SynKloud Technologies, LLC v. BLU Products, Inc.

The Western District of Texas has seen a significant increase in patent litigation since the confirmation of District Judge Alan D. Albright. That trend that has accelerated in 2020, the second quarter of which saw the Western District overtake Delaware as the most popular patent venue. With that popularity has come greater scrutiny of Judge Albright’s posture toward certain types of motions—most notably inter-district motions to transfer for convenience, a form of relief that Judge Albright has never granted, according to one litigant. The Federal Circuit has now pushed back against Judge Albright’s approach to such motions, ruling that he improperly weighed the applicable factors in a decision that denied a convenience transfer motion filed by Adobe. However, the Federal Circuit also rejected a similar mandamus petition filed by Dropbox in another case by the same plaintiff, SynKloud Technologies, LLC, holding that the defendant must first seek reconsideration of Judge Albright’s underlying order denying transfer.

SynKloud filed the underlying cases against Adobe (6:19-cv-00527) and Dropbox (6:19-cv-00525) in the Western District of Texas in September 2019, targeting both over the provision of software and services utilizing cloud storage. Both defendants filed motions to transfer their respective cases to the Northern District of California on convenience grounds later that year: Adobe in November, and Dropbox in December.

In its motion to transfer, Adobe argued that the plaintiff lacks any connection to the Western District of Texas apart from this litigation, noting that SynKloud’s president (Robert Colao) resides in New York, that the plaintiff is not incorporated in Texas, and that it had no employees, operations, or customers in the state. The Northern District of California would be more convenient, asserted the company, because the teams responsible for the “design, development, operation, marketing, and financial accounting” of the accused products” are all located in that venue—while the company’s two offices in Austin “have nothing to do with the Accused Products or this case”. Furthermore, Adobe noted that both the asserted patents’ named inventor, Sheng Tai Tsao, and his company, STT WebOS, are located in the Northern District, placing them under the sole subpoena power of that court—an issue of particular importance, argued Adobe, because that the inventor and his company “have advertised that they had ‘demonstratable’ products ‘protected by’ most, if not all, of the patents-in-suit prior to the earliest filing date of the asserted patents, potentially invalidating them by violating the statutory on-sale bar”.

Judge Albright denied the motion from the bench on March 27, and no explanatory order appears to have issued (with the court entering that decision as a text-only docket entry on June 15). However, as recounted by Adobe in its mandamus petition challenging that denial, Judge Albright found the “relative ease of access to sources of proof” factor weighed in favor of transfer, concluding that the presence of documents from Adobe, Tsao, and STT WebOS in the Northern District of California outweighed the presence of the plaintiff’s documents in New York and Virginia. Additionally, Judge Albright found that the “compulsory process” factor slightly weighed in favor of transfer, given the likelihood that the parties would want at least the inventor to testify, but noted that the parties disputed whether employees at Adobe’s Austin office would possess relevant information. Regardless, the court opted not to weigh this factor in favor of transfer due to the unlikelihood that all four of the listed individuals would testify. Meanwhile, the fact that Adobe has offices in both districts—while SynKloud does not have one in either—led to the court to find that the “local interest” factor “is neutral to slightly favors transfer”.

However, the dispositive factor for Judge Albright—indeed, the only one he found weighed conclusively in favor of transfer—was the “court congestion factor”. Judge Albright cited his “year and a half of experience in terms of setting schedules and timing of cases and trials” and his “order governing proceedings that [he] use[s] in virtually every case that specifies that the trial will occur within roughly 44 to 47 weeks after a Markman hearing”, noting that the parties seemed to have no trouble setting a trial date within that timeframe. As a result, Judge Albright denied Adobe’s motion, even though the Northern District “might be more convenient”. Adobe appealed the motion in late April.

Dropbox’s motion to transfer, meanwhile, raised similar arguments as did Adobe’s, arguing in part that the location of key witnesses and evidence in the Northern District justified transfer to that venue. In particular, the company highlighted the fact that the most likely Dropbox witness resides in the Northern District, as does the asserted patent’s inventor, as well as the presence there of “documents related to the accused technology, including technical documents, marketing materials, and financial records”.

