January 28, 2022

Volume XII, Number 28

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Convenience Trumps Potentially Higher Royalties

The U.S. Court of Appeals for the Federal Circuit vacated a denial of a motion to sever and transfer, directing the district court to grant petitioner’s motion because the transferee forum was more convenient than the transferor forum. In re Nintendo of America, Inc., Case No. 2014-132 (Fed. Cir., June 25, 2014) (Newman, J.).

Non-practicing entity Secure Axcess sued Nintendo and 11 retailers for patent infringement in the U.S. District Court for the Eastern District of Texas. Nintendo moved to sever the claims against it and transfer those claim to the U.S. District Court for the District of Washington where it is based and where most of the relevant documents and witnesses are located. Each of the 11 retailers stipulated that they would be bound by any judgment rendered by the transferee court. The Texas court denied the motion to sever, noting that the plaintiff could obtain a higher royalty against the retailers in light of higher retail prices and the retailers’ practice of bundling the accused systems with video games and other accessories. Having decided against severance, the district court held that the request for transfer must be denied.

The Federal Circuit vacated the district court decision, finding that the true defendant was the manufacturer and not the retailers, and thus the case should be severed to facilitate just, convenient, efficient and less-expensive determination. The issues of validity and infringement were common to the Nintendo and the retailers, and if the plaintiff were to collect royalties from Nintendo, it would be preclude a suit against the retailers.

In addition to the royalty concerns, the plaintiff argued that its choice of venue should be given deference because its principal place of business is in Plano, Texas. However, as a non-practicing entity, the plaintiff only leases 200 square feet of office space in Plano, and its executives work across the country. The Federal Circuit held that the district court must look beyond the connection of the parties with the transferor venue when the disparity of convenience is so marked as to outweigh the plaintiff’s right to choose the forum.

© 2022 McDermott Will & EmeryNational Law Review, Volume IV, Number 213
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