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Federal Circuit's recent decision in TS Tech looms large for patent plaintiffs' bar

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The Federal Circuit ended the year by handing down a decision that has commanded the attention of the patent litigation bar. It was the second high-profile writ of mandamus ordering the Eastern District of Texas to grant a motion to transfer venue within the final three months of 2008. Many patent defendants hope that this newest decision is likely to cool the hotbed of patent litigation that is the Eastern District of Texas.

In this most recent case, In re TS Tech USA Corp., Misc. No. 888 (Fed. Cir. Dec. 29, 2008), the Federal Circuit held that the district judge abused his discretion in failing to transfer a patent infringement case out of the district. Less than three months earlier, the en banc Fifth Circuit held that a district judge similarly erred by refusing to transfer a non-patent case to an alternate venue in In Re Volkswagen, No. 07-40058 (5th Cir. Oct. 10, 2008). Some believe the very low rate of transfer out of the plaintiff-friendly Eastern District of Texas may soon increase as defendants attempt to leverage these two recent decisions.

In TS Tech, plaintiff patent-holder had filed an infringement suit in the Eastern District of Texas, despite having no connection to that jurisdiction -- a common scenario in the world of patent litigation. Defendant promptly filed a motion to transfer under 28 U.S.C. ยง 1404(a), and the court predictably denied their request. In denying the motion, however, the court repeatedly misapplied Fifth Circuit law, including the Fifth Circuit's most recent pronouncement in Volkswagen. As a result, the Federal Circuit found that the court "clearly abused its discretion" in denying transfer out of the Eastern District.

According to the Federal Circuit, the first of many errors by the district judge was that he gave too much weight to the plaintiff's choice of venue, treating it as a distinct factor in the transfer analysis. Instead, the Federal Circuit emphasized that all the weight to be accorded to plaintiff's choice of venue is reflected in "the burden that a moving party must meet in order to demonstrate that the transferee venue is a clearly more convenient venue."

Second, the district court erroneously disregarded the Fifth Circuit's "100-mile" rule in assessing the cost for witnesses to attend trial in Texas. Under this rule, when the distance between the current and proposed venue is more than 100 miles, the witness convenience factor increases directly with the additional travel distance. In TS Tech, all of the key witnesses were clustered in Ohio, Michigan and Canada -- near to the venue proposed by the defendant, the Southern District of Ohio. The Federal Circuit determined that the substantially greater distance all of these witnesses would have to travel to the Eastern District of Texas weighed considerably in favor of transfer.

Similarly, the district court had emphasized that much of the evidence in the case was stored electronically, and it found that the relative ease of access to sources of proof to be insignificant due to "the increased ease of storage and transportation." However, the Federal Circuit reiterated the Fifth Circuit's pronouncement that recent technological advancements in document storage and transportation have not rendered the location of evidence superfluous, especially in TS Tech, where all of the physical evidence was located near the proposed venue.

Finally, the Federal Circuit concluded that the mere fact that the allegedly infringing product was sold in the Eastern District of Texas overstated the "local interest" in deciding the dispute. The Federal Circuit held that since the allegedly infringing products had been sold throughout the country, the citizens of the Eastern District of Texas have no more of an interest in the case than do the citizens of any other venue.

Some court watchers have wondered whether the Federal Circuit may have ended the Eastern District of Texas' run as the preferred forum of patent plaintiffs. The effects of the Federal Circuit's TS Tech decision will play out in the coming months. In the past, plaintiffs with few connections to the district have been willing to risk 1404(a) transfer motions. Many defendants hope that the rate at which the judges of the Eastern District of Texas will transfer cases out of the district will rise sharply. That may prove to be wishful thinking, as plaintiffs will argue that TS Tech does not stand for any new sweeping propositions of law, but rather was a case decided on a very narrow set of facts. For defendants, it may be enough to hope that plaintiffs will think twice before automatically filing their new cases in the Eastern District of Texas.


Woodmansee is a partner in the Patent Litigation Group at Morrison & Foerster's San Diego Office, and Simmons is an associate in that same group.

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