Fifth Circuit Weighs In on Transfer Factors In High-Tech IP Case

The Federal Circuit is charged with disposing of the mandamus petitions that regularly arise from decisions denying transfer under 28 U.S.C. § 1404(a) in Texas patent litigation. The Fifth Circuit, whose law the Federal Circuit applies in such cases, rarely issues precedential transfer opinions—not even one a year over the last fifteen years. Few, if any, bear on the kinds of evidence and arguments commonly offered as part of transfer disputes in modern patent litigation. In In re TikTok, Inc., No. 23-50575, 2023 U.S. App. LEXIS 28880 (5th Cir. Oct. 31, 2023), the Fifth Circuit seized the opportunity to provide guidance on such evidence and arguments in the context of a high-tech intellectual property case not involving patent claims. Its opinion, issued October 31, 2023, will likely impact the availability of transfer for parties in popular Texas patent venues.

The key takeaways from the TikTok opinion are:

• In software cases, if the defendant only allows certain engineers access to the relevant source code, the location of those engineers will likely bear heavily on the first private interest factor, “the ease of access to sources of proof.” This could have a significant effect on companies with source code accessible only to teams outside of Texas.
• The convenience of witnesses who will have to travel significant distances regardless of how transfer is ruled on (e.g., witnesses abroad) must still be given substantial weight. This will likely improve the odds of transfer for defendants developing products in Asia seeking transfer to the West Coast or those in Europe seeking transfer to the East Coast.
• Cases concerning foreign parties and conduct beyond Texas are good candidates for transfer absent a showing that individuals in the relevant Texas district have a documented connection to the dispute.
• Post-motion activity and case progress may not weigh against transfer in circumstances where, like here, the movant seeks transfer early in a case and does not otherwise cause or contribute to any delays in resolving that motion.

The Fifth Circuit granted mandamus and reversed Judge Alan D Albright’s denial of TikTok Inc.’s motion to transfer litigation from the Western District of Texas to the Northern District of California under 28 U.S.C. § 1404(a). The plaintiff is a Chinese company alleging that TikTok’s Chinese engineers took source code the plaintiff shared and used it to develop video-editing functionality that TikTok’s California engineers implemented in its popular app. TikTok, 2023 U.S. App. LEXIS 28880, at *2-3. TikTok petitioned the Fifth Circuit, not the Federal Circuit, for relief from Judge Albright’s denial of transfer because the claims are directed to copyright infringement, trade secret misappropriation, false advertising, and several state law torts—not patent infringement.

The Fifth Circuit analyzed the private and public interest factors set out in In re Volkswagen of America, Inc., 545 F.3d 304 (5th Cir. 2008) (en banc). The relevant holdings on a factor-by-factor basis are below.

