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Article: January 2021: Federal Circuit Provides Further Guidance on Section 1404 Transfer Analysis

January 27, 2021

The U.S. Court of Appeals for the Federal Circuit recently provided important new guidance regarding the proper analysis for a 28 U.S.C. § 1404(a) motion to transfer venue in patent cases. Specifically, in In re Apple Inc., 979 F.3d 1332 (Fed. Cir. 2020), a divided panel of the Federal Circuit granted Apple’s petition for a writ of mandamus, ordering the district court to transfer a patent-infringement lawsuit from the Western District of Texas (WDTX) to the Northern District of California (NDCA). This decision clarifies many aspects of the § 1404 analysis, and appears to continue a recent trend towards a more stringent venue framework in patent cases.

The underlying patent infringement case (No. 6:19- cv-00532) was filed by Uniloc LLC against Apple in September 2019 in the Waco division of WDTX before Judge Alan Albright. In November 2019, Apple moved to transfer, arguing that NDCA was a clearly more convenient forum to litigate. The district court held a hearing on Apple’s motion on May 12, 2020, during which it denied the motion and indicated that a written order would follow as soon as possible. The district court subsequently held a claim construction hearing and issued a claim construction order. On June 15, Apple filed its petition for a writ of mandamus, and the district court entered its written order denying transfer one-week later, on June 22.

The first significant aspect of the Federal Circuit’s ruling was an apparent criticism of the district court’s delay in issuing an order on the motion to transfer. Because the district court’s order denying transfer was issued only after the filing of the petition, Uniloc argued that the petition failed to address many bases for the district court’s order, and Apple waived arguments raised for the first time in its reply brief. The Federal Circuit disagreed, holding that Apple was justified in filing its petition prior to the district court’s written order, given the “rapid progression” of the case. In re Apple, 979 F.3d at 1337-38. In so holding, the Federal Circuit faulted the district court for “barrel[ing] ahead on the merits in significant respects,” including by considering and resolving claim construction issues while the written order on the motion to transfer remained outstanding. Id. at 1338. Notably, the Federal Circuit clarified that “once a party files a transfer motion, disposing of that motion should unquestionably take top priority.” Id. at 1337. Going forward, this ruling may foster a renewed focus by district courts in promptly deciding motions to transfer venue in patent cases.

The Federal Circuit’s decision is also notable on the merits. As Judge Moore pointed out in her dissent, there were many reasons suggesting that the issue before the district court was a close one, including the fact that Apple maintained a large campus in WDTX employing thousands of people, Apple manufactured one of the accused products in WDTX, and both third-party and party witnesses were located in WDTX. Id. at 1347 (dissenting opinion). Nevertheless, the majority opinion held that the district court clearly abused its discretion in denying transfer, and granted the extraordinary remedy of mandamus. Id. at 1347. In the process, the Court provided significant new guidance in the application of the public and private factors governing the § 1404 transfer analysis.

            “Relative Ease of Access to Sources of Proof”—First, the Federal Circuit found that the district court failed to “meaningfully compare” Apple’s sources of proof in NDCA to that in or near WDTX. In re Apple, 979 F.3d at 1340. Specifically, the Court found that the district court may have erred in “overemphasizing” sources of proof in WDTX. Id. at 1340-41. While the Court did not question that some relevant documentation was located in WDTX, the Court suggested that this may not have been sufficient to outweigh “wealth of important information” that Apple stored at its headquarters in NDCA. Id. at 1340. The Court reiterated prior holdings that “[i]n patent infringement cases, the bulk of the relevant evidence usually comes from the accused infringer.” Id. at 1340, quoting In re Genentech, Inc., 566 F.3d 1338, 1345 (Fed. Cir. 2009). Despite making these observations, however, the Court declined to disturb the district court’s finding that this factor was “neutral,” given its finding that the additional factors were sufficient to warrant transfer. In re Apple, 979 F.3d at 1340-41.    

            “Cost of Attendance for Willing Witnesses”—Next, the Federal Circuit addressed the district court’s conclusion that third-party witnesses in New York weighed against transfer. Under Fifth Circuit law, “the factor of inconvenience to witnesses increases in direct relationship to the additional distance to be traveled.” Id. at 1341, quoting In re Volkswagen of Am., Inc., 545 F.3d 304, 310 (5th Cir. 2008) (en banc). Yet, the Federal Circuit held, the district court erred in applying this principle too “rigidly.” In re Apple, 979 F.3d at 1342. Although NDCA was technically farther than WDTX from the New York witnesses, the Federal Circuit observed that “in either instance these individuals will likely have to leave home for an extended period of time and incur travel, lodging, and related costs.” Id. Thus, the district court should have given greater weight to the presence of party witnesses in NDCA, rendering this factor clearly in favor of transfer. Id.

            “All Other Practical Problems That Make Trial Easy, Expeditious, and Inexpensive”—The Federal Circuit also found several problems with the district court’s analysis of the “other practical problems” factor.  First, while the district court found that “significant steps” had been taken towards resolution of the case, the Federal Circuit discounted these steps because “[a] district court’s decision to give undue priority to the merits of a case over a party’s transfer motion should not be counted against that party in the venue transfer analysis.”  Id. at 1343.  The Court also rejected the district court’s finding that NDCA had more pending cases than WDTX.  To the extent a comparison of the sheer number of cases in the respective venues was even properly considered under this factor, id. at 1343 n.4, the Court held that it was too “tenuously related” to the issue of time to trial, particularly given that the respective venues historically had comparable times to trial in civil cases, and NDCA actually had a shorter average time to trial in patent cases.  Id. at 1343-44.  Finally, the Court held that the district court erred in failing to assign at least some weight to pending cases in NDCA with at least some “overlapping issues.”  Id. at 1344.  Accordingly, the Federal Circuit held, this factor weighed at least slightly in favor of transfer.  Id.

            Administrative Difficulties Flowing from Court Congestion—Regarding court congestion, the Federal Circuit rejected the district court’s reliance on its own aggressive case scheduling order.  According to the Federal Circuit, “a district court cannot merely set an aggressive trial date and subsequently conclude, on that basis alone, that other forums that historically do not resolve cases at such an aggressive pace are more congested for venue transfer purposes.”  Id. at 1344.   The district court therefore erred in finding that this factor favored transfer.

            “The Local Interest in Having Localized Interests Decided at Home—Lastly, the Federal Circuit found that the district court had placed too much emphasis on Apple’s “general contacts with the forum that are untethered to the lawsuit.” Id. at 1345. Per the Federal Circuit, this factor properly “regards not merely the parties’ significant connections to each forum writ large, but rather the ‘significant connections between a particular venue and the events that gave rise to a suit.’” Id., quoting In re Acer Am. Corp., 626 F.3d 1252, 1256 (Fed. Cir. 2010). Noting the significant connections between NDCA and the specific events giving rise to the suit (e.g.¸ the presence of the plaintiff in NDCA and the fact that the accused products were designed, developed, and tested in NDCA), the Federal Circuit held this factor should have weighed in favor of transfer. In re Apple, 979 F.3d at 1345.

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In re Apple is notable not only for the new guidance it provides on the § 1404 transfer factors, but also for the close scrutiny applied to a district court’s order denying transfer. Going forward, the decision may signal increased scrutiny of venue in patent cases, and may provide defendants with increased opportunity to transfer to the venue of their principle place of business.