Incorporation in Delaware Leads to Denial of Motion to Transfer

June 27, 2011

The plaintiff filed a lawsuit against five companies in the United States District Court for the District of Delaware for patent infringement. All five companies moved to transfer the case to the Northern District of California because none of the defendants had their headquarters in Delaware and they argued it would be more convenient for the witnesses if the case proceeded in the Northern District of California. The district court denied the motion.

The district court began its analysis by noting that the various defendants were incorporated in Delaware and several had their principal place of business in California.. It also noted that the plaintiff was incorporated in Delaware and had its principal place of business in Connecticut.

The defendants argued that the case should be transferred to California because four of the five defendants have their principal place of business in California, the court should not defer to plaintiff's choice of forum as it did not sue in the district where it has its principal place of business, there were potentially important non-party witnesses in California and the court congestion in Delaware also favored transfer. In reciting these facts, the district court specifically noted that there is one pivotal connection to Delaware: "it is the state of incorporation for all defendants."

The plaintiff opposed the request for transfer, leading with the point that all of the defendants are incorporated in Delaware. The plaintiff also noted that the defendants had not pointed to any witnesses or documents that could not be produced in Delaware.
After reciting the standards for transfer, the district court noted that the "Third Circuit has indicated that the analysis for transfer is very broad." The district court then began its analysis by stating, "[a]s always, the court stresses that, because all defendants are Delaware corporations, they have no reason to complain about being sued in Delaware."

The district court also found that the congestion argument had no merit because the dockets of both courts are congested and also noted "the irony that many members of the bar argue both sides of this argument from cases to case, making it even more of a non-issue from the court's perspective."

The district court also was not persuaded by the argument regarding convenience of witnesses. "In this electronic age, there are no substantial burdens associated with discovery of witness availability that support the need for transfer With respect to discovery, documents generally are stored, transferred and reviewed electronically." The district court also concluded that witnesses are generally deposed where they live and, at trial, only a handful of witnesses testify in person. Accordingly, "[g]iven these realities, this factor is outdated, irrelevant, and should be given little weight, if any, except for those rare exceptions where truly regional defendants are litigating."

As a result, the district court denied the defendants' motion to transfer.

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As the number of patent cases filed in Delaware continues to grow, it will be important to watch the decisions of the Delaware district courts on transfer issues. Plaintiff like to know that when they file a case in a particular district it will stay in that district. This decision highlights just how difficult it will be to transfer cases out of Delaware if the defendants are incorporated in Delaware. Given the vast numbers of corporations that call Delaware their home for purposes of incorporation, it is likely that more plaintiffs will file their patent infringement actions in Delaware, particularly when the Delaware district courts do not focus on the convenience of the witnesses, but rather on the companies incorporation in Delaware.

XPRT Ventures, LLC v. Ebay, Inc., et al., Case No. 10-595-SLR (D. Del. June 8, 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 Stan Gibson at 310.201.3548 or SGibson@jmbm.com.