Federal Circuit Holds Defendant’s State of Incorporation (Delaware) Improper Venue

By Dennis Crouch

54727largeLogoIn re Link_A_Media Devices Corp. (LAMD) (Fed. Cir. 2011)    

Introduction: The Federal Circuit has again asserted mandamus power to order a patent case to be transferred to a more convenient forum under 28 U.S.C. § 1404(a) – holding that Judge Robinson's denial of transfer out of Delaware was an abused of discretion.

Three facts make the case somewhat interesting and novel. First, the transfer is not out of Texas, but rather from Delaware to the Northern District of California. Second, the defendant, LAMD, who requested the transfer is a Delaware Corporation (although its operations are in California). Finally, the plaintiff, Marvell Int'l., is a foreign entity based in Bermuda although its subsidiary, Marvell Semiconductors, and the named inventors are all based in California.

Legal Background: The due process clauses of the US Constitution have been read to place personal jurisdiction limitations on the power of courts to pass judgment on non-resident parties. In patent cases, personal jurisdiction is rarely an issue because most defendants are national-players that have sufficient minimum contacts in every local jurisdiction.

Even when a court has personal jurisdiction over a case, the laws of civil procedure allow a court to transfer a case to a different jurisdiction "[f]or the convenience of the parties and witnesses, in the interest of justice." 28 U.S.C. § 1404(a). This provision in the law is derived from the common law doctrine of forum non conveniens and there continues to be cross-talk between the two docrines.

Lower Court Decision: In her decision to keep the case in Delaware, Judge Robinson primarily gave weight to three factors: (1) the plaintiff's choice of forum; (2) the defendant's choice of Delaware as its state of incorporation; and (3) the international (rather than regional) nature of the defendant. In addition, the court found no "congestion" problems or identified problems "with discovery or witness availability."

On appeal, the Federal Circuit reversed – holding that the fact that a defendant is incorporated in the forum state is only one factor to be considered in the analysis.

The Federal Circuit particularly pointed to four errors in the district court's analysis.

Choice-of-Forum: First, the court indicated that "far too much weight" was given to the plaintiff's choice of forum. While some weight may be given to that choice, the plaintiff's choice is given less deference when the forum is not the home-forum of the plaintiff. (Note, this result has the potential of being discriminatory to foreign entities under TRIPs because the foreign entities have no "home forum" in the US.)

State of Incorporation: Second, the appellate court held that heavy reliance on state of incorporation is inappropriate.

Neither § 1404 nor Jumara [the leading 3rd Circuit 1404 case] list a party's state of incorporation as a factor for a venue inquiry. It is certainly not a dispositive fact in the venue transfer analysis, as the district court in this case seemed to believe.

Convenience of Records: Judge Robinson refused to give weight to the convenience of witnesses and location of books and records – holding that those traditional 1404 factors are "outdated" except where truly regional defendants are litigating. The Federal Circuit held that at least some consideration should have been given to these factors.

Public Interest: Finally, the court looked to the interest of the forum jurisdiction (Delaware) in deciding the case and found it had very little interest because the state had no connection to the dispute and no connection to the parties other than the fact that LAMD is incorporated there.

Holding: The District Court is ordered to direct transfer of the case to the United States District Court for the Northern District of California.

  • It is important to note here that the Federal Circuit based its mandamus decision on 3rd Circuit law rather than Federal Circuit law.
  • Pilar G. Kraman discussed the district court decision at the Delaware IP Law Blog.

11 thoughts on “Federal Circuit Holds Defendant’s State of Incorporation (Delaware) Improper Venue

  1. TJ’s right. “Improper venue” is a term (phrase) of art having the special meaning TJ described. I also felt the title of this post was misleading because section 1404 deals with discretionary transfer between two “proper” venues.

    The Federal Circuit held that the district court committed clear error by affording the place of incorporation excessive weight in the inter-venue analysis. That is all.

  2. The CAFC has denied mandamus petitions like this from outside the Eastern District of Texas, but I think this is the first such petition that it’s granted.

  3. The title of the post made me pause, too, but I think it’s accurate. The CAFC held that the petitioner had a “clear and indisputable” right to the transfer — sounds like “improper” to me. Is the issue with the term venue?

  4. Just a quibble with the language. I think “improper venue” is typically used in civil procedure to mean a mandatory dismissal under FRCP 12(b)(3), for failure to comply with 28 USC 1391 and 1400. Holding the defendant’s state of incorporation to be improper venue in this sense would be outrageously wrong. Rather, the venue is proper, but it was inconvenient and subject to discretionary transfer under 1404(a).

  5. I wonder why the plaintiff spent all this time and money pushing for the Delaware venue when this was obviously at the edges of a 1404 transfer. Is there really much of a difference between the judges and jury pools in the venues? Yes, there is the potential for a local defendant bias out here in the N.D. Cal., but I’m skeptical that it amounts to much.

  6. The 3rd Circuit allows mandamus in 1404(a) cases only if the district court “amounted to a failure to meaningfully consider the merits of the transfer motion. See Swindell-Dressler Corp. v. Dumbauld, 308 F.2d 267, 272 (3d Cir. 1962).

    “…In this case, the district court failed to balance those factors fairly and instead elevated two considerations to overriding importance.”

    Are “fairly” and “failure to meaningfully” the same thing? I suggest not. I think what had to be shown is that the DC actually failed to consider the relevant factors. That may have been the case here. But I think “fairness” is not the appropriate standard.

  7. Good news! Hopefully trolls will not be able dodge this decision by setting up phony offices for their shell corporations in Delaware as in E.D. TX. I.e., hopefully that will also not provide an excuse for continued multiple-unrelated-defendant troll suits with pro forma un-specific complaints contrary to the new AIA anti-joinder statute?

  8. Judge Robinson refused to give weight to the convenience of witnesses and location of books and records – holding that those traditional 1404 factors are “outdated” except where truly regional defendants are litigating.

    Says the Judge who won’t be required to fly anywhere for any period of time, regardless of where the case ends up.

  9. Choice-of-Forum: First, the court indicated that “far too much weight” was given to the plaintiff’s choice of forum. While some weight may be given to that choice, the plaintiff’s choice is given less deference when the forum is not the home-forum of the plaintiff. (Note, this result has the potential of being discriminatory to foreign entities under TRIPs because the foreign entities have no “home forum” in the US.)

    I’m not sure “discriminatory” is the right word here. In any event, it seems to be a reasonable result. Perhaps it would be more accurate to simply say “this result means that the choice of forum of foreign entities will generally be given less deference than the choice of forum of domestic entities who choose a court in their home state.”

    Maybe Pedantic Pete will chime in … ;)

    I’m glad to see the Federal Circuit continue to move in this reason-based direction, though.

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