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The Federal Circuit Orders Another Case Transferred out of the Eastern District of Texas and to a Defendant’s Home District

09-M901
May 22, 2009

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Last Month at the Federal Circuit - June 2009

Judges: Michel, Friedman, Linn (author)

[Appealed from: E.D. Tex., Judge Clark]

In In re Genentech, Inc., No. 09-M901 (Fed. Cir. May 22, 2009), the Federal Circuit granted the accused infringers’ petition for a writ of mandamus to direct the U.S. District Court for the Eastern District of Texas to vacate the district court’s denial of a transfer of venue and to transfer the case to the Northern District of California.

The petition arose out of a patent infringement suit brought in the Eastern District of Texas by German pharmaceutical company Sanofi -Aventis Deutschland GmbH (“Sanofi ”) against California-based Genentech, Inc. (“Genentech”) and Biogen Idec Inc. (“Biogen”). The two biotechnology companies filed a related DJ action in the Northern District of California on the same day and then filed with the Texas court a motion to transfer the suit to California pursuant to 28 U.S.C. § 1404(a).

The district court denied the motion to transfer, finding that none of the witnesses that resided in the Northern District of California was identified as “key witnesses.” The district court also emphasized Texas’s central location to the European and U.S. parties and witnesses. Finally, the court found highly persuasive Genentech’s previous appearance as a plaintiff in the Eastern District of Texas.

In response, Genentech and Biogen filed a petition with the Federal Circuit for a writ of mandamus to direct the district court to vacate its order denying the transfer and to transfer the case to California. Petitioners challenged the district court’s weighing of the factors, arguing that the denial was patently erroneous under Fifth Circuit law that a motion to transfer should be granted, and the suit transferred to a district where it might have been brought, when the transferee venue “is clearly more convenient” than the plaintiff’s chosen venue. The parties did not dispute that Sanofi could have brought suit in the Northern District of California.

The Federal Circuit started by assessing the convenience of each venue for the witnesses and rejected all of the district court’s reasons why this factor did not favor transfer. First, the appellate court concluded that by requiring the petitioners to identify “key witnesses” within the transferee venue, the lower court had held the petitioners to a “higher standard than required by the law.” Slip op. at 7. The petitioners identified ten witnesses within the Northern District of California and an additional four witnesses within California who possessed relevant and material information. The identification of such witnesses, held the Court, favored transfer.

Second, the Federal Circuit held that the district court improperly applied the Fifth Circuit’s “100-mile” rule to witnesses traveling from Europe and thus erroneously held that the rule did not favor transfer. The “100-mile” rule dictates that the additional inconvenience to witnesses of traveling more than 100 miles increases in direct relationship to the additional distance traveled. But, reasoned the Court, witnesses from overseas must travel a significant distance regardless of the venue, while denying the transfer meant inconveniencing a substantial number of witnesses residing in the transferee venue. The Federal Circuit thus concluded that rigid application of the “100-mile” rule to give too significant weight to the inconvenience of the European witnesses could not stand when it did so at the expense of creating unnecessary inconvenience for other witnesses.

Third, the Federal Circuit held improper the district court’s emphasis on its central location as more convenient for U.S. witnesses from Iowa and the East Coast. It ignored that no witness is a resident of Texas, let alone of the Eastern District of Texas, and thus the situation was distinguishable from the only case cited by Sanofi in support, United States v. Binder, 794 F.2d 1195 (7th Cir. 1986), in which a substantial number of witnesses resided in both the transferor and transferee venues.

Finally, the Federal Circuit disagreed with the lower court’s rigid assessment that this factor should only favor transfer if it is more convenient for all of the witnesses. Because a substantial number of material witnesses resided in California and no witnesses resided in Texas, the Court held that the district court clearly erred in not determining that the convenience for witnesses factor weighed substantially in favor of transfer.

The Federal Circuit then turned to the convenience of the parties, finding that this factor also weighed significantly in favor of transfer. Genentech is headquartered in the Northern District of California and Biogen in San Diego, California, which is twice as close to the transferee venue as to Texas. In contrast, Europe-based Sanofi must travel a great distance regardless of the venue and thus would be only slightly more inconvenienced by having the case tried in California rather than Texas.

As for the availability of compulsory process, the Court noted that there is a substantial number of witnesses within the subpoena power of the Northern District of California and no witness who can be compelled to appear in the Eastern District of Texas. This factor therefore weighed in favor of transfer.

The Federal Circuit next weighed the access of each venue to sources of evidence and held that the district court clearly erred in counting this factor as neutral rather than as favoring transfer. The Court noted that it would only be slightly more inconvenient or costly to transport documents from overseas and Washington, DC to California rather than Texas. Moreover, the Court noted that the Fifth Circuit had rejected the district court’s reasoning that the physical location of documents is antiquated in light of modern methods of electronic storage and transmission.

The Federal Circuit also rejected the two practical problems identified by the district court as weighing significantly against transfer. First, the Federal Circuit held that the district court clearly erred in relying on Genentech’s earlier decision to file suit in the Eastern District of Texas in light of clear Supreme Court precedent that each transfer requires an individualized consideration of convenience and fairness. Second, the district court clearly erred in relying on the possibility that the Northern District of California lacked personal jurisdiction over Sanofi. Section 1404(a), the Court stated, does not require that the transferee court have jurisdiction over the plaintiff, only that it be a venue with jurisdiction over the defendants.

Finally, with regard to the administrative difficulties caused by court congestion, the Federal Circuit left undisturbed the district court’s finding based on statistics that it could dispose of the case more quickly. It noted, however, that “this factor appears to be the most speculative” and should not alone outweigh all of the other factors. Slip op. at 14. And with regard to the competing local interest of the transferor and
transferee venue in trying the case, the Federal Circuit noted that even if this interest only slightly favored transfer, as the district court decided, it favors it along with all the other relevant factors.

The Federal Circuit concluded that in denying the motion to transfer, the district court had clearly abused its discretion and produced a patently erroneous result. And, as petitioners had no other means of obtaining their requested relief, the court granted mandamus and ordered the case transferred out of the Eastern District of Texas and to the Northern District of California.

Summary authored by Sarah E. Craven, Ph.D., Esq.