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Case 2:12-cv-00490-MHS-CMC Document 1

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IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF TEXAS MARSHALL DIVISION TQP DEVELOPMENT, LLC Plaintiff V. AFLAC INCORPORATED, ET AL. Defendants ' ORDER The above-referenced case was referred to the undersigned United States Magistrate Judge for pre-trial purposes in accordance with 28 U.S.C. 636. The following pending motion is before the Court: Defendant Aflac Incorporateds Motion to Sever and Transfer (Docket Entry # 117). The Court, having considered the relevant briefing, is of the opinion Defendants motion to sever should be GRANTED. The Court considers whether Plaintiffs severed cause of action against Aflac Incorporated (Aflac or Defendant) should be transferred to the Middle District of Georgia, Columbus Division, in its discussion below. I. BACKGROUND On September 9, 2011, TQP Development, LLC (Plaintiff) filed its complaint against Defendants, asserting infringement of United States Patent No. 5,412,730 (the 730 Patent) Plaintiffs Complaint for Patent Infringement, (Docket Entry #1)(Complaint). Plaintiff accuses Defendant of infringement due to the methods employed on its various websites to transmit encrypted data (Complaint, 23). Defendant brings this motion to sever the claims against it and transfer them to the Middle District of Georgia, Columbus Division, pursuant to 28 U.S.C. 1404(a). II. SEVERANCE On May 11, 2012, Defendant filed a Notice of Supplemental Authority, attaching a copy of

No. 2:11CV397

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the opinion from the United States Court of Appeals for the Federal Circuit in In re EMC Corp., 2012 WL 1563920 (Fed. Cir. May 4, 2012) (Docket Entry #171). According to Defendant, the EMC case is a highly relevant precedential decision relating to the Federal Circuits opinion on the standard for severance and transfer. In its response, Plaintiff concedes that in light of EMC, it may be appropriate for its claims against Defendant to be severed (Docket Entry #178). However, Plaintiff asserts that EMC does not address the issue of transfer and reiterates the reasons why transfer would be inappropriate in this case. The Court is of the opinion the case against Defendant should be severed into a separate cause of action. The Court now considers whether Plaintiffs cause of action against Defendant should be transferred to the Middle District of Georgia. III. 28 U.S.C. 1404(a) Title 28, Section 1404(a) of the United States Code provides that [f]or the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought. A district court has broad discretion in deciding whether to order a transfer. In re Volkswagen of Am., Inc., 545 F.3d 304, 315 (5th Cir. 2008) (Volkswagen II). The Supreme Court of the United States has noted that Section 1404(a) is intended to place discretion in the district court to adjudicate motions to transfer according to an individualized, case-by-case consideration of convenience and fairness. Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 29 (1988); Van Dusen v. Barrack, 376 U.S. 612, 622 (1964). The Court of Appeals for the Fifth Circuit has set forth that the first threshold determination a district court must make under Section 1404(a) is whether the claims could have been brought in the proposed transferee district. In re Volkswagen AG, 371 F.3d 201, 203 (5th Cir. 2004) (Volkswagen I). After such a determination, the district court must then consider the convenience of the parties and witnesses in both forums. Id.; see also Humble Oil & Ref. Co. v. Bell Marine Serv., Inc., 321 F.2d 53, 56 (5th Cir. 1963); In re TS Tech USA Corp., 551 F.3d 1315, 1319 2

