Fed Circuit again finds East Texas judge abused discretion by denying patent transfer

Nicole Keenan Dec. 9, 2010, 4:26am

The Federal Circuit seems to be trying to make a point with regards to venue shopping.

In a Dec. 3 ruling – In re Acer American Corp. (Misc Doc No, 942) - the Federal Circuit once again found that the refusal by the Eastern District of Texas to transfer the case was a clear abuse of discretion. This is the second recent ruling addressing the issue of venue and the E.D of Texas.

In this most recent case, the Federal Circuit held that the original decision by Magistrate Judge Charles Everingham IV of the Marshall Division denying a change of venue request to transfer the pending case to the Northern District of California was a clear abuse of discretion.

As I have noted in several recent commentaries, this series of rulings has significant implications for businesses attempting to take advantage of the plaintiff friendly jurisdiction.

The plaintiff in this case, MedioStream Inc., which is headquartered in the Northern District of California yet filed suit in the Eastern District of Texas against 12 hardware and software companies -- including Acer America Corp., Cyerberlink.com Corp., Gateway Inc., Apple Inc., Asus Computer International Inc., Dell Inc., Microsoft Corp., Nero AG, Nero Inc., Sonic Solutions, Sony Corp. and Sony Electronics Inc.

None of the parties are headquartered in the E.D. of Texas. In fact, all of the U.S. based companies, except for Dell, are headquartered in California.

Defendants filed a motion to transfer the case to the N.D. of California, yet their motion was denied.

On appeal, the Federal Court, in granting the petition for a writ of mandamus and directing the transfer to California, stated that its prior orders in venue transfer cases make clear "that the combination of multiple parties headquartered in or near the transferee venue and no party or witness in the plaintiff's chosen forum is an important consideration."

After considering the convenience of the parties and witnesses, the sources of proof, the compulsory (subpoena) process and the local interest, the Federal Circuit held that all of these factors significantly favor a transfer to the Northern District of California. Further, no factor existed that favored keeping the case in Texas.

The impact of this decision could be powerful in that the Federal Circuit, in nearly back-to-back decisions, 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 venue.

Nicole Keenan is a partner in the Chicago office of McDonnell Boehnen Hulbert & Berghoff LLP, where she specializes in patent law. Read more at www.falsemarking.net.

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