Intellectual Property

California Dreaming

It will be interesting to see how the impact of this decision reverberates.

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Intellectual PropertyFor patent-focused Federal Circuit watchers, the past few years have seen the rise of a robust mandamus docket that continues to demand frequent monitoring. That need is particularly acute with respect to early stage procedural issues in big-ticket patent litigation, which most often involve large defendants and questions of venue being presented to the federal circuit. More pointedly, a healthy percentage of recent mandamus decisions have dealt with the treatment of requests by defendants to transfer their cases out of the Western District of Texas courtroom of Judge Alan Albright to defendant-friendlier climes, such as Texas or Washington state. In fact, just yesterday the Federal Circuit denied a mandamus petition filed by Amazon, where Amazon hoped to have a pending case before Albright transferred to the Northern District of California. While such mandamus petition decisions are issued routinely, there was another mandamus decision from the Federal Circuit issued yesterday that I think is worthy of additional discussion.

In fact, the Federal Circuit’s mandamus decision in In Re Stingray Solutions, LLC should prove to have broader implications than the typical mandamus review of an Albright transfer motion decision. In Stingray, the Federal Circuit panel granted the patent owner’s mandamus petition, which sought “to undo the United States District Court for the Eastern District of Texas’ order transferring two cases to the United States District Court for the Central District of California (‘CDCA’),” over the opposition of the defendant, Chinese technology company TP-Link. The two TP-Link entities sued were based overseas, in China and Hong Kong respectively, and argued that they were not subject to personal jurisdiction in the EDTX. TP-Link further argued “that Federal Rule of Civil Procedure 4(k)(2) ‘does not cure this jurisdictional defect because Defendants would be amenable to suit in the Central District of California.’”

Having been on the receiving end of a similar argument by a Chinese defendant in one of my own cases, the playbook for Chinese defendants with significant sales to retailers in the U.S. market — but no physical tie to U.S. soil otherwise — is a well-worn one. Here, TP-Link was comfortable agreeing to personal jurisdiction, but only if it could get its preferred venue in the bargain. Unsurprisingly, as a patent defendant TP-Link wanted to have the case move forward against it in California, as opposed to Texas.

After allowing for some jurisdictional discovery, Judge Gilstrap in the EDTX granted TP-Link’s motion under §1406, crediting TP-Link’s “affirmative representations ‘that CDCA has both proper jurisdiction and venue in this case.’” Stingray then filed its mandamus petition, arguing that Federal Rule of Civil Procedure 4(k)(2) allowed for the finding of personal jurisdiction over the TP-Link defendants in the EDTX, as they were both foreign entities. To start, the Federal Circuit panel first determined that the issue presented was ripe for treatment on mandamus, concluding that “unusual, exceptional circumstances presented by this case render mandamus review appropriate, as such review will permit us to resolve an important issue relating to proper judicial administration on which district courts have been divided.” The important issue presented? “[W]hether a defendant can defeat personal jurisdiction under Rule 4(k)(2) by unilaterally consenting to suit in a different district,” via a magical incantation — or whether more was needed before a district court could conclude that the rule did not apply to that defendant. The Federal Circuit concluded that the latter approach was more legally sound.

To get there, the panel first considered the history and purpose of Rule 4(k)(2), including the traditional burdening on defendants “to show that the negation requirement is not met — i.e., ‘the defendant is afforded the opportunity to avoid the application of the rule only when it designates a suitable forum in which the plaintiff could have brought suit.’” After brief discussion of earlier Federal Circuit treatment of the issue, the panel stated that “we now confirm that ‘the defendant’s burden under the negation requirement entails identifying a forum where the plaintiff could have brought suit — a forum where jurisdiction would have been proper at the time of filing, regardless of consent.’”

In so holding, the Federal Circuit has now precluded a defendant’s ability to “use a ‘unilateral statement of consent’ to preclude application of Rule 4(k)(2) and ‘achieve transfer into a forum it considers more convenient (or less convenient for its opponent).’” At bottom, the panel refused to give defendants a powerful forum-shopping sword to wield; one that could be wielded without the district court needing to perform the traditional convenience analysis on a motion to transfer under §1404. For TP-Link, therefore, its willingness to consent to jurisdiction in its preferred California venue would no longer be enough to insulate it from a district court’s analysis of its transfer motion on convenience grounds.

Ultimately, it very well be true that TP-Link will be able to get the case filed by Stingray from EDTX to CDCA. To get there, however, it will have to persuade Gilstrap that the case proceeding in California is clearly more convenient based on the facts relevant to the transfer analysis, or that “TP-Link can satisfy Rule 4(k)(2)’s negation requirement on the grounds that Stingray ‘could have brought suit’ in the Central District of California, independent of TP-Link’s post-suit consent.” That is of course a more involved process than being able to invoke transfer by saying that it is willing to consent to jurisdiction in California. At a minimum, I would expect that this decision will cause foreign-based patent defendants to weigh the benefit of consenting to jurisdiction in a particular forum against the cost and likelihood of success in litigating personal jurisdiction in the forum in which the case was originally filed. It will be interesting to see how the impact of this decision reverberates. In the meantime, we can be sure that defendants like TP-Link will continue their California Dreaming.

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Please feel free to send comments or questions to me at [email protected] or via Twitter: @gkroub. Any topic suggestions or thoughts are most welcome.

Gaston Kroub lives in Brooklyn and is a founding partner of Kroub, Silbersher & Kolmykov PLLC, an intellectual property litigation boutique, and Markman Advisors LLC, a leading consultancy on patent issues for the investment community. Gaston’s practice focuses on intellectual property litigation and related counseling, with a strong focus on patent matters. You can reach him at [email protected] or follow him on Twitter: @gkroub.

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