The Federal Circuit Further Loosens the Eastern District of Texas’ Iron Grip

In Re Acer America Corp. is the latest in a growing body of opinions authored by the Federal Circuit finding that the United States District Court for the Eastern District of Texas has abused its discretion in denying the transfer of a case to a more convenient venue under 28 U.S.C. § 1404(a). The United States Court of Appeals for the Fifth Circuit launched the opening salvo against the Eastern District’s unwillingness to transfer cases in its In re Volkswagen of America, Inc. opinion, and the Federal Circuit repeatedly has followed suit, granting writs of mandamus in favor of transfer in In re Nintendo Co., In re Hoffman-La Roche, Inc., In re Genentech, and In re TS Tech.

In the instant case, the U.S. District Court for the Eastern District of Texas denied a motion by twelve defendants seeking to transfer a patent infringement case to another district. The transfer motion was based primarily on the fact that all but one of the U.S.-based defendants were headquartered in California. Dell, as the lone Texas-based defendant, operates its headquarters outside of the Eastern District, 300 miles from Marshall, Texas, where the litigation was pending before Judge Everingham.

The Federal Circuit began its analysis by applying the public and private factors used in a forum non conveniens analysis. The private factors of the analysis 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 a trial easy, expeditious and inexpensive. The public factors to be considered are (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 conflicts of laws or in the application of foreign law.

Of these factors, the court focused on the convenience of the parties and witnesses, the sources of proof, and local interests. The Federal Circuit disagreed with the Eastern District’s conclusion that the convenience of the parties was a neutral factor. Rather, the Federal Circuit found that this factor weighed in favor of the defendants because a substantial number of party witnesses, in addition to the inventor and prosecuting attorneys, resided within the Northern District of California, and transferring the case there would substantially reduce potential costs associated with airfare, meals, lodging, and work productivity.

The Federal Circuit next noted that the ability to subpoena witnesses also favored transfer to the Northern District of California. The Eastern District of Texas would not have the ability to compel the appearance of witnesses from any of the parties to the case other than Texas resident Dell. Having the case before the Northern District, on the other hand, would be invaluable in the event that process would be required to hale relevant witnesses into court.

The source of proof issue again favored the defendants. Many defendants noted that evidence related to such pivotal issues as research, design, development, testing and marketing of accused products would likely be located within the state of California. In comparison, not a single party to the litigation identified any likely source of proof that would be found within the Eastern District of Texas.

Last, the Federal Circuit found that the local interest factor favored transfer. The Federal Circuit noted that although nationwide sale of an accused product does not necessarily give rise to a substantial interest in any single venue, significant connections between a particular venue and the events that give rise to a suit could favor a specific venue. The court noted that in this case, the company asserting the harm and many of the companies alleged to have caused that harm were residents of California, as were the inventor and patent prosecuting attorneys.

In light of its analysis, the Federal Circuit reversed the ruling of the Eastern District of Texas, and ordered that the case be transferred to the Northern District of California. Many plaintiffs are drawn to the Eastern District of Texas due to its reputation as a “plaintiff-friendly” forum. Regardless of whether this reputation is deserved, any plaintiff considering filing suit within that district would be well advised to review In Re Acer America Corp., and to ensure that it has substantial and meaningful contacts within the district, sufficient to defeat a motion to transfer.