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(Fed. Cir. 2009); Bolt v. Toyota Indus. Corp., 351 F. Supp. 2d 597, 599 (E.D. Tex. 2004). A convenience determination consists of balancing the conveniences and inconveniences resulting from the plaintiffs choice of venue, in comparison with those of the proposed venue. This balancing includes examining several private and public interest factors, none of which has dispositive weight. Volkswagen I, 371 F.3d at 203. The private interest factors include: (1) the relative ease of access to sources of proof; (2) the availability of compulsory process to secure the attendance of witnesses; (3) the cost of attendance for willing witnesses; and (4) all other practical problems that make trial of a case easy, expeditious and inexpensive. Id. (citing Piper Aircraft Co. v. Reyno, 454 U.S. 235, 241 n.6 (1981)); see also In re TS Tech, 551 F.3d at 1319. The public interest factors include: (1) the administrative difficulties flowing from court congestion; (2) the local interest in having localized interests decided at home; (3) the familiarity of the forum with the law that will govern the case; and (4) the avoidance of unnecessary problems of conflict of laws o[r] the application of foreign law. Volkswagen I, 371 F.3d at 203 (citing Piper, 454 U.S. at 241 n.6); see also In re TS Tech, 551 F.3d at 1319. The plaintiffs choice of venue is not a separate factor. Volkswagen II, 545 F.3d at 314-15. Instead, the plaintiffs choice of venue contributes to the defendants burden to prove that the transferee venue is clearly more convenient than the plaintiffs chosen venue. Id. at 315; In re TS Tech, 551 F.3d at 1319. Also, although the private and public interest factors apply to most transfer cases, they are not necessarily exhaustive or exclusive, and no single factor is dispositive. Volkswagen II, 545 F.3d at 314-15. IV. TRANSFER ANALYSIS A. Parties arguments Defendant moves to transfer Plaintiffs case against them to the Columbus Division of the Middle District of Georgia, asserting it is significantly more convenient for the case to be litigated there; the documents relevant to the case are located there; and the Middle District of Georgia has 3

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a greater interest in the case. Defendant submits the employees primarily responsible for operating its allegedly infringing website are located at Defendants headquarters in Georgia, and transfer would allow for the more convenient and inexpensive production of witnesses and documents relevant to this case. In contrast, Defendant asserts Plaintiff is only a shell company with no meaningful connection to the Eastern District of Texas. Defendant attempts to dilute Plaintiffs connection to its principal place of business in Marshall, Texas, a city in the Eastern District of Texas, by focusing on Plaintiffs corporate structure and past filings with the State of Texas, which provide a Dallas mailing address. In response, Plaintiff asserts transfer to the Middle District of Georgia is not clearly more convenient. According to Plaintiff, allowing transfer would result in multiple, parallel cases across the country; inefficiency; and an unnecessary drain on judicial resources. Plaintiff points out the same District Judge and Magistrate Judge have been assigned to all of Plaintiffs other related cases. According to Plaintiff, this court will shortly become familiar with the patent-in-suit and the issues surrounding it, and the outcome of the combined claim construction hearing in some of the earlierfiled TQP cases will impact subsequent cases. B. Whether Plaintiffs claims could have been brought in the proposed transferee district Before reaching the factors, the Court notes Defendant asserts Plaintiff could have filed these lawsuits in the Middle District of Georgia. Plaintiff does not dispute this. C. 1. Consideration of the convenience factors Private Interest Factors (a) Sources of Proof Despite technological advances that undoubtedly reduce the relative inconvenience of transporting documents across the country, this factor must still be considered. Volkswagen II, 545 F.3d at 316 (That access to some sources of proof presents a lesser inconvenience now than it might have absent recent developments does not render this factor superfluous.). 4

