Federal Circuit Orders Eastern District of Texas Patent Suit Stayed

The WLF Legal Pufederal circuitlse has addressed the U.S. Court of Appeals for the Federal Circuit’s patent litigation venue jurisprudence in several posts (here and here). That court issued two rulings this past March (In re Apple Inc. and In re Barnes & Noble, Inc.) that, in our opinion, incorrectly applied factors the Federal Circuit had previously relied upon to order patent suits transferred to more appropriate venues. On October 9, a unanimous three-judge panel added another twist to the Federal Circuit’s venue case law with In re Google Inc.

Background. Last October, non-practicing entity Rockstar Consortium filed a patent infringement suit in the Eastern District of Texas (EDTX) against five companies whose technology utilized Google’s Android operating system. At the end of 2013, Google filed a declaratory judgment action against Rockstar in the Northern District of California (NDCA) that involved the same patents that Rockstar was suing to enforce in Texas. Rockstar countersued Google in the NDCA and concurrently added Google as a defendant in the EDTX action. Rockstar then moved to transfer or dismiss the California action, which the NDCA denied. Google and its five customers petitioned the EDTX to stay Rockstar’s infringement action pending an outcome in the NDCA, or to transfer the case to California. EDTX Judge James Rodney Gilstrap denied the order, and the six companies appealed.

Federal Circuit Ruling. Judge Kathleen O’Malley, writing for herself and Judges Evan Wallach and Todd Hughes, found that Judge Gilstrap had abused his discretion in rejecting the defendants’ request and ordered that Rockstar’s Texas action be stayed. Judge O’Malley first referenced U.S. Supreme Court precedents on the doctrine of comity, which explain that when cases “involving substantially overlapping issues are pending before two federal district courts,” courts should ensure “wise judicial administration.” She rejected Judge Gilstrap’s reliance on a “mechanical” interpretation of a patent litigation doctrine (the “customer-suit exception”) in favor of a more “flexible approach” that would avoid wasting judicial resources.

The Federal Circuit panel further reasoned that “the comparative convenience of both venues” supported staying the Eastern District of Texas action. The factors the panel assessed echoed the Federal Circuit’s decisions on venue transfer. Google’s Android products were “designed and created” in California; its Android platform records are in California; and no defense witnesses are located in Texas. The panel also noted that while Rockstar claims an office in the Eastern District of Texas, “their primary operations are run out of Canada.”

Takeaways. Although the In re Google Inc. opinion is labeled “nonprecedential,” the outcome is an encouraging one for operating companies sued in inconvenient venues. The existence of nearly identical cases in Texas and California was a major factor in the Federal Circuit’s decision, and Google’s decision to file a declaratory action in California was tactically a wise move in that regard.

Patent litigants should not, however, discount the “venue transfer” aspects of the panel’s decision. The factors that weighed in favor of staying the EDTX action—such as Rockstar’s actual place of business and the location of Google’s design activity and records—did not similarly sway the two Federal Circuit judges who rejected venue transfer in the March 2014 In re Apple and In re Barnes & Noble decisions. Judge O’Malley’s citation to a 2009 venue precedent, In re Genentech, Inc., is a positive indication that those flawed March 2014 decisions haven’t necessarily moved the Federal Circuit away from actively scrutinizing district court judges’ transfer decisions.

Also published by Forbes.com at WLF’s contributor site

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