of the availability of electronic document production, particularly when there is no need to transport “physical evidence” to the EDTX. (Konami, Realtime and Sanofi). Other factors cited to deny transfer include the movant's delay and prior availment of the EDTX, (Realtime, Konami), the latter of which has served to negate the argument that the EDTX is an inconvenient forum. (Sanofi).

The CAFC Weighs in Again

Since TS Tech, three more petitions for mandamus have been filed with the CAFC directed to the EDTX's denial of motions for a transfer of venue. So far, the CAFC has decided one of these petitions, In re Telular, 2009 U.S. App. LEXIS 7192 (Fed. Cir. April 3, 2009), by denying the petition and holding that the EDTX's denial of transfer to the N.D. Illinois was reasonably supported by the facts. In so ruling, the CAFC distinguished TS Tech, citing the facts that: 1) the Telular plaintiff was a Texas resident, 2) the defendants and nonparty witnesses were geographically dispersed in Chicago and Atlanta, and 3) physical evidence would have to be transported from Atlanta to the EDTX or N.D. Illinois irrespective of the court's grant or denial of transfer. (The CAFC also noted the defendant's delay in filing the mandamus petition, but explained that this delay had not swayed its decision.)

EDTX No Longer Most Popular Patent Venue

Although recent cases make clear that TS Tech has not been the “death knell” for patent litigation in the EDTX, the decision appears to have significantly affected the number of new patent cases being filed in that district. Specifically, although the number of patent cases filed in the United States so far this year is comparable to the same period last year, in the EDTX, the average monthly patent case filings through the end of April are down 36% compared with last year's monthly average, while other popular patent venues have experienced an increase in such filings. For example, D.N.J., C.D Cal. and N.D. Cal have thus far all experienced 36-48% increases in patent case filings, outranking the EDTX, which currently ranks fourth, as opposed to its ranking last year of first, in frequency of patent suit filings.

Conclusion

The TS Tech decision has led to a decrease in the number of new patent cases filed in the EDTX and a corresponding increase in the number of cases transferred from that court. In the wake of TS Tech, it appears that patent plaintiffs are more carefully considering whether to file suit in the EDTX or in a district less likely to be subject to a venue challenge. This has resulted, at least for the time being, in the end of the EDTX's reign as the country's most popular venue for patent litigation. Nevertheless, decisions after TS Tech suggest that the EDTX will likely distinguish that case in retaining multi-defendant and other cases of “national” scope that feature parties and witnesses located throughout the country. In the new, post-TS Tech world, however, the EDTX is more likely to transfer “regional” cases to a venue in or near which the parties and witnesses are concentrated, assuming that no other, case-specific factors warrant denying transfer.

*All court statistics cited herein were compiled from PACER.

Vito J. DeBari is a partner in the Intellectual Property group of Kramer Levin Naftalis & Frankel, where his practice focuses primarily on intellectual property litigation, counseling, and transactional matters. He may be contacted at [email protected]. Henry J. Cittone is an associate in the firm's Intellectual Property group, where his practice focuses on intellectual property litigation and patent procurement. He may be contacted at [email protected].