IP Law Daily, PATENT—Fed. Cir.: Judge Albright ordered to sever and transfer infringement claims against Amazon, (Dec 15, 2022)

By Anne H. Gibson, J.D., LL.M.

District court abused its discretion by ignoring obvious forum manipulation by plaintiff and refusing to transfer claims against Amazon to Colorado.

The failure of the federal district court in Waco, Texas, to sever and transfer claims against Amazon.com, Inc. was an abuse of discretion, the U.S. Court of Appeals for the Federal Circuit has held. The Federal Circuit, in a nonprecedential order granting Amazon’s mandamus petition, vacated the district court’s denial, and ordered it to sever the infringement claims against a local small business and to transfer the remaining claims against Amazon to the U.S. District Court for the District of Colorado. The district court abused its discretion by ignoring the plaintiff’s obvious forum manipulation by adding a local defendant to the suit after Amazon filed its motion to transfer (In re Amazon.com, Inc., December 15, 2022, per curiam.).

Flygrip Inc. filed suit against Amazon in October 2021 in the Western District of Texas, alleging direct and indirect patent infringement based on the online resale of handheld device cases manufactured by PopSockets LLC, Otter Products LLC, and Quest USA Corp. PopSockets and Otter both have their headquarters in Colorado, and had filed related actions there. Amazon moved to transfer the case under 28 U.S.C. § 1404(a) to the District of Colorado. Flygrip then amended its complaint to add another defendant, Coghlan Family Enterprises LLC, a small business located in the Western District of Texas, which allegedly sells PopSockets products online. Amazon then filed a motion to sever the claims against Coghlan and an amended motion to transfer the claims against Amazon to Colorado. The district court denied Amazon’s motions, and Amazon filed the present mandamus petition.

In considering Amazon’s petition, the Federal Circuit first examined the district court’s reasoning. The district court found that Coghlan was not a peripheral party and so the claims against it could not be severed. It then denied the motion to transfer, based on the fact that the claims against Coghlan could not have originally been brought in Colorado.

Severance. The Federal Circuit noted that the inquiry in a mandamus petition to review transfer determinations in the Fifth Circuit looks at “whether the destination venue is ‘clearly more convenient than the venue chosen by the plaintiff,’” and that such determinations will only be overturned in cases of “clear abuses of discretion that produce patently erroneous results.”

In examining the district court’s decision, the Federal Circuit found that the district court failed to properly consider the manipulative nature of Flygrip’s addition of Coghlan to its complaint. The fact that this defendant was added only after the motion to transfer was filed “suggests that it was intended to affect the transfer analysis.” Furthermore, Coghlan was the only Western District of Texas-based reseller on a list of about 150 resellers that Flygrip had identified as alleged infringers, and it had allegedly infringing sales amounting to only just over $3000. These facts indicated to the Federal Circuit that the decision to add Coghlan was not because that business was more than merely “peripheral” to the case, but rather to manipulate the transfer determination. “[W]e must guard against manipulative measures designed to defeat transfer to a more convenient venue,” it stated, citing itself from a case in 2021 also related to a motion to transfer out of the federal district court in Waco. See In re NetScout Sys., Inc., No. 2021-173, 2021 WL 4771756, at *5 (Fed. Cir. Oct. 13, 2021).

Transfer. The district court also erred, the Federal Circuit found, in ending its analysis after determining that the claims against Coghlan should not be severed, and not considering the potential advantages from transferring the claims against Amazon to Colorado.

In undertaking that analysis, the Federal Circuit found that the transfer factors weighed heavily in Amazon’s favor, in particular the fact that the sources of proof for the claims are almost exclusively found in Colorado. PopSockets and Otter, the manufacturers of the allegedly infringing products, are based in Colorado, and their related documents and witnesses are primarily located there. Flygrip admitted that it had no documents or witnesses in the Western District of Texas. Flygrip is headquartered in New York and will have travel costs in any case. “Thus, the overwhelming presence of documents and witnesses in the District of Colorado weighs heavily in favor of granting Amazon’s motion to transfer.”

In examining the decision in its entirety, the Federal Circuit determined that “[t]he district court’s numerous errors in its analysis of the motions to sever and transfer amount to a clear abuse of discretion.” The district court’s order was vacated, and it was directed to grant Amazon’s motions to sever and transfer.

The Case is No. 22-157.

Attorneys: J. Christopher Carraway (Klarquist Sparkman, LLP) for Amazon.com, Inc. Robert Katz (Katz PLLC) for Flygrip, Inc.

Companies: Amazon.com, Inc.; Flygrip, Inc.

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