January 3, 2024
The U.S. Court of Appeals for the Fifth Circuit recently issued a writ of mandamus transferring a case from the Western District of Texas—a commonly chosen jurisdiction for patent infringement lawsuits—to the Northern District of California.1 This analysis examines the Fifth Circuit’s decision and explores its potential impact on forthcoming litigation, especially patent infringement actions involving source code.
Meishe Network Tech. Co. (“Meishe”), a Chinese provider of video and audio technology, filed a lawsuit against TikTok in 2021 in the Western District of Texas alleging copyright infringement, trade-secret misappropriation, false advertising under the Lanham Act and several other state law claims.2 Meishe’s claims were all based on allegations that TikTok utilized Meishe’s source code to develop and implement TikTok’s current video editing functionality.3
TikTok filed a motion requesting transfer to the Northern District of California under 28 U.S.C §1404.4 On April 11, 2023, the Magistrate Judge issued an order recommending denial of the transfer motion explaining that both Texas and California would be equally convenient, or inconvenient, for “the key witnesses and the employee at the heart” of the claims in the case, who reside in China.5 In addition, the decision held that the electronic storage of the key evidence, the source code, was a neutral factor because witnesses can equally access the electronic source code from Texas and California.6 The District Court Judge adopted the order recommending denial of the transfer motion.7 TikTok subsequently petitioned the Fifth Circuit for a writ of mandamus directing the district court in Texas to transfer the case to California.8
The Fifth Circuit Decision
Under 28 U.S.C. §1404, district courts have discretion to grant or deny a motion to transfer venue in a civil action to any district where it could have been brought or to any district where all parties consent.9 The Fifth Circuit’s In re Volkswagen of Am., Inc. decision sets forth an eight-factor test for district courts to consider in deciding transfer motions.10 Under this test, transfer should be granted if the movant proves that the transferee venue is “clearly more convenient.”11 The Fifth Circuit explained that the analysis of the factors emphasizes overall convenience rather than any isolated circumstance.12 The appellate panel further recognized that mandamus is an extraordinary remedy and that TikTok was required to demonstrate three elements for mandamus relief: i) the absence of alternative adequate means for the desired relief; ii) a clear and indisputable right to the issuance of the writ; and iii) appropriateness of the writ’s issuance under the circumstances.13
The Fifth Circuit specifically scrutinized two factors from the Volkswagen test concerning TikTok’s transfer motion: the ease of access to evidence and the cost for willing witnesses to attend trial.14 Regarding ease of access to evidence, the district court deemed this factor neutral because the source code was electronic documentation equally accessible to both parties.15 The Fifth Circuit disagreed, however, especially with regard to accessing the highly relevant source code. The Fifth Circuit explained that while source code is electronically stored, in this particular case its access was restricted to specific TikTok personnel with high-level security clearance, who were located in California and China.16 Consequently, the Fifth Circuit determined a trial in California would be more convenient for both parties.
Similarly, the Fifth Circuit held California was more convenient for the key witnesses that resided in China.17 This conclusion was based on the additional time and greater expense required for travel to Texas compared to California, contrasting with the district court’s assertion of equal inconvenience between Texas and California in relation to China.18 The Fifth Circuit found the remaining six Volkswagen factors were neutral and, hence, held the district court abused its discretion in denying TikTok’s motion to transfer.19
The appellate panel also noted that granting mandamus was appropriate under the circumstances as it would serve to enhance the consistency of future decisions by providing additional guidance on when a case transfer was justified in response to a § 1404(a) motion:
“the Fifth circuit has issued fewer than ten precedential opinions applying its test despite the fact that district courts within the fifth circuit have been called on to apply Volkswagen in over 2,000 cases, and the Federal Circuit—which is bound by our law when certain procedural matters arise in patent cases—must review many of these decisions with little guidance from our court.”20
Ultimately, the Fifth Circuit provided three key reasons for issuing the writ of mandamus: i) TikTok lacked alternative adequate means for relief, as mandamus was the sole avenue to seek reversal of the erroneous venue decision; ii) the district court’s abuse of discretion in deeming neutral the access to evidence, especially restricted source code and witness attendance costs; and iii) enhancement of consistency in outcomes concerning § 1404(a) motions.21
Implications for Future Patent Cases
While Meishe’s claims against TikTok did not include patent infringement, the Fifth Circuit’s decision carries substantial implications for cases involving source code evidence, an important element in many patent disputes involving software. In view of this decision, Plaintiffs should weigh factors like the location of individuals with access to proprietary information, i.e. source code, when deciding the forum to file its lawsuit.
Following its decision in TikTok, the Fifth Circuit similarly overturned another order in a separate case denying the transfer of a patent infringement case from the Western District of Texas to the Northern District of California.22 Emphasizing that most witnesses were abroad and the patented technology was centered in California, the Fifth Circuit again deemed the lower court’s denial an abuse of discretion.23
It is worth noting that following the Fifth Circuit’s reversal of the district court’s denial of transfer in the TikTok case, the same court subsequently granted Meta Platforms, Inc.’s motion to transfer venue from Texas to California.24 The decision cited the Tiktok case and was primarily based on Meta’s claim that its source code control team, crucial for collecting and providing source code during discovery, is not situated in Texas.25
In conclusion, the In Re TikTok decision is likely to play a role in deciding venue for patent cases, especially cases involving source code with access restricted to certain individuals.