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Defendant submits the location of many of the sources of proof supports transfer. Specifically, Defendant asserts the documents related to the operation and maintenance of the accused website, as well as the employees responsible for the website, are located in Columbus, Georgia. Plaintiff counters that Defendant has not produced any evidence supporting its claims of where relevant documents are located, nor did they mention whether these relevant documents are available electronically. Plaintiff further takes issue with Defendants not identifying the specific knowledge the relevant employees have and Defendants lack of mentioning whether these employees will even be called to testify in person at trial. Not only are many of the sources of proof located in the Middle District of Georgia, but the Court also notes that no documentary proof or other evidence is located in this district. According to Defendant, Plaintiff and its licensing arm, IP Navigation, are based in Dallas, outside of the Eastern District of Texas. On balance, the Court finds this factor favors transfer. (b) Availability of Compulsory Process Defendant asserts the only persons having knowledge of Defendants alleged infringement reside in the Middle District of Georgia and thus are outside the subpoena power of this Court. Defendant also points out that the inventor and prosecuting attorney both reside outside this Courts jurisdiction; but, the Court notes they do not reside in the Middle District of Georgia. The inventor of the 730 Patent resides in New Hampshire, and two of the prosecuting attorneys reside in Florida and West Coast. Plaintiff responds there is not any one jurisdiction that would have absolute subpoena power in this case and further notes that Defendant did not assert they will have difficulty compelling the attendance of any witness. Neither party has shown that either this district or the Middle District of Georgia has absolute subpoena power over a meaningful number of third-party witnesses. The Court find this factor is neutral.

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(c) Cost of Attendance for the Parties and Witnesses This factor is analyzed giving broad consideration [to] the parties and witnesses in all claims and controversies properly joined in a proceeding. Volkswagen I, 371 F.3d at 204. Further, courts are not to consider the significance of the identified witnesses testimony, at least not beyond assess[ing] the relevance and materiality of the information the witness may provide. In re Genentech, 566 F.3d at 1343. The relative materiality of witnesses testimony is irrelevant to this inquiry. See id. (Requiring a defendant to show that a potential witness has more than relevant and material information at this point in the litigation or risk facing denial of transfer on that basis is unnecessary.). Thus, for the transfer analysis, all potential material and relevant witnesses must be considered as offering testimony of equal importance. The Fifth Circuit has adopted a 100-mile rule to assist in analyzing this factor, which is clearly applicable here. See Volkswagen I, 371 F.3d at 204-205. When the distance between an existing venue for trial of a matter and a proposed venue under 1404(a) is more than 100 miles, the factor of inconvenience to witnesses increases in direct relationship to the additional distance to be traveled. Volkswagen I, 371 F.3d at 205. When applying the 100-mile rule, the threshold question is whether the plaintiffs chosen venue and the proposed venue are more than 100 miles apart. See Volkswagen II, 545 F.3d at 317; In re TS Tech, 551 F.3d at 1320. If so, then a court determines the respective distances between the residences (or workplaces) of all the identified relevant witnesses and the two venues under consideration. See Volkswagen II, 545 F.3d at 317; In re TS Tech, 551 F.3d at 1320. The 100-mile rule generally favors transfer (with differing degrees) if the proposed venue is a shorter average distance away from witnesses than the plaintiffs chosen venue. See Volkswagen II, 545 F.3d at 317; In re TS Tech, 551 F.3d at 1320. Finally, for this factor to favor transfer, the proposed venue need not be more convenient for all of the witnesses. In re Genentech, 566 F.3d at 1345. Instead, this factor can favor transfer when a substantial number of material witnesses reside 6

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in the transferee venue and no witnesses reside in plaintiffs chosen venue. Id. With respect to this factor, Defendant reiterates its contention that the only witnesses having knowledge of Defendants alleged infringement are its employees located in the Middle District of Georgia. In response, Plaintiff asserts that any cost savings resulting from the shorter travel time resulting from transfer would be undercut by the increased cost of to the judicial system resulting from the creation of duplicative suits. Plaintiff also has a Marshall office, which is within the Eastern District of Texas. Not only does Plaintiff fail to identify any witnesses in the Eastern District of Texas, but Defendant also asserts Plaintiff is a shell company whose only business is patent litigation. Defendant specifically asserts as follows: Plaintiff has listed its principal place of business as Dallas, Texas; The Texas Secretary of State has listed Plaintiffs mailing address as Dallas; Plaintiffs owners reside in Dallas; Plaintiffs sole member, Granicus IP, LLC, shares the same principal place of business in Dallas with Plaintiff; Granicus manager, Erich Spangenberg, resides in Dallas and is also the chairman of IP Navigation, which represents Plaintiff in its efforts to license the 730 Patent; IP Navigation has offices in Dallas; Dublin; Paris; Shanghai; and Marshall; and IP Navigations Marshall office appears to be shared with Plaintiff. The Court is not convinced, nor does it address herein, Defendants assertion that the only connection to the Eastern District of Texas is Plaintiffs sham office in Marshall, Texas, which appears to be used to manufacture venue in this district for Plaintiffs patent infringement suits against legitimate operating companies. Docket Entry #117 at 1-2. However, the Court agrees with Defendant that the Middle District of Georgia is a more convenient forum for this partys witnesses. In this case, as in many cases, the evidence with respect to this factor is closely aligned with the 7

