Manufacturer's Right to Transfer May Warrant Staying Claims Against Distributor: Federal Circuit | Practical Law

Manufacturer's Right to Transfer May Warrant Staying Claims Against Distributor: Federal Circuit | Practical Law

In In re Toyota Motor Corp., the US Court of Appeals for the Federal Circuit granted the defendants' petition for a writ of mandamus ordering the US District Court for the Eastern District of Texas to reconsider a motion to sever and stay infringement claims against an independent distributor when the accused manufacturer had a right to transfer the claims against it to a more convenient venue under 28 U.S.C. § 1404(a).

Manufacturer's Right to Transfer May Warrant Staying Claims Against Distributor: Federal Circuit

by Practical Law Intellectual Property & Technology
Published on 04 Apr 2014 • USA (National/Federal)
In In re Toyota Motor Corp., the US Court of Appeals for the Federal Circuit granted the defendants' petition for a writ of mandamus ordering the US District Court for the Eastern District of Texas to reconsider a motion to sever and stay infringement claims against an independent distributor when the accused manufacturer had a right to transfer the claims against it to a more convenient venue under 28 U.S.C. § 1404(a).
On April 3, 2014, in In re Toyota Motor Corp., the US Court of Appeals for the Federal Circuit granted defendants' petition for a writ of mandamus holding that the US District Court for the Eastern District of Texas's denial of defendants' motion to transfer claims against Toyota was an abuse of discretion and ordered the district court to reconsider defendants' motion to sever and stay the remaining claims against an independent, Houston-based Toyota distributor pending resolution of the claims against Toyota (No. 2014-113, (Fed. Cir. Apr. 3, 2014)).
In 2012, American Vehicular Sciences LLC (AVS), a subsidiary of patent licensing and enforcing company Acacia Research, Inc., brought a patent infringement suit in the Eastern District of Texas against defendants Toyota and Gulf States Toyota, Inc. (Gulf States), an independent distributor of Toyota vehicles based in Houston. Some of the patents at issue are in the same family of patents litigated in cases in the US District Court for the Eastern District of Michigan from the early 2000s to 2011. Gulf States could not be sued in the Eastern District of Michigan.
Toyota and Gulf States filed a motion requesting the Eastern District of Texas:
  • Sever the claims against Gulf States under Federal Rule of Civil Procedure 21.
  • Transfer the claims against Toyota to the Eastern District of Michigan under 28 U.S.C. § 1404(a).
  • After transferring the claims against Toyota, stay the remaining claims against Gulf States pending resolution of the transferred case in Michigan.
The Eastern District of Texas did not rule on the requests to sever and stay separately from the request to transfer. Instead, it held that:
  • The 28 U.S.C. § 1404(a) convenience factors did not indicate that the Eastern District of Michigan would be a clearly more convenient forum for the claims against Toyota.
  • Because transfer was not warranted, there was no reason to sever and stay the remaining claims against Gulf States.
Toyota and Gulf States subsequently sought a writ of mandamus from the Federal Circuit directing the Eastern District of Texas to grant the motion. The Federal Circuit granted defendants' petition, holding that:
  • The Eastern District of Texas's no-transfer conclusion was a clear abuse of discretion because several factors favored the transferee forum, including the availability of compulsory process to secure witness attendance and the fact that the Eastern District of Michigan had hosted several other cases involving related patents.
  • On remand, the Eastern District of Texas must reconsider defendants' motion to sever and stay the claims against Gulf State in view of Toyota's clear right to transfer the case against it to the Eastern District of Michigan.
The ruling is significant because it indicates the Federal Circuit's willingness to stay infringement claims against a distributor (or customer) pending the resolution of claims against a manufacturer, which is a subject of pending Congressional patent reform.