TQP Development, LLC v. Twitter, Inc.
Filing
41
MEMORANDUM ORDER Signed by Magistrate Judge Roy S. Payne on 9/29/2013. (ch, )
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF TEXAS
MARSHALL DIVISION
TQP DEVELOPMENT, LLC
v.
TWITTER, INC.
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Case No. 2:12-CV-503-JRG-RSP
MEMORANDUM ORDER
Before the Court is Defendant Twitter, Inc.’s Motion to Transfer Venue to the Northern
District of California Pursuant to 28 U.S.C. § 1404(a) and to Stay Any Other Proceeding Pending
Disposition of the Transfer Motion (Dkt. No. 25, filed December 21, 2012). The complaint
against Twitter was filed on August 23, 2012. Twitter waited nearly four months after being
served with the summons before filing the instant motion to transfer on convenience grounds.1
This is one of many cases filed by Plaintiff TQP Development, LLC alleging
infringement of U.S. Patent No. 5,412,730. The ’730 patent relates to secure communication
through the use of pseudo-random encryption keys. A sequence of pseudo-random keys is
generated based on a seed value and an algorithm, and keys are selected depending upon the
message data that is being sent over the transmission medium. The transmitter and receiver are
thereby able to generate the same sequence of keys without the security risk of transmitting keys
from the transmitter to the receiver or vice versa. This patent has been litigated numerous times
1
The present motion to transfer venue is brought solely on convenience grounds under 28
U.S.C. § 1404(a). Neither TQP nor Twitter disputes that the Eastern District of Texas is a proper
venue for this lawsuit. Twitter has not challenged venue by filing a timely motion to dismiss
under Federal Rule of Civil Procedure 12(b)(3).
in the Eastern District of Texas, is the subject of upcoming trials2, and this Court has previously
construed the ’730 patent on five occasions.3
APPLICABLE LAW
Section 1404(a) 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.” 28 U.S.C. § 1404(a) (2006). The first inquiry when
analyzing a case’s eligibility for § 1404(a) transfer is “whether the judicial district to which
transfer is sought would have been a district in which the claim could have been filed.” In re
Volkswagen AG, 371 F.3d 201, 203 (5th Cir. 2004) (“In re Volkswagen I”).
Once that threshold is met, courts analyze both public and private factors relating to the
convenience of parties and witnesses as well as the interests of particular venues in hearing the
case. See Humble Oil & Ref. Co. v. Bell Marine Serv., Inc., 321 F.2d 53, 56 (5th Cir. 1963); In
re Nintendo Co., Ltd., 589 F.3d 1194, 1198 (Fed. Cir. 2009); In re TS Tech USA Corp., 551 F.3d
1315, 1319 (Fed. Cir. 2009). The private factors are: 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. In re Volkswagen I, 371 F.3d at 203; In re Nintendo, 589
F.3d at 1198; In re TS Tech, 551 F.3d at 1319. The public factors are: 1) the administrative
2
TQP Development, LCC v. 1-800-Flowers, Inc., et al., Case No. 2:11-CV-248; TQP
Development, LLC v. Alaska Air Group, Inc., et al., Case No. 2:11-CV-398; and TQP
Development, LCC v. Branch Bank and Trust Company, Case No. 2:12-CV-55.
3
See TQP Development, LLC v. Merrill Lynch & Co., Inc., et al., No. 2:08-CV-471, Dkt.
Nos. 383 (E.D. Tex. Mar. 28, 2011) and Dkt. No. 512 (May 19, 2012); TQP Development, LLC
v. Barclays PLC, et al., No. 2:09-CV-88, Dkt. 165 (E.D. Tex. Mar. 28, 2011); TQP
Development, LLC v. Ticketmaster Entertainment, Inc., No. 2:09-CV-279, Dkt. No. 232 (E.D.
Tex. Sept. 23, 2011); and TQP Development, LCC v. 1-800-Flowers, Inc., et al., Case No. 2:11CV-248 (hearing held on Mar. 12, 2013).
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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 or in the application of foreign law. In re
Volkswagen I, 371 F.3d at 203; In re Nintendo, 589 F.3d at 1198; In re TS Tech, 551 F.3d at
1319.
The plaintiff’s choice of venue is not a factor in this analysis. In re Volkswagen of Am.,
Inc., 545 F.3d 304, 314-15 (5th Cir. 2008) (“In re Volkswagen II”). Rather, the plaintiff’s choice
of venue contributes to the defendant’s burden of proving that the transferee venue is “clearly
more convenient” than the transferor venue. In re Volkswagen II, 545 F.3d at 315; In re
Nintendo, 589 F.3d at 1200; In re TS Tech, 551 F.3d at 1319. Furthermore, though the private
and public factors apply to most transfer cases, “they are not necessarily exhaustive or
exclusive,” and no single factor is dispositive. In re Volkswagen II, 545 F.3d at 314-15.
Timely motions to transfer venue should be “should [be given] a top priority in the
handling of [a case],” and “are to be decided based on ‘the situation which existed when suit was
instituted.’” In re Horseshoe Entm’t, 337 F.3d 429, 433 (5th Cir. 2003); In re EMC Corp., Dkt.
No. 2013-M142, 2013 WL 324154 (Fed. Cir. Jan. 29, 2013) (quoting Hoffman v. Blaski, 363
U.S. 335, 443 (1960)).
DISCUSSION
A.
Proper Venue
The Northern District of California and the Eastern District of Texas are proper venues.
B.
Private Interest Factors
1.
