October 5, 2020
On September 15, 2020, the Federal Circuit granted HP Inc.’s writ of mandamus overriding another attempt by the Eastern District of Texas (EDTX) to hold onto a patent infringement lawsuit with few ties to EDTX. The Federal Circuit issued its nonprecedential opinion in Largan Precision Co., Ltd. v. HP Inc., et al., Case No. 2020-140 (nonprecedential).
In the lawsuit, Largan, a Taiwanese company, sued HP, a company headquartered in Northern California, and Ability Opto-Electronics Technology Co., Ltd. (“AOET”), a Taiwanese company, for patent infringement. The complaint also named another Taiwanese company who has since settled with Largan.
HP moved in the lower court to transfer the case to the Northern District of California (“NDCA”), its home court, pursuant to 28 U.S.C. § 1404(a). The EDTX court, under the Fifth Circuit’s standard for venue transfer, denied the motion. The district court found that only the “local interest” factor slightly favored transfer, and that all other factors were either neutral or weighed against transfer.
The Federal Circuit found four errors in the trial court’s weighing of the factors. First, on the “willing witness” factor, even though the district court acknowledged that HP had identified witnesses located in NDCA and that no key witnesses appeared to reside in EDTX, it nonetheless held this factor neutral on the ground that many more significant witnesses resided in Taiwan. The Federal Circuit rejected the district court’s reasoning because it was inconsistent with the legal principle that the comparison between the transferor and transferee forums should not be altered by the presence of witnesses located somewhere else (i.e., outside both forums). Under this principle, the Federal Circuit found that this factor weighed at least slightly in favor of transfer.
Second, the Federal Circuit held that the district court made a similar mistake on the “sources of proof” factor by again letting the fact that most of the evidence would likely come from Taiwan alter its comparison between the two relevant forums. Because there were physical sources of proof in NDCA but not in EDTX, the Federal Circuit determined that this factor again weighed at least slightly in favor of transfer.
The third mistake made by the district court concerned the “compulsory process” factor (i.e., third-party production and testimony). HP identified two third-party entities in Northern California that had potentially relevant information. The record also showed that NDCA could compel those entities to produce information and testimony without the need to travel. Largan also identified Texas residents with relevant information, but those third parties resided more than 100 miles outside EDTX, which meant that EDTX could only compel testimony if it would not result in undue burden or a substantial expense to those third parties. The district court recognized that the third-party entities identified by HP would likely have relevant information but discounted HP’s evidence on the ground that HP had not identified any individual witnesses of those third parties by name. Given that Largan had identified its Texas third-party witnesses by name, the district court weighed this factor in favor of Largan. The Federal Circuit determined that it was unreasonable for the district court to discount HP’s third party witnesses just because HP did not identify them by name and found this factor to be, at a minimum, neutral.
The last error identified by the Federal Circuit related to the “practical problems” factor (i.e., the forum court’s familiarity with the case). The NDCA previously handled two patent infringement suits brought by Largan involving the same or similar technology and at least one of the asserted patents. The EDTX court, however, placed significant weight on its own familiarity with the case gained by deciding the two Taiwanese defendants’ personal jurisdiction challenges earlier in the proceeding. The Federal Circuit found this to be an error because the correct timing for comparison was when the suit was initiated, not when the motion was being decided.
In the end, the Federal Circuit noted that while mandamus ordinarily “does not reach all erroneous rulings of the district court,” this case presented “a stark contrast in relevance, convenience, and fairness between the two venues” that warranted a writ to direct transfer.
The Federal Circuit’s decision is encouraging for defendants seeking to transfer their cases out of a forum that has no particular ties to either side.
Author: Hui Liu