Federal Circuit: Clear Attempts to Manipulate Venue Won’t Defeat Motions to Transfer

The U.S. Court of Appeals for the Federal Circuit (CAFC) in In re Samsung today granted Samsung’s and LG’s writs of mandamus, which sought to order the United States District Court for the Western District of Texas to transfer the underlying actions to the United States District Court for the Northern District of California. The CAFC explained that the district court erred in failing to consider pre-litigation tactics by Ikorongo Technology LLC (Ikorongo Tech) and Ikorongo Texas LLC aimed at purposely manipulating venue in the case.

District Court Proceedings

Ikorongo Texas filed two complaints against Samsung and LG on March 31, 2020 in the Western District of Texas. The company had been formed just one month before that date as a Texas limited liability company. Ikorongo Texas and Ikorongo Tech are run out of the same office and are owned by the same five individuals. Ten days before the two complaints were filed in Texas, Ikorongo Tech assigned exclusive rights to sue for infringement and collect damages “within certain specified parts of the state of Texas, including certain counties in the Western District of Texas,” to Ikorongo Texas. One day after the initial complaints were filed, Ikorongo Texas and Ikorongo Tech filed first amended complaints together, alleging infringement of at least one claim of the four patents at issue by Samsung and LG.

Samsung and LG separately moved to transfer the cases to the Northern District of California, since the five accused third-parties involved (Google Maps, Google+, Google Play Music, YouTube Music, and AT&T Secure Family) were developed and located in Northern California, and because witnesses and evidence were located in the Northern District of California – no potential witnesses resided in Texas.

The district court denied the transfers, saying that Samsung and LG had “failed to establish the threshold requirement that the complaints ‘might have been brought’ in the Northern District of California.” While venue in California would be appropriate based on Ikorongo Tech’s allegations, Ikorongo Texas’ rights could not have been infringed in California because their assigned rights were limited to certain areas in Texas. The court also said that, while the location of relevant documents and witnesses in the case tilted in favor of transfer, other factors, such as local interest and practical problems, weighed neutral and against transfer, respectively.

Manipulation is a Losing Strategy

In its discussion, the CAFC said that the amended complaints, and not the original complaints filed only by Ikorongo Texas, governed. Looking at the litigation history, the CAFC said that the district court had dismissed “the pre-litigation acts by Ikorongo Tech and Ikorongo Texas aimed at manipulating venue.” Citing court precedent and statute on jurisdiction, the CAFC said that “in cases similar to this one, the Supreme Court and other courts have rejected litigants’ attempts to manipulate jurisdiction, disregarding property transfers among entities under common ownership designed to create jurisdiction.” While there is no analogous statute on venue,  “the Supreme Court and this court have repeatedly assessed the propriety of venue by disregarding manipulative activities of the parties.” See, e.g., Van Dusen v. Barrack, 376 U.S. 612 (1964); In re Microsoft Corp., 630 F.3d 1361 (Fed. Cir. 2011)

The CAFC explained:

Although our previous cases addressing venue manipulation by plaintiffs involved “the convenience of parties and witnesses, in the interest of justice” factor, longstanding principles against manipulation are no less applicable to the requirement that an action “might have been brought” in the transferee district.

These cases present just such a manipulation under § 1404(a). Ikorongo Texas was created and assigned its targeted geographic rights in counties in the Western District of Texas in the month leading up to these suits. The same group of five individuals owns all membership interests in both Ikorongo entities. Ikorongo Texas and Ikorongo Tech share the same office in North Carolina, and the same person signed the relevant agreement documents on behalf of both companies. Nothing would prevent the Ikorongo entities from undoing the assignment if they so de-sired. Moreover, it does not appear that Ikorongo Texas conducts any other business—rather, it seems to exist for the sole purpose of limiting venue to the Western District of Texas.

Ultimately, disregarding this manipulation, Ikorongo Tech could have filed suit in the Northern District of California, said the court. “[T]he presence of Ikorongo Texas is plainly recent, ephemeral, and artificial— just the sort of maneuver in anticipation of litigation that has been routinely rejected,” it added.

As to the merits of the transfer motions, the CAFC said that the district court gave too little weight to the convenience of the California court, since many identified sources of proof and likely witnesses are in Northern California and none in the Western District of Texas:

In weighing the willing witness factor only slightly favoring transfer to the Northern District of California, the district court provided no sound basis to diminish these conveniences. It gave no weight to the presence of possible party witnesses in Northern California despite this courtholding that the district court must consider those individuals. See In re Apple Inc., 818 F. App’x 1001, 1003 (Fed. Cir. 2020).

The district court also “overstated” the “practical problems” it identified, such as waste of judicial resources and risk of inconsistent results considering the plaintiffs had another infringement suit in the Western District of Texas. “The incremental gains in keeping these cases in the Western District of Texas simply are not sufficient to justify overriding the inconvenience to the parties and witnesses,” said the CAFC.

The court ultimately granted the petitions for writ of mandamus and vacated the district court’s March 1, 2021 orders denying transfer, and the district court was ordered to transfer the cases to the Northern District of California.