In re Nitro Fluids L.L.C. (Fed. Cir. 2020)

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Venue in patent cases has been a topic of recent Supreme Court (TC Heartland LLC v. Kraft Foods Group Brands LLC) and Federal Circuit (In re Cray) consideration.  Last month, the Federal Circuit again considered venue with regard to a motion to transfer and defendant's writ of mandamus challenging the District Court's denial of its transfer motion, in In re Nitro Fluids L.L.C.

The issue arose when plaintiff Cameron International Corp. filed suit against Nitro Fluids, LLC in the Southern District of Texas in 2018 over three patents; the opinion notes that both parties are headquartered there, making venue proper under 35 U.S.C. § 1404(a).  The case lingered:  by early 2020 (pre-COVID), there had been no claim construction performed nor trial date set.  Cameron then filed suit against Nitro in 2020 in the Western District of Texas, raising patent infringement of two other patents and the same products. Nitro moved the Western District Court either to refuse jurisdiction or transfer to the Southern District for consolidation.  The Western District denied the motion.  In its reasoning, the District Court recognized that such motions are typically resolved under the first-to-file rule, wherein "the court in which an action is first filed is the appropriate court to determine whether subsequently filed cases involving substantially similar issues should proceed."  Save Power Ltd. v. Syntek Fin. Corp., 121 F.3d 947, 950 (5th Cir. 1997).  But the District Court recognized another principle, that such a motion can be denied when there are "sufficiently compelling circumstances" to avoid applying the rule, citing Mann Mfg., Inc. v. Hortex, Inc., 439 F.2d 403, 407 (5th Cir. 1971).  And those compelling reasons are determined by a balancing of the "traditional transfer factors" under 28 U.S.C. § 1404(a) and can result in denial of the transfer motion when they do not weigh in favor of transfer.

The District Court supported its decision to deny the motion by saying that "two of the factors—the relative ease of access to sources of proof and the local interest in having localized interests decided at home— both favored transfer" while "the administrative difficulties flowing from court congestion weighed against transfer," and the "practical problems factor" weighed "heavily against transfer" because Cameron had filed a co-pending suit against another defendant in the Western District and that could raise inconsistent claim construction issues as a result.

Nitro filed a petition for writ of mandamus to the Federal Circuit, to compel the Western District to either dismiss the action or transfer to the Southern District of Texas.  As noted in In re Cray, the standards for having a writ of mandamus granted are high:  only "exceptional circumstances" will suffice.  There are three general requirements for obtaining a writ:

• The Petitioner must have no other "adequate means of obtaining the relief petitioned for (Cheney v. U.S. Dist. Court for Dist. of Columbia, 542 U.S. 367, 380 (2004))

• The Petitioner's right to the writ (and the relief petitioned for) must be "clear and indisputable" (Id., citing Kerr v. U.S. Dist. Court for N. Dist. of Cal., 426 U.S. 394, 403 (1976))

• The Court issuing the writ must be "satisfied that the writ is appropriate under the circumstances."

The Federal Circuit granted the writ, in an order support by an opinion by Judge Reyna, joined by Judges Wallach and Chen.  The standard of review the Court applied was abuse of discretion, citing In re Genentech Inc., 566 F.3d 1338, 1348 (Fed. Cir. 2009), which could result "on an erroneous view of the law or on a clearly erroneous assessment of the evidence," citing Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 405 (1990).

The panel reviewed the District Court's decision under 5th Circuit law (albeit voicing the opinion in a footnote that Federal Circuit law would not result in a different conclusion here).  The Federal Circuit understood the basis for the District Court's decision to be that "the legal proposition that the first-to-file rule is only applicable when the balance of factors favors the first-filed court."  "That proposition," according to the panel, "is contrary to law."  Even worse, the panel believed that the cases the District Court cited in support of its decision show that the court "had the matter[] backwards."  The correct statement of the law according to the Court is that "[u]nless the balance of transfer factors favor keeping the case in the second-filed court, there are no compelling circumstances to justify such an exception," citing decisions from the 2nd, 11th, and 5th Circuits in support.  The opinion found "good reasons for making these adjustments from an ordinary § 1404(a) calculus."  For example, deference to plaintiff's choice of forum is usually to be respected in transfer motions.  But this deference is not owed to a party that has instituted "two substantially overlapping proceedings continue at the same time before two different courts."  And these typical transfer considerations also seek to avoid "potential interference in the affairs of another court" which is accomplished in instances such as the one before the Western District by requiring that "the balance of the transfer factors favor the second-filed court" before denying a transfer motion.

Under the Court's analysis mandamus relief was warranted because "[t]he district court did not expressly resolve the critical issue of whether a balance of the factors favors the second-filed court."  Although the District Court had analyzed the different factors in the transfer calculus it did not (apparently) indicate "that those factors were important enough to warrant, on balance, favoring" denying the motion to transfer.  Perhaps more relevant, and specifically cited by the panel, was the District Court's assessment that for the "court congestion" factor the history of the first-filed action (showing little progress to trial after 2 years pendency) favored the Western District as being able to hear the case more expeditiously because the court has "patent-specific" orders resulting in quicker patent adjudications.  The proper focus of this factor, according to the opinion, was whether there is "an appreciable difference in docket congestion between the two forums" (and much of the factual bases for delay in the Southern District did not, in the panel's view, relate to "an appreciable difference" in trial scheduling).  While the opinion says the District Court "may be on stronger footing" in light of there being a related case brought by the same plaintiff against other defendants on the same patents, the panel considered the District Court's explanation of this factor to be "cursory" and that the court had not considered other alternatives (multidistrict litigation, for example).  For all these reasons the panel granted the writ, vacated the District Court's opinion and directed the Court to consider the transfer motion in light of this order.

In re Nitro Fluids L.L.C. (Fed. Cir. 2020)
Panel: Circuit Judges Reyna, Wallach, and Chen
Order by Circuit Judge Reyna

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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