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Federal Circuit Again Orders Transfer from Eastern District of Texas

December 02, 2009

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Last Month at the Federal Circuit - January 2010

Judges: Lourie, Friedman, Gajarsa (author)

[Appealed from: E.D. Tex., Chief Judge Folsom]

In In re Hoffmann-La Roche Inc., No. 09-M911 (Fed. Cir. Dec. 2, 2009), the Federal Circuit held that the U.S. District Court for the Eastern District of Texas clearly abused its discretion in denying the defendants’ motion to transfer venue pursuant to 28 U.S.C. § 1404(a).  The Federal Circuit granted the petition for a writ of mandamus to direct the district court to transfer the case to the Eastern District of North Carolina.

Hoffmann-La Roche Inc., Roche Laboratories Inc., Roche Colorado Corp. (collectively “Roche”), and Trimeris, Inc. (“Trimeris”) make Fuzeon®, an HIV inhibitor drug.  Trimeris developed the drug in North Carolina.  Roche manufactures and markets the drug at various facilities and through several subsidiaries in Colorado, Michigan, New Jersey, and Switzerland.  Novartis Vaccines and Diagnostics, Inc. (“Novartis”), a company headquartered in California, brought this suit in the Eastern District of Texas, alleging that Fuzeon® infringed its patent.  Roche and Trimeris moved to transfer the case to the Eastern District of North Carolina. 

The district court denied the transfer motion, reasoning that in this “decentralized” case, transfer would merely shift inconveniences among witnesses.  The district court noted its subpoena power over one of the potential witnesses to attend trial and emphasized that Novartis had transferred 75,000 pages of documents in electronic format to the district.  It also found no localized interest in the case in either venue.  Roche and Trimeris filed a petition for a writ of mandamus with the Federal Circuit.

The Federal Circuit observed “a stark contrast in relevance, convenience, and fairness” between the two venues.  Slip op. at 5.  According to the Court, multiple factors favored the transfer to the Eastern District of North Carolina.  First, Trimeris developed and tested Fuzeon® within the district and still maintains the bulk of the key documentary evidence there.  Second, the district has strong local interest because the case calls into question the work and reputation of individuals who reside in or near the district and conduct business there.  Third, if the case were transferred, the district court could compel at least four nonparty witnesses, all of whom reside within 100 miles of the district, for both deposition and trial testimony.  Also, the Eastern District of North Carolina has a less congested docket and may be able to resolve the dispute expeditiously.

On the other hand, the Court discerned no connection between the case and the Eastern District of Texas.  It first rejected the labeling of the 75,000 pages of documents transferred to the district in electronic format as “Texas” documents.  Only in anticipation of this litigation did Novartis’s counsel in California convert these documents into electronic format and transfer them to its Texas local counsel, the Court noted.  Through such a maneuver, the Court concluded, Novartis created a “fiction” to manipulate the propriety of venue.  But, § 1404(a) prohibits this type of litigation tactic, the Court admonished, because the statute “prevent[s] parties who are opposed to a change to venue from defeating a transfer which, but for their own deliberate acts or omissions, would be proper, convenient and just.”  Id. at 6 (quoting Van Dusen v. Barrack, 376 U.S. 612, 625 (1964)). 

The Federal Circuit next concluded that the Eastern District of Texas gave too much weight to its ability to compel one witness to attend trial.  This witness resides in Texas but more than 100 miles outside the district.  Thus, under Rule 45 of the Federal Rules of Civil Procedure, even though the district court has authority to compel her attendance at trial, it cannot compel her attendance at a deposition within the district as any such subpoena would be subject to a motion to quash, the Court analyzed.  Because the Fifth Circuit defines “absolute subpoena power” as subpoena power “for both depositions and trial,” the Eastern District of Texas does not have absolute subpoena power over this witness, the Federal Circuit concluded.  In contrast, the Eastern District of North Carolina has absolute subpoena power over at least four nonparty witnesses. 

In addition, the Federal Circuit found that the district court failed to assess convenience and fairness to all the potential witnesses.  The Court observed that the one witness over whom the Eastern District of Texas has authority would have to travel more than 100 miles to attend trial; on the other hand, the four witnesses subject to the absolute subpoena power of the Eastern District of North Carolina could attend both trial and deposition without incurring similar inconvenience.  Under In re Volkswagen of America, Inc., 545 F.3d 304, 316 (5th Cir. 2008) (en banc), the district court should have considered the factor of subpoena power in favor of transfer, the Federal Circuit noted. 

The district court also erred in finding that neither venue had local interest in this case, the Federal Circuit held.  Citing In re TS Tech USA Corp., 551 F.3d 1315 (Fed. Cir. 2008), and In re Genentech, Inc., 566 F.3d 1338 (Fed. Cir. 2009), its first two decisions transferring patent infringement cases out of the Eastern District of Texas, the Court repeated that “[w]hile the sale of an accused product offered nationwide does not give rise to a substantial interest in any single venue, if there are significant connections between a particular venue and the events that gave rise to a suit, this factor should be weighed in that venue’s favor.”  Slip op. at 8 (citations omitted).  According to the Court, the Eastern District of North Carolina’s interest in this matter is “self-evident,” while the Eastern District of Texas has no meaningful connection to the case.  Id.  And because the district court ignored this significant contrast and exclusively relied on other forum non conveniens factors, it rendered the factor of local interest meaningless.

For all these reasons, the Federal Circuit granted the petition for a writ of mandamus and directed the district court to transfer the case to the Eastern District of North Carolina.

Summary authored by Zhenyu Yang, Ph.D., Esq.