Judge Albright denied the motion in mid-May. In that ruling, which did receive a written order, the court found that the “relative ease of access to sources of proof” factor weighed slightly in favor of transfer, placing greater weight on the presence of the defendant’s documents in the transferee district (as he did with Adobe) and concluding that the convenience of party witnesses factor was neutral (a factor allegedly ignored by the court in the Adobe case). Unlike the Adobe case, he found the “compulsory process” factor to be neutral due to the presence of Dropbox witnesses in both the transferor and transferee districts. Relatedly, Judge Albright found the “cost of attendance of willing witnesses” factor to be neutral given the presence of those witnesses in both venues. Additionally, in consideration of the factor addressing other “practical problems” affecting the ease, expediency, and expense of trial, Judge Albright found that the presence of parallel litigation in the same district and over the same patent—namely, the Adobe case—weighed against transfer, a factor apparently not considered in the court’s companion Adobe ruling. However, he found that the “local interest” factor was neutral given the presence of Dropbox offices in both the Northern District of California and the Western District of Texas, as well as the distribution of witnesses in both venues. As he did in the subsequent Adobe ruling, Judge Albright found the “court congestion” factor weighed in favor of transfer.

The court then denied the motion, finding in sum “that the access to proof factor slightly weighs in favor of transfer while court congestions weigh against transfer with the other factors being neutral”. Dropbox appealed in late May.

The Federal Circuit’s Two Decisions on Appeal

The Federal Circuit addressed both the Adobe and Dropbox appeals in two separate decisions issued on July 28.

- The Adobe Appeal

The appeals court identified several errors in its opinion addressing the Adobe ruling. “First”, the Federal Circuit held that “the district court failed to accord proper weight to the convenience of the transferee venue” despite finding that several private interest factors weighed toward transfer. In so holding, the court found that “[c]learly, ‘[w]hen fairly weighed,’ here, the compulsory process and sources of proof factors together tip ‘significantly in’ favor of transferring the case” (citation omitted)—criticizing Judge Albright for having “only weighed those factors as ‘slightly’ favoring the transferee forum”.

“Second, and relatedly”, the Federal Circuit ruled, “the district court failed to weigh the cost of attendance for willing witnesses factor in its discussion, yet this factor also favors transfer”. Here, the appeals court noted the “significant number” of potential Adobe employee witnesses residing in the Northern District of California, whereas “SynKloud’s own employees will be coming from outside both districts”. Those facts, as noted by the district court, would make the Northern District more convenient even when giving SynKloud the benefit of the doubt as to its argument that certain Austin-based Adobe employees could have relevant knowledge.

“Third”, continued the Federal Circuit, “the district court erred in denying transfer based solely on its perceived ability to more quickly schedule a trial”. This conclusion by the district court is not consistent with Federal Circuit precedent, the appeals court ruled: under its 2009 decision in In re: Genentech, the Federal Circuit “granted mandamus where, like here, there was a stark contrast in convenience between the two forums” and where the lower court determined that “the court congestion factor weighed against transfer based solely on its assessment of the average rate of disposition of cases between the two forums”. In that ruling, the Federal Circuit questioned the relevance of the court congestion factor under the circumstances, holding that even if it was true that the court in question could have resolved the case in question more quickly, if “several relevant factors weigh in favor of transfer and others are neutral, then the speed of the transferee district court should not alone outweigh all of those other factors”.

That “same conclusion” applies in the present case, held the Federal Circuit—rejecting Judge Albright’s application of this factor as not “withstand[ing] scrutiny”. The reason, explained the appeals court, is that the “court congestion” factor “concerns whether there is an appreciable difference in docket congestion between the two forums” (emphasis added), and the court’s overall ability to “set a schedule directly” is inapplicable in this context. Moreover, the Federal Circuit found that the record does not show an “appreciable difference” in congestion between the Western District of Texas and the Northern District of California (notwithstanding statements to the contrary made by Judge Albright in a scheduling order issued in an unrelated case). Even if it were true that the Western District could resolve the case more quickly, “with several factors favoring transfer and nothing else favoring retaining this case in Western Texas, the district court erred in giving this factor dispositive weight”.

