Federal Circuit ruling could curb patent filings in East Texas
A recent Federal Circuit ruling, In re Microsoft Corp., No. 944 (Fed. Cir Nov. 8, 2010), has significant implications for businesses contemplating establishing local ties to support favorable litigation jurisdiction.
In this case, the Federal Circuit held that the original decision, by U.S. District Judge Leonard Davis in the Eastern District of Texas, denying a change of venue to transfer the pending case to the Western District of Washington was a clear abuse of discretion.
The impact of this decision could be powerful in that the Federal Circuit has made it much more difficult for a plaintiff to file a patent infringement suit in the Eastern District of Texas without a true, legitimate tie to the area – meaning motivation by pure litigation strategy is not going to cut it any longer.
What was the basis for this decision?
The plaintiff in the underlying case, Allvoice Developments U.S., filed a patent infringement suit against Microsoft in the E.D. of Texas. Shortly before filing suit, Allvoice, a UK-based company, incorporated a U.S. subsidiary in Texas.
At the same time, they opened an office in Tyler and shipped documents related to the litigation to the Texas office, claiming that its documents are maintained in the ordinary course of business.
Because of this, Judge Davis denied Microsoft's motion to change venue, noting that the E.D. of Texas had an interest in adjudicating the matter.
The federal court, in granting the petition for a writ of mandamus and directing the transfer to Washington, stated that Allvoice's argument that it has established a presence in the Eastern District of Texas "rests on a fallacious assumption: that this court must honor connections to a preferred forum made in anticipation of litigation and for the likely purpose to make that forum appear convenient."
Given that Allvoice's ties to Texas were purely motivated by litigation, and that the record showed that Washington was the more convenient venue for several reasons, including for example, the convenience of witnesses and document production issues, the court directed the transfer to the Western District of Washington.