Texas Data v. Target, 2:10cv269 (E.D. Tex. Jan. 12, 2011)
Judge: T. John Ward
Holding: Motion to Transfer Venue DENIED
For any other opinion this heading might be hyperbole, but this opinion merits a few waves of the proverbial lighter (or cell phone). As I've posted recently, every venue ruling to date that I'm aware of (two from Marshall and five from Tyler) summarily granted motions to transfer. Two others were argued in Marshall in December, including this one, and Judge Ward just issued his ruling denying the motion, making it the first venue motion denied within the district.
But the opinion is noteworthy for going through the background of the cause of action and venue law in patent cases in some detail before turning to the facts of the case. I commend the analysis to you, since it's a very useful summary of the law to crib from. (The Court even surfs over to Gray on Claims for one footnote - this is good stuff, Maynard, as we used to say in the music department at ETSU back when it was ETSU and I was in music. But I digress).
One issue to be addressed at the outset was the defendant's argument that the plaintiff's choice of forum should be accorded less than the usual deference in a false marking case. Perplexed, Judge Ward pointed out that there is no deference to the plaintiff's choice any longer - it isn't even a factor in the venue analysis. The question was whether the burden of proof in false marking cases should be the same as that set forth in the Fifth Circuit's In re Volkswagen case, or whether it should be lessened. After detailing the policy rationale underlying the false marking statute, as well as the history of the false marking statute, and the fact that given that the usual factors already favor defendants so that any contrary decision would likely ensure that all false marking cases would be heard in the defendant's home forum, Judge Ward declined to depart from the rule set forth in In re Volkswagen. In doing so, the Court was also not persuaded that the plaintiff's status as a recently-formed "marking troll" affected the analysis.
The label of a “marking troll” obviously draws its name from the “patent troll” label often ascribed to entities created solely to buy patents and then license them or bring patent infringement suits. But these entities own a legitimate property right—the patent—that they are seeking to enforce. The Court is not aware of any rules that apply differently to them. Likewise, a holding company formed to prosecute marking cases has a legitimate claim and the rules should not apply any different to them. Indeed, in the Forest Group decision, one party argued that the Federal Circuit‟s interpretation could give rise to a “new cottage industry” of such entities, but the Federal Circuit responded that “[t]his, however, is what the clear language of the statute allows.”
(Internal citation looked at, thought about, then omitted).
Judge Ward then went on to the transfer analysis, where he noted that most of the proof in false marking cases is not located with the plaintiff, but instead with the defendant or third parties. Interestingly, in this case the products at issue were not made by the defendant Target, but rather by third parties, Kimberly-Clark and Bemis. Now, guess where these third parties make the accused products? In Paris, Texas and Longview, Texas, both within the Eastern District and within absolute subpoena power of Marshall court. In fact the packaging itself is made only about twenty miles away from Marshall at Bemis' facility in Longview, and while KC makes the products in Paris, its headquarters are in Irving, Texas, which is far closer to Marshall than Wisconsin, to where transfer is sought. (And let me tell you, it is a long and miserable collection of flights to get from Texas to Wisconsin, as I discovered when I spoke at a Door County, Wisconsin bar event three years ago' Love the people - love the dairy products - hate the flights). Of course the evidence regarding the alleged intent to deceive is in Wisconsin, but this case presented substantial local connections with respect to the marking and manufacture of the accused products.
He also rejected the argument that the plaintiff's incorporation in Texas gave no "local interest" under In re Microsoft and In re Zimmer because plaintiff was allegedly a "front for counsel" created in anticipation of litigation, noting that the persons who formed the Texas company were in Texas before forming the company, with the counsel having been here for many years prior to that (I would note that I tried a horse-kicking case against one of their counsel at least ten years ago in state court - a Texas connection that we both likely regret), and noting that it was incorporating to manipulate venue that the Federal Circuit held was not permissible, not incorporating in anticipation of litigation, which Bon Tools expressly held was. Therefore he gave it some weight - but after considering the other Texas interests noted above and the Wisconsin interest, called this factor even.
In the end, Judge Ward wrote that "[i]n balancing the Gilbert convenience factors in this case, the Court observes that two factors slightly weigh in favor of transfer and one factor slightly weighs against transfer. Therefore, Target has not met its burden in showing the Eastern District of Wisconsin is 'clearly more convenient' than the Eastern District of Texas."
Once again, to echo what Judge Ward said about the way this analysis will apparently usually come out in false marking cases given the nature of the cause of action (and as if the prior seven rulings granting motions didn't already suggest this) in this case where the marking and the product were both made within absolute subpoena range of the courthouse in Marshall, the balance still very slightly (net one factor slightly favoring) weighed in favor of transfer. But that was not sufficient to meet Volkswagen's "clearly more convenient" standard, which the Volkswagen court says (referencing the plaintiff's choice of forum, which it roughly equates to the burden of proof) "places a significant burden on the movant to show good cause for the transfer."
Overall a very engaging read - I highly recommend it. But then again, I think Box. v. Ameritrust, 810 F. Supp. 776 (E.D. Tex.1992) (Hall, J.) was a potboiler due to its nuanced analysis of the effect of President Jefferson's political issues in the Louisana Territory on contemporary venue law.