The Federal Circuit then concluded by stating that keeping the case in the Western District “is not convenient for the parties and witnesses” and “is not in the interest of justice or proper administration”. By ruling to the contrary, the appeals court held, Judge Albright had committed a “clear abuse of discretion”—granting Adobe’s mandamus petition.

- The Dropbox Appeal

The Federal Circuit issued its decision on appeal as to Dropbox on the same day as the Adobe case, but denied Dropbox’s petition after treating the Adobe ruling as an “intervening decision”: due to that Adobe ruling, the appeals court “decline[d] to find that Dropbox has ‘no other adequate means to attain the relief [it] desires’ without Dropbox first moving the district court for reconsideration of its orders denying Dropbox’s motions to transfer”. The court did not explain its rationale for treating the two cases differently, as Adobe does not appear to have moved for reconsideration of the court’s order either.

The Decision’s Impact on Another Ongoing Dispute

The Federal Circuit’s rejection of Judge Albright’s ruling as to Adobe follows another recent battle over his treatment of a similar motion filed by Apple, which has also sought to transfer a case filed by Fortress Investment Group LLC subsidiary Uniloc 2017 LLC from the Western District of Texas to the Northern District of California on convenience grounds. As recently reported by RPX, Apple filed a mandamus petition of its own after Judge Albright denied its transfer motion from the bench, arguing that his restrictive approach to convenience transfers contributed to judge-shopping. In that petition, Apple noted that “[i]n his nearly two years on the bench, Judge Albright has never granted” a transfer out of his district on convenience grounds.

It was only after Apple took its argument to the Federal Circuit—more than a month after the court issued its ruling from the bench—that Judge Albright issued a written opinion explaining his decision, asserting that he would not “follow the crowd” by “blindly” adopting related factual findings and rulings from other judges ruling on related litigation between the same parties. In that opinion, Judge Albright again cited the quick time to trial in his district as tipping the “court congestion factor” against transfer. He also cited the time to trial in finding the “practical problems” factor as “heavily” weighing against transfer—asserting that the Northern District is more congested and that transferring the case thus is an “act against judicial economy” (emphasis in original), also citing the advanced stage of the case and the court’s familiarity with it. Despite also finding that the “ease of access to relevant sources of proof weighs in favor of transfer”, Judge Albright declined to transfer the case.

On July 29, the day after the Federal Circuit issued its opinion on the Adobe case, Apple urged the court to apply that same rationale in a notice of supplementary authority. Beyond demonstrating that the “linchpin of the district court’s decision”—its heavy reliance on the time to trial for two factors—“was an abuse of discretion”, Apple argues that the decision “also confirms the district court’s other errors” with respect to underweighting the “compulsory process” and “sources of proof” factors. As in the Adobe case, Apple asserts, “the district court erred by giving little weight to the convenience of party witnesses”, and that it “further erred by improperly considering witnesses ‘from outside both districts’”.

For its part, Uniloc 2017 has argued in response that the cases are distinct due to differences in the underlying facts and in the court’s analysis. As to the facts, the NPE argues that, in contrast to the Adobe case, a significant amount of proof is located in the Western District of Texas as to Apple, while the inventors of the asserted patent are not located in the Northern District of California. Additionally, Uniloc 2017 asserts that unlike the Adobe ruling, Judge Albright “did not give the trial date dispositive weight under the court congestion factor” in this case.

See “Judge Albright Declines to ‘Follow the Crowd’ on Convenience Transfers” (June 2020) for more on this litigation. Additionally, for more on the growing popularity of the Western District of Texas and other recent trends in patent litigation, see RPX’s second-quarter review.