Federal Circuit calls BS on venue manipulation scheme

In re: Samsung Electronics co., Ltd.,

Samsung Electronics America, Inc., LG Electronics Inc., LG Electronics USA, Inc., Petitioners

2021-139 2021-140

June 30, 2021

Case Summary

Question: If a patent owner schemes to manipulate venue so a case can’t be transferred out of the Western District of Texas, will the Federal Circuit grudgingly go along with it? Answer: No.

Five individuals own Ikorongo Technologies, which is a North Carolina LLC that is the assignee of several patents relating to certain applications that run on smart phones. In an effort to keep a planned litigation against LG and Samsung before Judge Albright in the Western District of Texas, Ikorongo Tech’s five owners formed a new entity (Ikorongo Texas), and then assigned it the exclusive rights to sue for infringement and collect damages for Ikorongo Tech’s patents—but only for infringement that takes place in Texas counties that are located in the Western District. Ikorongo Tech retained the rights to sue for patent infringement everywhere else.

Ikorongo Tech and Ikorongo Texas ultimately sued LG and Samsung in Waco. Noting that witnesses, documents, and inventors were all present in the Northern District of California—and none were present in Texas—the two defendants asked Judge Albright to transfer the case.

He refused. In denying the defendants’ motion, the judge said that his hands were tied: first, 28 USC §1404(a) states that a civil action may be transferred only to another district where the action “might have been brought;” and second, the relevant portion of 28 USC §1400(b) allows a patent infringement action to be brought “where the defendant has committed acts of infringement.” With respect to Ikorongo Texas—which, by contract, only had rights to sue in WDTX—the action could not have been brought in California. QED.

Adding a belt to those suspenders, the Texas judge also weighed the public- and private interest factors that are typically considered when deciding a motion to transfer. Although there were no witnesses, parties, or documents in his district, Albright concluded that the case should not be transferred—mostly because

Ikorongo Tech had asserted the same patents against another defendant in an earlier litigation, and because his court would likely be able to conduct a trial before the California court could. Samsung and LG then filed writs of mandamus with the Federal Circuit.

In a scathing opinion, the Court of Appeals held that Judge Albright had abused his discretion in refusing the transfer. The Texas judge’s conclusion—that Ikorongo Texas’s action could not have initially been brought in California—was plainly wrong because he had ignored the Ikorongo entities’ pre-litigation acts that were deliberately aimed at manipulating venue. Citing Supreme Court and Federal Circuit precedent in which those courts had stopped similar schemes that were “recent, ephemeral…and existed for no other purpose than to manipulate venue,” the panel here rejected the attempt to limit venue, noting that Ikorongo Texas was assigned its targeted geographic rights (to counties in the Western District) less than a month before the first complaint was filed; that the same group of five people own membership interest in both Ikorongo entities; that nothing would prevent those entities from undoing the assignment at any time; and that Ikorongo Texas seems to exist for the sole purpose of limiting venue to Judge Albright’s district.

Because previous Federal Circuit decisions had routinely rejected these types of pre-litigation maneuvers, the panel said that its venue analysis did not need to consider Ikorongo Texas’s geographically-bounded claims. Disregarding this deliberate attempt at venue manipulation (and under the proper construction of §1404(a)), the action “might have been brought” in the NDCA.

With that out of the way, the Federal Circuit addressed Judge Albright’s conclusion that the public- and private interest factors favored keeping the action in Texas. Not surprisingly, the panel said that Albright had abused his discretion by assigning too little weight to the relative convenience of the Northern District of California, where defendants, witnesses, documents, inventors, and relevant third parties (which had developed the accused technologies) were located. Precisely zero of these were in Texas.

The district court judge also overstated the worry about waste of judicial resources. True, there was another Ikorongo patent infringement case pending in the EDTX; but that one involved an entirely different underlying application, so there would likely be little overlap with the Samsung/LG cases. Finally, regarding Judge Albright’s belief that the action would likely go to trial faster in his court, the Federal Circuit said that its earlier decisions established that a court’s ability to set a fast-paced schedule was not particularly relevant in a venue analysis. Because

neither the district court nor the patent owners had explained why the WDTX’s supposedly faster disposition of the case should be assigned significant weight in this particular transfer of venue analysis, the panel concluded that the Texas judge had abused his discretion in refusing the transfer to California.

2021.06 case summary for In Re Samsung 2021-139
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