Yesterday morning I accepted an invitation to work up a presentation on venue-related issues for the forthcoming State Bar Advanced Patent Litigation seminar at the Hyatt Tamaya in New Mexico in July, under the working title of Venue Practice in the Eastern District of Texas After the AIA: Unintended Consequences and Case Management Challenges. I started outlining the paper last night, but had to leave in several big question marks because the Federal Circuit's opinion in In re EMC II had not yet come down. Then, last night, it finally did, in a unanimous opinion by Judge Dyk, with Chief Judge Rader and Judge Moore on the panel answering several important questions dealing with venue in patent cases.
For readers not familiar with the underlying litigation, the case I am talking about is Oasis v. Adrive, a Tyler Division case pending before Judge Amos Mazzant. In Oasis, the plaintiff initially sued 18 companies, asserting violation of its patents dealing with online backup and storage. Judge Mazzant denied the defendants' motions to sever, holding, consistent with prior Eastern District caselaw, that the defendants’ accused services and products were “not dramatically different.” Oasis Research LLC v. ADrive LLC, No. 4:10-CV-435, 2011 WL 3099885, at *2 (E.D. Tex. May 23, 2011), and based on that finding also denied the defendants' motions to transfer. The Federal Circuit granted mandamus to a limited extent, rejecting the test for severance that Judge Mazzant had applied, and holding that claims against independent defendants could not be joined under the transaction-or-occurrence test of FRCP 20 “unless the facts underlying the claim of infringement asserted against each defendant share an aggregate of operative facts." It then remanded for the district court to apply its new test, expressing no opinion on the issue of venue. In re EMC Corp., 677 F.3d 1351 (Fed. Cir. 2012). (This test has nothing to do with the standard under the AIA, the court was careful to point out, noting that this is a pre-AIA case. As a result, the test will have less and less application as the older cases work their way through the system. Unless, of course it is extended to the AIA analysis. As an aside, in an analogous situation, courts applying 28 USC section 1404 after its enactment in 1948 tended to refer to cases applying common law forum conveniens, including the 1947 Gulf Oil v. Gilbert case, so the common law analysis eventually became a substantial part of the statutory analysis).
On remand, Judge Mazzant subsequently severed the matter into four separate cases, consolidated the cases for pretrial proceedings, and again denied the petitioners’ motions for transfer in separate orders. Judge Mazzant concluded that in each case the petitioners had failed to show that the transferee venues were clearly more convenient. In so finding, Judge Mazzant addressed the traditional factors, under which there were considerations going both ways, butalso concluded in each case that judicial economy weighed heavily against transfer, noting that if he were to transfer the cases other courts “would have to spend significant resources to familiarize [themselves] with the patents, prosecution history, claim construction, and other issues in th[ese] case[s].” It was this latter holding that gave rise to the second mandamus proceeding. "Taking particular issue with that analysis," the Federal Circuit wrote in yesterday's opinion, "the petitioners now seek a writ of mandamus with regard to those orders."
The Federal Circuit's opinion started - as all good appellate opinions must - with the standard of review.
The petitioners’ request for a writ directing the district court to transfer these cases runs up against a highly deferential standard of review. The question before us on mandamus is not whether the transferee venues are more convenient and fair; nor is it even whether in our view it was an abuse of discretion for the trial court to have denied transfer, which is the applicable standard of review on direct appeal. Instead, the question is whether the denial of transfer was such a “‘clear’ abuse of discretion” that refusing transfer would produce a “patently erroneous result.” Under this highly deferential standard, we must leave the district court’s decision undisturbed unless it is clear “that the facts and circumstances are without any basis for a judgment of discretion.” Here, we cannot say that standard has been met.
(Internal citations omitted). To be sure, the court noted, the case "is a prime example of the importance of addressing motions to transfer at the outset of litigation." It cited the same authority recently quoted by another Federal Circuit panel in In re Fusio-io (12/21/12), but crafted the relative precedence of the citations somewhat more elegantly, with the Fifth Third case in the text, and the Third Circuit case in a footnote. (Given his statements at Fifth Circuit judicial conferences, I wonder if Justice Scalia would observe that a cite to Ninth Circuit authority should be in the form of an endnote contained in a different book - most appropriately a work of fiction. I should license him that joke. But I digress.)
The court then went to the heart of the issue - could the district based its denial of the petitioners' motions to transfer on considerations of judicial economy? Well, to borrow a status from Facebook, it's complicated. First, of all, the court can't consider the judicial economy based on the court's familiarity gained during the pendency of the case. "Petitioners are correct that the district court could not properly rely on judicial economy involved in retaining the very cases that were the subject of the transfer motion," it wrote.. Motions to transfer venue are to be decided based on “the situation which existed when suit was instituted." Any subsequent familiarity gained by the district court is therefore irrelevant." (Internal citations omitted; emphasis added).
But this came with an important caveat. "It does not follow, however," Judge Dyk wrote, "that the district court’s judicial economy rationale was wholly misplaced. While considerations of judicial economy arising after the filing of a suit do not weigh against transfer, a district court may properly consider any judicial economy benefits which would have been apparent at the time the suit was filed. For example, we have held that a district court’s experience with a patent in prior litigation and the copendency of cases involving the same patent are permissible considerations in ruling on a motion to transfer venue. In re Vistaprint, Ltd., 628 F.3d 1342, 1346-47 & n.3 (Fed. Cir. 2010). The latter consideration was applicable here, the panel found, thus the district court "could properly consider the benefits to judicial economy arising from having the same judge handle both Oasis’s suits against the petitioners and Oasis’s suits against other parties involving the same patents and technology as to which there was no issue of transfer."
And here an interesting result of setting the relevant time period at the time suit was instituted comes into play. "Petitioners complain that Oasis’s claims against other defendants have since been dismissed, but, as discussed above, the relevant inquiry is the state of affairs at the time “when suit was instituted.” Because the dismissal of Oasis’s suits as to the other defendants occurred later, it is not relevant to the venue inquiry." (Internal citation omitted; emphasis added). Accordingly, the panel concluded that the district court could properly conclude that considerations of judicial economy favored retention of the cases. But this being the Federal Circuit, there's a caveat to the caveat. "To be clear, we are not suggesting that the judicial economy of having the same judge handle multiple suits involving the same patents should dominate the transfer inquiry. After all, the MultiDistrict Litigation Procedures exist to effectuate this sort of efficiency."
But in the end, the panel noted that even the petitioners conceded that the district court considered all of the other relevant interest factors in reaching the conclusion that the transferee venues were not clearly more convenient for trial than the Eastern District of Texas. The district court found not only that judicial economy weighed against transfer, but also that "a significant number of identified potential sources of proof and witnesses are located outside of the transferee venues, including at least one witness in Carbonite’s case and two witnesses in EMC’s case who reside in the Eastern District of Texas." "Given these facts," it concluded, "we cannot say that, on the whole, the district court’s determination as to transfer was so unreasonable as to warrant mandamus relief." According the petition was denied, and the associated motion to stay denied as moot.