Federal Circuit Grants Writs Of Mandamus Ordering Transfer Of Venue
On June 30, 2021, the Court of Appeals for the Federal Circuit (CAFC) granted petitions for writs of mandamus ordering the United States District Court for the Western District of Texas to transfer the underlying actions to the Northern District of California. In re Samsung Elecs. Co., LTD, __ F.3d __ (Fed. Cir. June 30, 2021).
Ikorongo Texas LLC (“Ikorongo Texas”), a Texas limited liability company formed in February 2020, separately sued Samsung and LG for patent infringement of four patents in the Western District of Texas just one month after the LLC’s formation. Another limited liability company, Ikorongo Technology LLC (“Ikorongo Tech.”), exists, but, despite being run out of the same Chapel Hill, North Carolina office as Ikorongo Texas, and despite the same five individuals owning the membership interests in both Ikorongo entities, Ikorongo Texas claimed to be unrelated to Ikorongo Tech., which owns the four patents-in-suit. Ten days before Ikorongo Texas filed its complaint, Ikorongo Tech. assigned to Ikorongo Texas exclusive rights to sue for patent infringement in specific areas of Texas, while Ikorongo Tech. retained the rights to sue in the rest of the country. The day after Ikorongo Texas filed the original complaint, the Ikorongo entities filed together as co-plaintiffs amended complaints in the Western District of Texas. (The Court of Appeals opinion does not discuss the legality of the right-to-sue transfer itself, but the transfer presumably included more than just the bare right to sue.)
In September 2020, Samsung and LG separately moved under 28 U.S.C. § 1404(a) to transfer the suits to the Northern District of California, arguing that three of the five accused third-party applications (which run on the accused mobile products they sell) were developed in California, that all of the potential witnesses and sources of proof are in California, that none of the applications were developed or researched in Western Texas, and that no source of proof or potential witnesses are there.
The district court denied the transfer motions, concluding that Samsung and LG failed to establish the threshold requirement, under § 1404(a), that the complaints “might have been brought” in the Northern District of California because Ikorongo Texas’s rights to the asserted patents were limited to counties in Texas. The district court also alternatively analyzed the traditional public and private interest factors, and, notwithstanding its conclusion that the sources of proof and witnesses generally leaned toward California, found other factors—e.g., that Ikorongo Texas’s claims specifically relate to infringement in the district, that certain practical problems existed, and that the Texas district court could likely hold a trial sooner than the Northern District of California—weighed against transfer.
On Samsung’s and LG’s petitions for writs of mandamus (which were consolidated), the CAFC explained that whether the cases could be transferred to the Northern District of California turns on whether venue there is proper under § 1400(b), which provides, in relevant part, that “[a]ny civil action for patent infringement may be brought … where the defendant has committed acts of infringement and has a regular and established place of business.”
As a threshold matter, the CAFC rejected Ikorongo’s argument that the initial complaints (filed by Ikorongo Texas as sole plaintiff) govern the inquiry, explaining that the initial complaints were “dead letter[s]” after the amended complaints were filed.
The CAFC then explained that the district court’s analysis as to whether Ikorongo Texas could have brought the action in California, which it concluded in the negative due to the license agreement’s geographical restrictions, was in error because the district court’s analysis disregarded the Ikorongo entities’ pre-litigation acts aimed at manipulating venue. The CAFC emphasized that the propriety of venue should be assessed “by disregarding manipulative activities of the parties.” Specifically, the CAFC cited the recent creation of Ikorongo Texas, and its limited assignment targeted to geographic areas in the Western District of Texas—along with the apparent sole purpose of its existence being to file patent infringement lawsuits in Texas. In sum, the CAFC concluded that it need not consider separately Ikorongo Texas’s geographically-bounded claims because that limitation was one of Ikorongo’s own making—specifically, that geographical limitation was for the purpose of manipulating patent venue laws.
With respect to Samsung and LG’s arguments regarding the merits of transfer, the CAFC explained that the district court assigned too little weight to the relative convenience of litigating in the Northern District of California, citing to undisputed affidavits identifying over a dozen third-party individuals with relevant, material information residing in the Northern District of California, and that, by contrast, not a single Texas-residing witness had been identified. The CAFC explained that the district court erroneously discounted the convenience of third-party witnesses by presuming that only a few would testify at trial, and at the same time overstated the concern of potential waste of judicial resources. Other public interest factors also were found to favor transfer, including the local interest in having localized controversies decided at home—specifically, that the accused applications were largely researched, designed, and developed in the Northern District of California. And, contrary to the district court’s conclusion that Ikorongo Texas’s claims “do specifically relate to infringement in this District,” the CAFC found that the fact that infringement is alleged in the Western District of Texas gives no more of a local interest than the Northern District of California or any other venue. Last, the CAFC found Ikorongo’s argument—that the district court’s conclusions should be upheld due to potential court congestion—unavailing, because there was no evidence that the prospective speed with which this case might be brought to trial is of particular significance.