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Federal Circuit: District Court Abused Discretion by Refusing to Transfer Case to California Based Mainly on Dell’s Presence in Texas

December 3, 2010

A Texas federal district court abused its discretion by refusing to transfer a case to a California district court pursuant to 28 U.S.C. § 1404(a) based mainly on the fact that patent infringement defendant Dell Inc. is located in Texas, the U.S. Court of Appeals for the Federal Circuit ruled Dec. 3 (In re Acer America Corp., Fed. Cir., Misc. No. 942, 12/3/10).

Vacating the denial of the defendants’ motion to transfer, the appellate court reasoned that many of the defendants and most of the witnesses and evidence were located in the U.S. District Court for the Northern District of California and granted a writ of mandamus ordering transfer.

Relevant Factors Favor Northern California as Venue.

In this case, MedioStream Inc. brought a patent infringement suit against Acer America Corp., Dell Inc., and 10 other companies in the U.S. District Court for the Eastern District of Texas. The defendants petitioned the court for a motion to transfer pursuant to 28 U.S.C. § 1404(a), which authorizes transfer “[f]or the convenience of parties and witnesses, in the interest of justice.”

However, the district court refused the motion, largely on the fact that Dell is headquartered in Round Rock, Texas. The defendants petitioned the Federal Circuit for a writ of mandamus directing the district court to transfer the case to the U.S. District Court for the Northern District of California.

This court has applied Fifth Circuit law in other recent cases granting a mandamus “to correct a patently erroneous denial of transfer,” Judge Alvin Schall observed, citing a line of authority. In re Nintendo Co., 589 F.3d 1194 (Fed. Cir. 2009); In re Hoffmann-La Roche Inc., 587 F.3d 1333 (Fed. Cir. 2009); In re Genentech, Inc., 566 F.3d 1338 (Fed. Cir. 2009); In re TS Tech USA Corp., 551 F.3d 1315 (Fed. Cir. 2008). In determining whether the transferee venue is clearly more convenient, the Fifth Circuit applies the public and private factors used in forum non conveniens analysis, he continued, citing the en banc ruling in In re Volkswagen of America Inc., 545 F.3d 304 (5th Cir. 2008).

The private interest factors include (1) the relative ease of access to sources of proof; (2) the availability of compulsory process to secure the attendance of witnesses; (3) the cost of attendance for willing witnesses; and (4) all other practical problems that make a trial easy, expeditious, and inexpensive. The public interest factors include (1) the administrative difficulties flowing from court congestion; (2) the local interest in having localized interests decided at home; (3) the familiarity of the forum with the law that will govern the case; and (4) the avoidance of unnecessary problems of conflicts of laws or in the application of foreign law.

“All of the U.S.-based companies in this case except for Dell are headquartered in California, including six companies actually located within the Northern District of California,” Schall said. However, “no party is headquartered in the Eastern District of Texas,” he said, clarifying that Dell’s base of Round Rock is 300 miles from Marshall, Texas, where the case was brought. Even the inventor, prosecuting patent attorneys, and identified potential employee witnesses of MedioStream all reside within the Northern District of California, Schall explained in a footnote. “Our prior orders in venue transfer cases make clear that the combination of multiple parties being headquartered in or near the transferee venue and no party or witness in the plaintiff’s chosen forum is an important consideration,” he said, citing Nintendo.

Noting that convenience of the witnesses is an “important factor in a § 1404(a) calculus,” the court said that many of the witnesses here reside in the Northern District of California. These witnesses would incur significant expenses for airfare, meals, and lodging, as well as losses in productivity from time spent away from work, if required to try the case in Texas, the court explained. As these costs would be significantly minimized or avoided by transferring the case to Northern California, Schall said, “the witness convenience factor clearly favors transfer.”

Since a venue’s ability to compel testimony through subpoena power is also an important factor in the § 1404(a) analysis, the subpoena powers of the Northern District of California will be much more useful in this case compared to the powers of the Eastern District of Texas, Schall continued. “This factor surely tips in favor of transfer.” Further finding that “a significant portion of the evidence” and a greater local interest in this case rest in the Northern District of California, the appellate court granted the petition for writ of mandamus.

Schall concluded this way:

In sum, the convenience of the parties and witnesses, the sources of proof, the local interest, and the compulsory process factors all significantly favor transfer. Meanwhile, no factor remotely favors keeping this case in the Eastern District of Texas. Although Dell may be a likely source of evidence at trial and is closer to the Eastern District of Texas, the district court’s conclusion that Dell’s presence in Texas was enough to preclude transfer here is in our view a clear abuse of discretion.

The opinion was joined by Judges Arthur Gajarsa and Kimberly Moore.

Acer Corp. was represented by Elaine Y. Chow of K&L Gates, San Francisco. Apple Inc. was represented by Mark C. Scarsi of Milbank, Tweed, Hadley & McCloy, Los Angeles. ASUS Computer International was represented by Joshua M. Masur of Turner Boyd, Palo Alto, Calif. Dell was represented by Scott F. Partridge of Baker Botts, Houston. Microsoft Corp. was represented by George F. Pappas of Covington & Burling, Washington, D.C. Nero Ag and Nero Inc. were represented by M. Craig Tyler of Wilson Sonsini Goodrich & Rosati, Austin, Texas. Sonic Solutions was represented by Roderick M. Thompson of Farella Braun & Martel, San Francisco. Sony Corp. was represented by Lewis V. Popovski of Kenyon & Kenyon, New York.

Respondent MedioStream  Inc. was represented by Byron W. Cooper of Goodwin Procter, Menlo Park, Calif.

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