• The ease of access to source of proof favored transfer
• The Fifth Circuit reinforced that, “when the vast majority of the evidence is electronic, and therefore equally accessible in either forum, this factor bears less strongly on the transfer analysis.” TikTok, 2023 U.S. App. LEXIS 28880, at *7-8 (cleaned up) (quoting In re Planned Parenthood Fed’n Am., Inc., 52 F.4th 625, 630 (5th Cir. 2022)).
• But the panel determined that the district court abused its discretion in treating the factor as neutral because the record evidence demonstrated that it would be relatively easier to access source code in the transferee forum than in the Western District. Id. at *8-9. Specifically, several TikTok engineers in the Northern District of California are permitted to access source code, whereas the only relevant TikTok engineer in Texas with access resides in the Northern District of Texas, not the Western District. Id. The Fifth Circuit emphasized that a proper analysis compares the relevant federal districts, not the relevant forum states. Id. (citing Volkswagen, 545 F.3d at 307). The Federal Circuit has made similar distinctions in the context of the local-interest factor. See In re Apple Inc., No. 2022-137, 2022 U.S. App. LEXIS 14398, at *6 (Fed. Cir. May 26, 2022).
• The availability of compulsory process was neutral
• The district court did not abuse its discretion in finding this factor neutral because TikTok failed to identity any unwilling non-party witnesses. TikTok, 2023 U.S. App. LEXIS 28880, at *11-13.
• The attendance for willing witnesses favored transfer
• The Fifth Circuit reaffirmed its “100-mile rule,” which provides that, when the distance between the transferor court and the proposed transferee court is more than 100 miles, “the factor of inconvenience to the witnesses increases in direct relationship to the additional distance to be traveled.” Id. at *13-14 (quoting Volkswagen, 545 F.3d at 315).
• The panel determined that the district court abused its discretion by disregarding the convenience of the parties’ Chinese witnesses, who are closer to the Northern District of California than the Western District of Texas, making the former the “clearly more convenient venue for most relevant witnesses.” Id. at *14-15. This departs from Federal Circuit opinions holding that the 100-mile rule should not be rigidly applied when witnesses would have to travel significant distances regardless of forum. In re Apple Inc., 979 F.3d 1332, 1342 (Fed. Cir. 2020).
• The panel also determined that the convenience of the California and Chinese TikTok engineering teams overwhelmed that of a single TikTok engineer residing in Irving, Texas. TikTok, 2023 U.S. App. LEXIS 28880, at *14-15.
• All other practical problems that make trial of a case easy, expeditious, and inexpensive were neutral
• The Fifth Circuit rejected the rationale that this factor weighed against transfer because the district court had familiarized itself with the case during the fourteen-month pendency of TikTok’s transfer motion. Id. at *16-18. The panel found that, under the specific facts before it, the district court abused its discretion by relying on the substantial post-motion case progress as weighing against transfer when that progress was attributable to the district court’s delay in deciding the motion. Id. The panel emphasized that § 1404(a) motions “should [take] a top priority in the handling of a case.” Id. at *16 (quoting In re Horseshoe Ent., 337 F.3d 429, 433 (5th Cir. 2003)). This echoes the Federal Circuit’s instructions in In re Apple Inc., 979 F.3d 1332, 1338 (Fed. Cir. 2020) and In re SK Hynix Inc., 835 F. App’x 600, 601 (Fed. Cir. 2021).
• The administrative difficulties flowing from court congestion were neutral
• The Fifth Circuit similarly rejected the district court’s rationale that this factor weighed against transfer due to the progress the case had made during the pendency of TikTok’s § 1404(a) motion in progressing towards to trial. Id. at *18-20. The panel distinguished Planned Parenthood, in which the petitioner inexcusably delayed seeking transfer until months into discovery, on the ground that the trial court—not TikTok—was responsible for the delayed resolution here. Id. at *19 (citing Planned Parenthood, 52 F.4th at 631). To find the post-motion progress towards trial as weighing against transfer in that circumstance was an abuse of discretion. Id. at 15-16.
• The local interest in having localized interests decided at home was neutral
• The Fifth Circuit affirmed the district court’s finding that this factor was neutral because the alleged act giving rise to suit—the misappropriation of source code—occurred in China. Id. at *21-22 (citing Def. Distrib. v. Bruck, 30 F.4th 414, 435 (5th Cir. 2022)).
• The familiarity of the forum with the law that will govern the case was neutral
• The Fifth Circuit first found that the district court abused its discretion by failing to conduct a “good-faith” choice-of-law analysis to ascertain which jurisdiction’s law would apply to the state law claims. Id. at *23.
• The panel also found that the district court abused its discretion by finding that it was more capable of deciding claims arising under Texas law without considering whether those laws were so “exceptionally arcane” that the Northern District of California would be less equipped to handle them. Id. at *23-24.

Having weighed these factors, the Fifth Circuit summarized the case as one “concern[ing] Chinese intellectual property that was allegedly infringed and misappropriated by employees located in China” and remarked that “[t]he only individuals in the United States who have any documented connection to this dispute are located outside the district.” Id. at *25. It held, therefore, that “[t]he Northern District of California is a clearly more convenient venue to adjudicate this case.” Id.

In concluding, the opinion noted that “the Federal Circuit has reached conflicting outcomes in reviewing mandamus petitions from the Western District of Texas” over the last few months before characterizing the instant opinion as a means to “improve ‘consistency of outcomes’ by further instructing when transfer is—or, for that matter, is not—warranted in response to a § 1404(a) motion.” Id. at *27 & n.15.