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relative ease of access to sources of proof factor. As the Court found with respect with that factor, this factor weighs in favor of transfer. (d) Practical Problems Practical problems include those that are rationally based on judicial economy.Digital Reg of Texas, LLC v. Adobe Systems, Inc., et al., C.A. No. 6:11cv305-LED (E.D. Tex. March 28, 2012). The existence of multiple lawsuits involving the same issues is a paramount consideration when determining whether a transfer is in the interest of justice. In re Volkswagen of Am., Inc., 566 F.3d 1349, 1351 (Fed. Cir. 2009) (Volkswagen III). Defendant asserts there are no practical problems that would affect transfer because this case is still in its infancy. The Court disagrees with Defendant that it has yet to invest substantial resources in the case. There are over 40 pending TQP cases which have been referred to the undersigned for pretrial purposes. The Court has held numerous scheduling conferences and issued numerous scheduling and discovery orders, including one to govern this case. In this case, all of the TQP cases currently pending in this Court involve common questions of claim construction. While the Court has not formally consolidated these cases for pretrial purposes, the Court has scheduled a couple of combined claim construction hearings on different dates in 2013.1 The Court has also recently consolidated the claim construction briefing in these cases. Considering there are many other TQP cases pending in this Court, traditional notions of judicial economy weigh strongly against transfer.

The Federal Circuit Court of Appeals has made clear the court has considerable discretion to consolidate cases for discovery [when] there is only a common question of law or fact. In re EMC Corp., 677 F.3d 1351, 1359 (Fed. Cir. 2012). Further, under Federal Rule of Civil Procedure 42(a), the court has the discretion to consolidate cases for hearings when there is a common question of law or fact. Id. 8

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D.

Public Interest Factors

(a) Court Congestion The speed with which a case can come to trial and be resolved is a factor in the transfer analysis. A proposed transferee courts less congested docket and ab[ility] to resolve this dispute more quickly is a factor to be considered. In re Hoffmann-La Roche, 587 F.3d at 1336. This factor is the most speculative, and in situations where several relevant factors weigh in favor of transfer and others are neutral, the speed of the transferee district court should not alone outweigh all of those other factors. In re Genentech, 566 F.3d at 1347. Defendant, citing Federal Court Management Statistics, asserts the median time from filing to trial in civil cases is approximately three months less in the Middle District of Georgia than in the Eastern District. Plaintiff does not dispute this statistic but rather argues that Defendant ignores the other factors that would expedite this case, namely that several claim construction orders are expected to be issued by this Court before this case has its claim construction hearing. The Federal Circuit has cautioned against placing too much emphasis on case disposition statistics, which may not always tell the whole story. See Genentech, 566 F.3d at 1347. The Court does not find that the case statistics in this case make this factor favor one venue or the other. As pointed out by Plaintiff, the statistics do not adequately reflect the fact that there have been numerous detailed claim construction orders already issued from the Eastern District of Texas, meaning this district is already well experienced and knowledgeable regarding the patent-in-suit. The first combined claim construction hearing is scheduled in March 2013. Given the procedural posture of this case, the Court is not convinced the court in the Middle District of Georgia would be able to receive this case (if transferred), set a scheduling conference, and provide the parties with claim construction and jury selection dates sooner than those already established in this district. The parties have been diligently working to exchange infringement contentions and invalidity contentions according to the Scheduling Order entered in this case, and the parties are scheduled to exchange 9

