The Eastern District Of Texas - No Longer The Venue Of Choice?

Sunday, February 1, 2009 - 01:00

Editor: Mr. DeBari, please describe your practice for our readers.

DeBari: Our firm's Intellectual Property group represents clients in all aspects of intellectual property law, including litigation, prosecution, counseling and transactional services. My practice in particular is focused primarily on representing both plaintiffs and defendants in patent litigation, as well as on counseling and transactional matters relating to intellectual property, in a variety of technology areas and industries, including telecommunications, semiconductors, digital imaging, medical devices/scanners and automotive. A significant portion of my practice involves the representation of Japanese clients.

Editor: You and Nicholas Coch of your firm played a key role in the U.S. Court of Appeals for the Federal Circuit's (CAFC's) decision to grant a writ of mandamus to transfer a patent case from the Eastern District of Texas (ED Texas) to another venue. Would you tell us about the background of this case?

DeBari: Our clients are the defendants in the case, TS Tech USA Corporation ("TST USA"), TS Tech North America, Inc. ("TST NA") and TS Tech Canada, Inc. ("TST Canada") (collectively, "TS Tech"). TS Tech is an automotive parts manufacturer and supplier which specializes in automotive seating products and is a major supplier of automotive seating to Honda. TST USA and TS Tech NA both are based in Reynoldsburg, Ohio, while TST Canada is based in Ontario, Canada. TS Tech does not make or sell any products in Texas and does not have any offices in Texas. Rather, TS Tech sells its automotive seating products to Honda in Ohio and Canada, and then Honda incorporates these products into Honda automobiles that are sold throughout the United States.

TS Tech was sued for patent infringement by Lear Corporation ("Lear"), another major automotive parts manufacturer and supplier which is based in Michigan, in the ED Texas in September 2007, alleging infringement of one of its patents directed to a pivotal headrest mechanism for automobile seats ( Lear v. TS Tech USA Corp., et al. , Civil Action No. 2:07-cv-406 (TJW)). In December 2007, TS Tech filed a motion to transfer the case to the Southern District of Ohio ("SD Ohio"), arguing that the SD Ohio was a far more convenient venue to try the case because none of the parties had any meaningful connections to the ED Texas, the physical and documentary evidence was located mainly in the SD Ohio where TST USA and TS Tech NA are located, and the key witnesses all lived in Ohio, Michigan and Canada, at locations hundreds of miles closer to the SD Ohio than to the ED Texas. Lear opposed the motion, and the ED Texas (Judge Ward) denied TS Tech's motion on September 10, 2008.

One month later, on October 10, 2008, the U.S. Court of Appeals for the Fifth Circuit (which includes the ED Texas) issued an en banc decision granting a Petition for Writ of Mandamus ordering the transfer of a product liability case from the ED Texas, In re Volkswagen of America, Inc. , 545 F.3d 304 (5th Cir. 2008) (" Volkswagen II "), holding that the ED Texas (i.e., Judge Ward - the same judge in our case) clearly abused its discretion in denying the defendant's motion to transfer venue in that case. Since the district court's analysis in that case was essentially the same as the analysis in our case, TS Tech filed on November 12, 2008 a Petition for Writ of Mandamus with the CAFC (which handles all patent appeals) requesting that the CAFC order the ED Texas to transfer our case to the SD Ohio, in which we relied on the Fifth Circuit's decision in the Volkswagen II case. On December 29, 2008, the CAFC granted TS Tech's petition, holding that because the district court's errors in our case were essentially identical to the errors in the Volkswagen II case, TS Tech demonstrated a "clear and indisputable right to a writ."

Editor: Why is this case possibly the expression of a new trend, and why is it important to defendants in patent cases?

DeBari: The CAFC's decision in TS Tech should make it easier for defendants in ED Texas patent cases in which none of the parties is located in the ED Texas or has any significant connections with the ED Texas - such as in cases where the only connection to the ED Texas is the sale there of the product accused of infringement - to get those cases transferred to a more convenient venue. Thus, it is likely that as a result of the TS Tech decision, fewer patent cases will be filed in the ED Texas. In addition, there likely will be an increase in filings of motions to transfer venue in cases currently pending in the ED Texas.

