July 7, 2021
On June 30, in In re: Samsung Electronics Co., Ltd., et al., the Federal Circuit held that it was not bound by the plaintiffs’ attempts to manipulate venue and granted petitions for writs of mandamus filed by defendants Samsung Electronics Co., Ltd., Samsung Electronics America, Inc., LG Electronics Co., Ltd. and LG Electronics USA, Inc. The writs order the U.S. District Court for the Western District of Texas (Judge Albright presiding) to transfer venue to the Northern District of California in patent infringement actions brought by plaintiffs Ikorongo Texas LLC and Ikorongo Technology LLC regarding four patents. The Federal Circuit discounted certain prelitigation transactions, through which the plaintiff attempted to exclude the Northern District of California as a venue where the suit “might have been brought” and to sway the merits of the private and public interest factors against transfer under 28 U.S.C. § 1404(a).
The two plaintiffs were non-practicing entities claiming to be unrelated, but they were commonly owned by five individuals with an office in North Carolina. Ikorongo Tech, a North Carolina company, owned the four patents. Ten days before filing suit, Ikorongo Tech assigned to Ikorongo Texas the exclusive rights to sue for infringement of those patents within specified parts of Texas, including certain counties in the Western District of Texas, while Ikorongo Tech retained rights to the patents in the rest of the country. Ikorongo Texas alone initially filed complaints in two separate actions in the Western District of Texas. The next day, Ikorongo Tech was added to the suits in amended complaints.
In moving to transfer venue to the Northern District of California, defendants Samsung and LG argued that three of the five accused applications used in the defendants’ products were developed by third parties in the Northern District of California and no targeted application was developed in the Western District of Texas. They further argued that potential witnesses and sources of proof, including two of the named inventors, were located in the Northern District of California, and that no source of proof or potential witness was located in the Western District of Texas.
In denying the motion to transfer, the district court had held that the defendants failed to establish the threshold requirement that the suits, even as amended to include Ikorongo Tech, “might have been brought” in the Northern District of California because Ikorongo Texas’s rights under the asserted patents could not have been infringed in the Northern District of California. Therefore, the district court held that venue over the entirety of the actions was improper under section 1400(b). Alternatively, the district court held that the private and public interest factors weighed against transfer to the Northern District of California “for the convenience of parties and witnesses, in the interest of justice” under section 1404(a).
In granting the petitions for writ of mandamus and ordering transfer of venue, the Federal Circuit held that the suits “might have been brought” in the Northern District of California. The court first rejected the plaintiffs’ argument that the initial complaints filed only by Ikorongo Texas (which asserted infringement occurring only in the Western District of Texas) governs the inquiry. Instead of looking only at the original complaints, the court focused on the amended complaints and stated that the original complaints were “dead letter[s]” and “no longer performed[ed] any functioned in the cases[s]” (quoting from ConnectU LLC v. Zuckerberg).
The Federal Circuit held, however, that the suit might have been brought in the Northern District of California because it was not bound by the plaintiffs’ efforts to manipulate venue through its pre-suit creation of Ikorongo Texas and assignment of the patents to it. Noting that Ikorongo Texas “seems to exist for the sole purpose of limiting venue to the Western District of Texas” and its presence “is plainly recent, ephemeral and artificial—just the sort of maneuver in anticipation of litigation that has been routinely rejected,” the court held that it “need not consider separately Ikorongo Texas’s geographically bounded claims.” The court further stated that “disregarding this manipulation, Ikorongo Tech could have filed suit in the Northern District of California.”
The Federal Circuit also maintained that the way the district court balanced convenience and fairness factors against practical and public concerns factors was an abuse of discretion. The Federal Circuit noted that the district court erroneously failed to give any weight to the presence of possible party witnesses in the Northern District of California and erroneously discounted the convenience of third-party witnesses by presuming that “only a few … non-party witnesses will likely testify at trial.” The Federal Circuit also noted that even if not all witnesses testify, with no witnesses “on the other side of the ledger, the factor strongly favors transfer.” In disagreeing with the district court’s discounting of the local interest in the case in the Northern District of California where the third-party applications were developed, the Federal Circuit rejected the district court’s statement that the local interest in patent cases is “generally a fiction,” stating, “Local interests are not a fiction, and the record evidence here shows a substantial local interest.”
This decision is notable in demonstrating that attempts to manipulate venue through pre- litigation transactions may be viewed with suspicion and ignored by a court in determining the propriety of a transfer of venue.
For more information regarding this matter, please contact Fitch Even partner Karl R. Fink, author of this alert.
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