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IP: You can’t always sue Delaware-incorporated companies in Delaware

Plaintiffs should analyze factors relating to both personal jurisdiction and venue prior to selecting a forum in which to bring suit.

Imagine that you are preparing to sue an alleged infringer. A quick visit to the website for the Delaware Department of State’s Division of Corporations confirms your suspicion that the defendant is incorporated in Delaware, as many other companies are.

But before you start booking hotel rooms in Wilmington, take a look at the Federal Circuit’s recent decision in In re Link_A_Media Devices Corp. This case reminds us that figuring out where we can keep our opponents in court requires understanding the relationship, and important differences, between personal jurisdiction and venue.

As background, the case was before the Federal Circuit on a petition from Link_A_Media Devices Corp. (LAMD), which Marvell International Ltd. had sued for patent infringement in Delaware. LAMD sought a writ of mandamus ordering the District of Delaware to reverse an order denying a motion to transfer the case to the Northern District of California.

In support of its motion to transfer, LAMD argued that a change of venue would be convenient for both sides. For its own part, LAMD argued that transfer was appropriate because, although LAMD was incorporated in Delaware, none of its employees worked there: Instead, they were located, along with all relevant documents, at LAMD’s headquarters in northern California. Moreover, Marvell’s inventors and documents were also located at the headquarters of a Marvell subsidiary in the transferee district. LAMD also argued that Marvell’s choice of forum was not entitled to deference because it had not sued on its own turf (Marvell is a Bermudan holding company).

In opposition, Marvell argued that, as plaintiff, its choice of forum was entitled to substantial deference, that LAMD should not be surprised at having to defend itself in its state of incorporation and that LAMD had not shown that any witness or document could not be produced in Delaware.

The lower court judge decided that the convenience of parties and witnesses and the interests of justice did not favor transfer for a number of reasons, two of which are discussed below.

First the court reasoned (with abundant citation to district court and 3rd Circuit precedent) that the plaintiff’s choice of forum was “of paramount consideration” and should be honored “as long as a plaintiff has selected the forum for some legitimate reason.”

Second, the lower court rejected any suggestion that producing witnesses and documents in Delaware would be inconvenient, stating: “In this electronic age, there are no substantial burdens associated with discovery or witness availability that support the need for transfer,” thus rendering that factor “outdated, irrelevant, and [thus deserving of] little weight,” except for regional defendants. In any case, the lower court argued, LAMD was not a “regional enterprise” for which such burdens would be more of an issue, but was rather an international company with offices in California, Minnesota, the U.K. and Japan.

On appeal, the Federal Circuit reversed the district court judge on all grounds. First, the Federal Circuit held that the lower court “placed far too much weight on the plaintiff’s choice of forum,” which it said was entitled to much less deference when a plaintiff sues outside of its home forum.

Second, the Federal Circuit held that the lower court’s reliance on LAMD’s state of incorporation was unwarranted, noting that neither § 1404 nor the leading Third Circuit case on the subject mention that as a factor in the venue inquiry and concluding that “[i]t is certainly not a dispositive fact in the venue transfer analysis, as the district court in this case seemed to believe.”

Third, the Federal Circuit condemned the lower court’s refusal to consider the convenience of witnesses and the location of documents, reasoning that advances in technology could only alter the weight given to these factors, not make them entirely irrelevant.

In light of these and other factors, the Federal Circuit issued the writ of mandamus as requested by LAMD. The court also rejected a subsequent joint motion to withdraw or dismiss the petition—filed on the ground that the lawsuit had settled the day before the appellate decision issued—because the parties had failed to notify the court in writing of the settlement until three days after the fact.

In conclusion, although it is still probably a good bet that you’ll be able to sue an infringer where they are incorporated, particularly for national or international companies, there are circumstances when this rule of thumb will fail, as the Link_a_Media Devices case shows. Consequently, a plaintiff should engage in a thorough analysis of factors relating to both personal jurisdiction and venue prior to selecting a forum in which to bring suit, even where it might seem that venue is a given. 

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Cullen Pendleton

Cullen Pendleton, Ph.D., is a litigation partner at Marshall, Gerstein & Borun LLP. He is an alumnus of the University of Houston, the University...

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