Editor: Do you expect to see 28 U.S.C.§1391 (a)(1), which allows plaintiffs to file suits in any jurisdiction in which a defendant resides, to be amended by Congress as the AIPLA hopes?

DeBari: The most recent proposal that was included in the Patent Reform Act that was before Congress would have amended the current patent venue statute, 28 U.S.C. § 1400(b), so that venue in a patent infringement case would be proper either where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business. The bill was passed by the House in 2007, but was never voted on by the Senate. I suspect that given the other more pressing issues the Obama Administration currently is facing, patent reform likely will not be a high priority item for the Administration or Congress, so it is possible that patent reform will not be taken up again until late 2009 or even later.

Editor: How did the Eastern District of Texas come to be the favored venue for patent cases, especially those brought by plaintiffs?

DeBari: The adoption by the ED Texas of local patent rules a number of years ago, combined with the fact that the time to trial there was very short - it used to be 12 to 14 months - made the ED Texas a very popular venue for patent plaintiffs who sought to minimize the cost of litigation and apply maximum pressure on defendants who had relatively little time to prepare their defenses. In addition, the success rate of patent plaintiffs in the ED Texas cases led to the perception that the ED Texas was a plaintiff-friendly venue, which resulted in more patent cases being filed in the ED Texas. In fact, in 2008, nearly 13 percent of all patent cases filed nationwide were filed in the ED Texas - the highest percentage of any court in the country. Another factor that helped to increase the popularity of the ED Texas was the fact that defendants had very little success in getting cases transferred out of the ED Texas, even in cases that had no meaningful connections to the ED Texas and where none of the parties were located there.

Editor: What are the drawbacks today to bringing cases in the Eastern District of Texas?

DeBari: The popularity of the ED Texas for patent cases has led to a significant backlog of cases which has considerably slowed the time to trial. For patent cases recently filed in the ED Texas, the time to trial now is about three years - more than double the time it used to be. Thus, the ED Texas now is significantly slower than other popular patent venues, and patent plaintiffs have lost one of the key advantages of filing in the ED Texas. Add to this the fact that the TS Tech decision likely will make it easier for defendants to get patent cases transferred out of the ED Texas, and I think most patent plaintiffs will conclude that the ED Texas is not as appealing as it used to be.

Editor: What are the perils of allowing unrestricted venue? Is there a danger that the pendulum tilts too much in favor of the plaintiff?

DeBari: Allowing unrestricted venue certainly would favor the plaintiff, because the defendant likely would not be able to transfer the case to another venue, even when that venue clearly is more convenient. As a result, it would lead to forum shopping without regard to the actual connections that a case has to a particular forum - which is exactly what happed with the ED Texas.

Editor: In light of the decision in TS Tech , what advice would you offer to patent holders who are considering whether or not to file their patent infringement actions in the ED Texas? Alternatively, what advice would you offer to defendants who are sued for patent infringement in the ED Texas?

DeBari: As to patent holders considering whether to file in the ED Texas, I would say that unless the case has some meaningful connection to the ED Texas, such as one or more of the parties being located there or material witnesses that are located there, the patent holder should consider the risk that the defendant may succeed in getting the case transferred to another venue that is more convenient than the ED Texas. In fact, in cases where the only connection to the ED Texas is that the accused product is sold there, I would advise the patent holder that in light of the TS Tech decision, there is a very good chance that the defendant will succeed in getting the case transferred to another more convenient venue. For defendants, my advice would basically be the other side of the coin - if they are sued in the ED Texas and the only connection to the ED Texas is that the accused products are sold there, they should file a motion to transfer the case to a more convenient venue, such as where the defendants are located. Of course, they should cite the CAFC's TS Tech decision in their motion papers.

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