Fifth Circuit Ruling May Impact Venue Transfer for Patent Cases in the Western District of Texas

Maier & Maier

In recent years the Western District of Texas has become an increasingly popular destination for patent litigation, in large part due to the litigant friendly rules propagated by Judge Albright. The Western District of Texas (as well as the Eastern District of Texas, another popular district for patent litigation) is part of the 5th Circuit.

Where venue is proper Defendants have limited options for changing to a different location, one way of doing so is through venue provision 28 U.S.C. 1404(a), which allows for change of venue “for the convenience of parties and witnesses.” However, changing for convenience is not given as a matter of right, and the district judge overseeing the case has significant discretion in determining whether the transfer is allowed. How much discretion the district judge has is a matter of some debate among the district courts, and mandamus petitions for venue cases are not commonly taken up by the 5th circuit. However, the 5th circuit did recently take just such a case in re Planned Parenthood Fedn. On Am., Inc. 52 F.4th 625 (5th Cir. 2022).

The Planned Parenthood case was originally filed in Amarillo (N.D.Tex.), and Planned Parenthood moved for a transfer of venue to Austin (W.D.Tex) as a much more convenient forum. The district court denied the motion and planned parenthood filed a mandamus petition.

The circuit court further denied the petition, citing several grounds. Of particular note the court frequently hit on the broad discretion given to the district court in deciding whether to grant a transfer for convenient venue, for example the court opened by stating “we have often said that a writ of mandamus is an ‘extraordinary remedy’ reserved for ‘extraordinary causes”. Later in the opinion the court further “reiterate[s] that district courts have broad discretion in deciding motions to transfer; they need only grant such a motion where the evidence demonstrates that the destination venue is ‘clearly more convenient’ than the chosen venue. [the court] review that decision ‘only for clear abuses of discretion that produce patently erroneous results.’ The district court carefully considered each of the private and public interest factors, ultimately concluding that they do not weight in favor of transfer. The standard for reversing that holding is high” (emphasis added). While citing that the district judges have broad discretion in these cases is not new, and is taken from the precedent, the frequency and emphasis in which the court repeated this may indicate that the circuit is raising the bar on the showing required to reverse a judge’s denial of transfer.

The Circuit court also noted to other factors that weighed in favor of upholding the district courts denial of transfer, (1) was that the judge for this case had particular familiarity with the law at issue, (2) Amarillo (where the district court was located) is less expensive than Austin (where the case would be transferred to), finally (3) the district court found that the Amarillo Division is less congested than the Austin division. At least the first two points could potentially apply to patent cases under Judge Albright as well, Judge Albright definitely has familiarity with patent law, and Waco (where Judge Albright is located) is cheaper than many other locations that defendants are likely to want to transfer to (for example California, Delaware, Etc.).

One other factor that contributed to the denial as well was Planned Parenthood’s “inexcusable delay” in filing a motion to transfer. Specifically, Planned Parenthood waited until after resolution of an earlier motion to dismiss the case was denied before filing for transfer, so future defendants would be advised to make any planned transfer motions as early as possible.

In total this decision may cement Judge Albright’s (and any other patent friendly judges in districts under the 5th circuit) ability to retain the plethora of patent cases filed in their courts. This may continue to enable patent litigants to take advantage of the friendly rules of these specific Districts.

Federal Circuit Clarifies How Venue Under TC Heartland Will Be Applied

Maier & Maier

In In re Cray Inc., No. 2017-129 (Fed. Cir. Sept. 21, 2017) the Federal Circuit issued a decision clarifying the Supreme Court’s ruling in TC Heartland LLC v. Kraft Foods Group Brands LLC, 137 S. Ct. 1514 (2017). This Supreme Court case had rejected long-standing patent venue precedent, clarifying that, for the purposes of the patent venue statute, a domestic corporation “resides” only in its state of incorporation. As such, a patent plaintiff is restricted to suing a domestic corporate defendant in its state of incorporation, or in a judicial district where the defendant allegedly has committed acts of infringement and has a “regular and established place of business”.

In the district court decision below, Raytheon Co. v. Cray, Inc., No. 2:15-cv-01554-JRG, 2017 WL 2813896 (E.D. Tex. June 29, 2017), Judge Gilstrap of the Eastern District of Texas had outlined a four-factor test for whether the defendant had a “regular and established place of business” in a district, requiring consideration of the following four factors:

(1) The extent to which a defendant has a physical presence in the district, including but not limited to property, inventory, infrastructure, or people.

(2) The extent to which a defendant represents, internally or externally, that it has a presence in the district.

(3) The extent to which a defendant derives benefits from its presence in the district, including but not limited to sales revenue.

(4) The extent to which a defendant interacts in a targeted way with existing or potential customers, consumers, users, or entities within a district, including but not limited to through localized customer support, ongoing contractual relationships, or targeted marketing efforts.

Applying this test, Judge Gilstrap found that venue was proper over the defendant, Cray, in the Eastern District, based on the fact that two sales employees of Cray worked from their homes within the district.

The Federal Circuit somewhat unsurprisingly overturned this determination, holding that venue was improper and the four-factor test was “not sufficiently tethered to [the] statutory language” and thus “fail[ed] to inform each of the necessary requirements of the statute.” Instead, the Federal Circuit set forth its own venue factors under TC Heartland, requiring that each element of a three-prong test be met before venue would be proper. Specifically:

“(1) there must be a physical place in the district;” (that is, there must be some physical, geographical location within the district in which the business of the defendant is carried out)

“(2) it must be a regular and established place of business;” (that is, business must be conducted in more than a sporadic fashion) and

“(3) it must be the place of the defendant” (that is, the defendant corporation rather than a mere employee of the defendant must operate or exercise control over that location).

Applying this test, the Federal Circuit found that the factors were not met, and an employee working from home on their own does not sufficiently “establish or ratify” the place of business as being a place of business of the defendant corporation.