Wednesday, July 14, 2021

Serial assertions of the same patent claims in the Western District of Texas against multiple defendants: judicial economy weighs against venue transfer

Once upon a time, there was a federal judicial district to the east of Dallas that every defendant to a patent infringement case sought to leave. Today, that district still exists, and remains pretty important. But the number one hotspot is the Western District of Texas (specifically, its Waco division).

Judge Alan Albright is his lawsuits' keeper, at least when we're talking about patent cases. Not only does he take a long time to rule on venue transfer motions but from time to time he denies venue transfers even though the arguments made by plaintiffs against a transfer are outrageous, such as in a case in which a shell company was set up just to game the system. Unsurprisingly, the exit route from the Western District of Texas quite often passes through the DC-based Federal Circuit.

The Federal Circuit made an interesting--not spectacular, but definitely instructive--decision (PDF) that practicioners should keep in mind. There's a case in which a Canadian company named NCS Multistage is suing a Norwegian company named TCO in the Western District of Texas. The defendant would have preferred to litigate in the Southern District of Texas. But the Federal Circuit found that Judge Albright had not clearly abused his discretion.

The standard of review in a mandamus matter (somewhat similar to an interlocutory appeal) is that there must be a "clear and indisputable" right to relief, which in a venue transfer case means (if there is no clear error) a clear abuse of discretion. Judge Albright placed some emphasis on judicial economy because the plaintiff is suing another defendant in the same court over the same patent claims. However, judicial efficiency is a valid factor. What the district court has to do is just to balance convenience (for the parties and, especially, witnesses) against judicial economy. Only if that balance isn't struck is there a clear abuse of discretion and a basis for a writ of mandamus.

The mandamus petition in this Canadian-Norwegian case was denied "particularly in light of the fact that several potential witnesses are located outside of the proposed transferee venue, including some in the Western District of Texas, and the fact that the only party headquartered in the proposed transferee venue elected to litigate this case in the Western District of Texas."

Look at it this way: it's often a lot easier to complain about something being suboptimal than to propose a clearly superior alternative. Here, it's easy to see that a company headquartered in the Southern District of Texas would probably assert its patents in its home court if it didn't expect a better outcome in the Western District. That was a tactical choice, but not illegitimately tactical. While some witnesses are based in the Southern District, some others are in the Western District. And the plaintiff had previously sued someone else in the latter over the same patent claims. So Judge Albright had sufficient discretion to deny the venue transfer motion in the Federal Circuit's opinion.

The lesson is that serial assertions of the same patent claims in the Western District may work. If the patentee firstly sues a defendant who can't realistically win a venue fight (because it has a strong presence in that district, and the alleged infringement(s) likely had to do with the defendants' activities there, especially R&D), it then has a judicial-economy argument when suing others in the same district. That argument isn't singlehandedly dispositive, but as the failure of TCO's mandamus petition shows, the hurdle is very high as the standard of review is extremely deferential.

It may be easier for state lawmakers to flee from Texas only to derail a vote than for defendants to W.D. Tex. patent cases.

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