Judge Leonard P. Stark recently adopted Magistrate Judge Christopher J. Burke’s recommendation from earlier this month, in which Judge Burke recommended denial of a defendant’s motion to transfer to the Northern District of California. MAZ Encryption Technologies LLC v. Hewlett-Packard Company, C.A. No. 13-306-LPS, Report and Recommendation (D. Del. Mar. 6, 2014), adopted, Order (D. Del. Mar. 28, 2014).
Plaintiff was a small Delaware corporation that claimed to have no revenue. Report and Recommendation at 3. It had also brought nine other cases in Delaware; seven involved one or both of same patents-in-suit, and two others involved a related patent. Id. at 2. Defendant was a large Delaware corporation with its principal place of business, and much of its operations, in California. Additionally, the designers of the accused products, while no longer employed with defendant, resided in California. Id. at 4.
As to plaintiff’s forum preference, defendant argued that this factor should be given less or no weight because plaintiff’s “minimal ties to Delaware were manufactured in an apparent attempt to manipulate the venue laws.” Id. at 9 (internal quotation marks omitted). Judge Burke recognized that “the record clearly suggests a connection between Plaintiff’s formation as a Delaware LLC, the assignment of the patents to Plaintiff and the filing of the instant suit in this Court, all of which occurred in relatively short order,” id., and that “[t]here are clearly certain circumstances in which a plaintiff’s connection to a forum and its choice to file suit there evidence an improper motive,” id. at 10. But Judge Burke observed that it may be difficult to differentiate between a formation that is an “appropriate kind of business or litigation decision” and one that is essentially “venue manipulation.” Id. at 11-12. Judge Burke did not have to make this determination here, however, because plaintiff’s forum choice was legitimate for another reason: it brought suit in Delaware to assure personal jurisdiction over defendant, a Delaware corporation. Id. at 12. Therefore, this factor weighed against transfer.
The other factors weighing against transfer were the convenience of the parties and practical considerations. The convenience of the parties only weighed slightly against transfer; while plaintiff’s small size and financial condition, as compared to that of defendant, may have meant that it would suffer greater hardship if forced to litigate in California, Judge Burke gave this minimal weight because there was little detailed information available about plaintiff’s finances, “and the reality [is] that Plaintiff’s members can and have initiated litigation here and in other courts.” Id. at 18. More significantly, the number of pending related cases in Delaware and their level of overlap with the patents-in-suit in this case weighed against transfer. See id. at 23-25.
All other factors weighed in favor of transfer (defendant’s forum preference, where the claim arose, convenience of witnesses, and books and records – although the last two only slightly) or were neutral. Judge Burke explained that “[u]ltimately, with the factors in equipoise, Defendant has not bet its burden to show that the balance of convenience of the parties is strongly in its favor.” Id. at 28. Therefore, Judge Burke recommended that the motion to transfer be denied.
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