Court Won't Move Patent Lawsuit Out Of East Texas, Despite Plaintiff's 'Ephemeral' Connection To Texas
from the we're-all-from-east-texas-now dept
As has been discussed plenty of times, a disproportionate number of patent lawsuits are filed in East Texas, under the belief that the venue is the most friendly to patent holders (there is some debate lately about how accurate this is, but either way it remains, by far, the most popular place for patent lawsuits). This happened even in cases where there was clearly no reason for the case to be heard in Texas. My favorite is the story of two San Jose, California companies, whose offices were blocks away from each other… who ended up in an East Texas court to fight a patent battle. Two years ago, the Federal Circuit suggested courts should be more willing to transfer cases that don’t really belong in their district — a clear warning shot at East Texas.
In response, there were a few cases moved to more convenient locations. However, there were also some rather transparent efforts by patent holders to convince a court that these lawsuits should remain in East Texas. For example, some patent holders started suing lots of companies all over the place, so they could argue that East Texas was just as convenient as anywhere else. Then there are the cases that sue a bunch of big companies elsewhere, and then find some random small company in East Texas to include as well — sometimes picking companies that don’t even exist.
One trick that’s getting popular is to set up a shell corporation in East Texas right before filing the lawsuit. Unfortunately, it looks like this particular tactic is working. We recently mentioned one such case involving a company from Michigan that “moved” in name only to Texas right before filing the lawsuit. The judge in East Texas refused to move the case, saying that the move could have been for any reason, such as the “tax benefits.” As I noted at the end of that post, if you want to make some money, now is a good time to set up a “business” that helps others quickly set up an “office” in East Texas, because it’s about to get popular.
It’s now about to get even more popular.
In another case with a very similar story — involving a patent holding company who sued Apple, Sirius XM, Archos and others over a patent — the patent holder, one Personal Audio LLC, had only set up offices in Texas two months before the lawsuit and has no employees in Texas. In fact, the “office” just happens to be in the same office as the patent holders’ lawyers. The district court refused to transfer to Massachusetts (despite a bunch of the witnesses being in Massachusetts), saying that East Texas was now the “home venue” for the company, so it made sense. The companies appealed, but it looks like the Federal Circuit has agreed with the lower court. Even while noting that Personal Audio’s presence in Texas is “both recent and ephemeral,” it refused to transfer the case, saying that the defendants failed to make a “compelling showing that Massachusetts is a more convenient forum.”
The key point may have been that none of the sued companies were based in Massachusetts — so companies looking to transfer cases out of East Texas might want to think about their home districts as possible destinations. However, the fact that so many witnesses were in Massachusetts and that the patent holder clearly was not really in Texas seems like reasonable arguments for moving the case. Apparently the courts feel differently.