In re: Nitro Fluids L.L.C., Appeal No. 2020-142 (Fed. Cir. Oct. 28, 2020)
In the Court’s only precedential patent opinion this week, the Federal Circuit granted a mandamus petition vacating the district court’s denial of a convenience transfer under 28 U.S.C. § 1404(a). Plaintiff Cameron International Corporation had initially brought suit in 2018 against appellant Nitro Fluids in the Southern District of Texas, alleging infringement of fracking-related patents, and then sued Nitro on related patents in the Western District of Texas in February 2020, alleging infringement by the same accused products. When Nitro moved to transfer the second action to the Southern District of Texas under the first-to-file rule, the district court agreed that the cases involved substantially similar issues such that the first-to-file rule would typically apply. However, notwithstanding that both parties were headquartered in the Southern District and that several of the Fifth Circuit’s § 1404(a) factors favored transfer, the district court found that because Nitro had not demonstrated that a balance of the factors favored transfer, compelling circumstances existed to avoid application of the first-to-file rule.
The Federal Circuit granted mandamus and vacated the order denying transfer. The Court acknowledged that regional circuit law governs transfer motions and that a balance of transfer factors can support “compelling circumstances” warranting an exception to the first-to-file rule. However, the Court found in such an analysis, the burden is on the party opposing transfer to show that the factors weigh in favor of keeping the case in the second-filed court, and that the district court erred in denying transfer without making this affirmative finding. The Federal Circuit further found that the district court erred in its analysis of factors that it had found weighed against transfer, which focused principally on the Western District court’s perceived ability to resolve the case more quickly than the Southern District.
Specifically, while Fifth Circuit courts consider “the administrative difficulties flowing from court congestion,” the district court erred by premising its analysis on the fact that the Southern District case had “been pending for almost two years with barely any progress” without actually considering whether there was an appreciable difference in docket congestion between the two fora. (The Court noted Cameron’s multiple efforts to amend its complaint and a stay of those proceedings pending potential USPTO review, suggesting that any difference in the courts’ ability to schedule trial was not actually related to docket congestion.) Observing that the first-to-file rule places a premium on allowing one court to resolve substantially overlapping issues, the Federal Circuit found that the district court also erred in determining that it would not be performing duplicative work simply because it could resolve the case faster. Finally, the Federal Circuit acknowledged that Cameron’s co-pending suit against another defendant in the Western District presented the possibility of conflicting claim constructions, but suggested that on remand the district court should consider the availability of multi-district litigation to resolve such conflicts, as well as whether the aim of the first-to-file rule would be impermissibly thwarted by permitting a plaintiff to avoid its application simply by filing related suits against other defendants in the transferor district.
The opinion can be found here.
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