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proposed terms for claim construction on September 14, 2012. It is likely this suit will be resolved more quickly in this Court than if it were transferred. Although this is the most speculative of the 1404(a) factors, considering the above circumstances, the Court concludes this factor weighs against transfer. (b) Local Interest This factor considers the interest of the locality of the chosen venue in having the suit resolved there. Volkswagen I, 371 F.3d at 20506. This consideration is based on the principle that [j]ury duty is a burden that ought not to be imposed upon the people of a community [that] has no relation to the litigation. Id. (citing Gilbert, 330 U.S. at 50809). When the accused products are sold in every district in the country, this factor will be neutral unless a district has identifiable connections to the events giving rise to the suit. See Hoffman-La Roche, 587 F.3d at 1338. Defendants headquarters are located in the Middle District of Georgia with 3,700 employees in Columbus. (Griffin Decl. 6). Relying on In re Hoffman-La Roche, Inc., 587 F.3d 1333 (Fed. Cir. 2009), Defendant argues the Middle District of Georgia has a greater connection to this case because this cause of action calls into question the reputation of individuals residing and doing business in the Middle District of Georgia. Id. at 1336. Defendant further argues this case has no ties to this district, other than Plaintiffs apparent mailbox in Marshall. Docket Entry #117 at 15. Plaintiff, also relying on In re Hoffman-La Roche, responds that Defendants ties to the Middle District of Georgia are greatly weakened because Defendants infringing website is available nationwide, and there was no particular infringement in Georgia that would support transferring the case there. However, Defendant points out that the conduct giving rise to infringement emanates from Columbus because that is where the IT department that controls the allegedly infringing aspect of the website is located. Given Plaintiff has an office in Marshall, Texas, the Court finds both the Eastern District of 10

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Texas and the Middle District of Georgia have local interests in the resolution of this case. However, given the nature and extent of Defendants operations in Georgia are more significant than the nature and extent of Plaintiffs operations in the Eastern District of Texas, this factor weighs in favor of transfer. (c) Familiarity With the Governing Law No party has shown that this factor is applicable. The Court accordingly finds this factor neutral. (d) Avoidance of Unnecessary Conflict of Laws Problems No party has shown that this factor is applicable. The Court accordingly finds this factor neutral. E. Balancing the Factors In conclusion, this is not a case where the Middle District of Georgia is clearly more convenient than the Eastern District of Texas. Defendant has shown two factors favor transfer while two factors weigh against transfer, with judicial economy weighing heavily against transfer given the over 40 other TQP cases pending before the Court. The remaining factors are neutral. Accordingly, and for the reasons set forth herein, Defendants motion to transfer is denied. Based on the foregoing, it is ORDERED that Defendant Aflac Incorporateds Motion to Sever is GRANTED but its motion to Transfer (Docket Entry # 117) is hereby DENIED. It is further ORDERED that the filing fee is waived for the severed case. In the severed case, the Clerk of the Court shall docket this Order, the First Amended Complaint for Patent Infringement (Docket Entry #94), Defendant Aflac Incorporateds Answer and Counterclaim to TQPs Complaint (Docket Entry # 105), TQPs Answer to Aflac Incorporateds Counterclaims to Amended Complaint (Docket 11

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Entry #122), Motion Practice Order (Docket Entry # 147), Protective Order (Docket Entry #148), Order Regarding E-Discovery (Docket Entry # 149), Scheduling and Discovery Order (Docket Entry #154); and Order Regarding Claim Construction Briefing (Docket Entry #200).
SIGNED this 15th day of August, 2012.

____________________________________ CAROLINE M. CRAVEN UNITED STATES MAGISTRATE JUDGE

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