Delaware Court Again Rules That A Corporate Entity's State of Incorporation in Delaware Weighs Heavily Against Transferring Out of Delaware

June 30, 2011

A Delaware Court again recently denied transfer from Delaware to the Northern District of California despite that (a) all of the accused infringers were headquartered in the transferee venue, (b) the party witnesses knowledgeable about the accused products and documents related to the accused products were there and (c) the plaintiff also maintained an office there as well. Focusing instead on the fact that the plaintiff and three of the four defendants were incorporated in Delaware, the Court stated that the Plaintiff's choice of venue was entitled to "significant deference" because Delaware was considered plaintiff's home turf. Moreover, the Court found that because three of the four defendants were incorporated in Delaware, they could not be heard to complain about defending a lawsuit in Delaware because they had availed themselves of the rights and privileges of the State of Delaware by incorporating there. The Court quoted from another decision from the District of Delaware that "absent some showing of a unique or unexpected burden, a company should not be successful in arguing that litigation in its state of incorporation is inconvenient."

The Court also gave no weight to the convenience of party witnesses because the companies' were obligated to procure their attendance at trial. Convenience of expert witnesses also was given little weight because (a) they are compensated for their time and expenses, including travel and (b) their selection as an expert generally is based on their subject matter expertise and not where they reside. Non-party fact witnesses, on the other hand, are to be accorded significant consideration in avoiding inconveniencing them. Notwithstanding this consideration, the Court found that this potential inconvenience is mitigated because (a) only 3% of patent cases ever reach trial; (b) non-party fact witnesses can be compelled for a deposition wherever they are found; and (c) if they are not willing to voluntarily appear for trial, the deposition transcript can be used at trial with little prejudice to the other side - indeed, both sides must contend with this disadvantage this poses, if any.

Finally, the Delaware Court noted that the recent Federal Circuit cases finding an abuse of discretion in denying transfer were decided under Fifth Circuit law and thus were not applicable because the Fifth Circuit law on transfer differs significantly from the law of the Third Circuit. In particular, the Fifth Circuit accords no significant weight to a plaintiff's choice of venue while Third Circuit law requires that a plaintiff's choice of venue be given heavy consideration. Moreover, the cases on which the Federal Circuit found an abuse of discretion generally did not involve the situation where, as here, most of the defendants and the plaintiff are incorporated in the state of the plaintiff's choice of venue.

Intellectual Ventures I, LLC v. Checkpoint Software Technologies Ltd., et al, Case No. 10-1067 LPS (D. Del. June 22, 2011)

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The authors of www.PatentLawyerBlog.com are patent litigation lawyers at Jeffer Mangels Butler & Mitchell LLP. We represent inventors, patent owners and technology companies in patent licensing and litigation. Whether pursuing patent violations or defending infringement claims, we are aggressive and effective advocates for our clients. For more information contact Greg Cordrey at 949.623.7236 or GCordrey@jmbm.com.