Relative Ease of Access to Sources of Proof
“In patent infringement cases, the bulk of the relevant evidence usually comes from the
accused infringer. Consequently, the place where the defendant’s documents are kept weighs in
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favor of transfer to that location.” In re Genentech, Inc., 566 F.3d 1338, 1345 (Fed. Cir. 2009)
(citation omitted).
Twitter is a Delaware corporation with its principal place of business in San Francisco,
California.
Twitter has submitted a declaration by Ed Axelsen, Director, Real Estate and
Facilities (Axelsen Decl., Dkt. No. 25-1.) Mr. Axelsen states that, “[t]o the limited degree that I
understand Plaintiff’s infringement allegations, documents and evidence relevant to this
litigation are most likely located in Twitter’s San Francisco, California, headquarters or are
easily accessible from Twitter’s headquarters.” (Id. at 2.).
TQP is a limited liability company with a single employee located in Dallas, Texas. TQP
does not identify any sources of proof located in the Eastern District of Texas. This factor
weighs in favor of transferring to the Northern District of California.
2.
Cost of Attendance for Willing Witnesses
“The convenience of the witnesses is probably the single most important factor in a
transfer analysis.” In re Genentech, Inc., 566 F.3d 1338, 1342 (Fed. Cir. 2009). While the Court
must consider the convenience of both the party and non-party witnesses, it is the convenience of
non-party witnesses that is the more important factor and is accorded greater weight in a transfer
of venue analysis. Aquatic Amusement Assoc., Ltd. v. Walt Disney World Co., 734 F.Supp. 54,
57 (N.D.N.Y. 1990); see also 15 Charles Alan Wright & Arthur R. Miller, Federal Practice and
Procedure § 3851 (3d ed. 2012). “A district court should assess the relevance and materiality of
the information the witness may provide.” In re Genentech, Inc., 566 at 1343. However, there is
no requirement that the movant identify “key witnesses,” or show “that the potential witness has
more than relevant and material information . . . .” Id. at 1343-44.
Mr. Axelsen states that, “[t]o the limited degree that I understand Plaintiffs infringement
allegations, it appears that all Twitter employees who may have relevant information to this
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litigation are located in the Northern District of California.”
(Axelsen Decl. at 2.)
“San
Francisco serves as the headquarters for Twitter’s U.S. sales, finance, and marketing operations,
and Twitter employees with knowledge regarding these operations are based [there].” (Id. at 2.)
The convenience of willing witnesses weighs in favor of transfer.
3.
Availability of Compulsory Process to Secure the Attendance of Witnesses
Inventor and Prosecuting Attorneys
The sole applicant for the ’730 patent is Michael F. Jones. Mr. Jones is a resident of
Nashua, New Hampshire. Twitter argues that Mr. Jones is available “anywhere by virtue of
[TQP] having retained him as a ‘consultant.’” (Mot. at 7.) Charles Call, a prosecuting attorney,
is located in Marco Island, Florida. Sanjay Prasad, the other prosecuting attorney is located in
Mountain View, California.
RC4 Algorithm Prior Art
D. James Bidzos is the CEO and Chairman of the Board at VeriSign, a publicly traded
company, and was previously the President and CEO of RSA Security from 1986 to 1999. (Mot.
Ex. F, Dkt. No. 26-7.) According to Twitter, Mr. Bidzos is relevant to showing that the asserted
patent is invalid based upon RSA’s RC4 encryption algorithm. (Mot. at 8.) Mr. Bidzos was
deposed in the prior Merrill Lynch case but did not testify at trial. (Id. at 8-9.)
TQP argues that Mr. Bidzos cannot offer relevant testimony because 1) he does not have
personal knowledge of when Dr. Ron Rivest invented the RC4 encryption algorithm; 2) he does
not have personal knowledge of when the algorithm was delivered to a customer; and 3) “he
never saw the functional specification and development schedule.” (Resp. at 9.) To the extent
that RC4 is relevant to this case, TQP contends that Dr. Ron Rivest, who resides in
Massachusetts, is the relevant witness to be considered, and he is outside the subpoena power of
the Northern District of California. (Id.)
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Authors and Inventors of Prior Art Considered by the PTO
Douglas A. Maisel is the first inventor listed on an international patent application (filed
on June 26, 1986) that was “central in the reexamination of the ‘730 patent.” (Mot. at 9 & Ex.
M, Dkt. No. 25-15.) According to Twitter, Mr. Maisel currently resides in Berkeley, California.
(Mot. at 9.)
Allen Gersho is a research professor of computer and electrical engineering at the
University of California, Santa Barbara. (Mot. at 9.) Prof. Gersho “is the author of relevant
prior art cited on the face of the asserted patent’s reexamination certificate.” (Id.)
Christopher J. Bennett is the first named inventor of U.S. Patent No. 4,864,615 (filed on
May 27, 1988), which was assigned to General Instrument Corp. of New York City. (Mot. Ex.
Q, Dkt. No. 25-19.) The patent is cited on the face of the reexamination certificate of the
asserted patent, and the patent was included in the invalidity contentions relied upon by
defendants in prior litigation involving the asserted patent. (Mot. at 10.) According to a
commercial database, Mr. Bennett may reside in San Diego. (Mot. Ex. R, Dkt. No. 25-20.)
Twitter argues that Mr. Maisel, Prof. Gersho, and Mr. Bennett may offer testimony
relevant to the validity of the ’730 patent, and that these witnesses are subject to compulsory
process in the Northern District of California because California courts enjoy statewide subpoena
power. (Mot. at 8-10.) TQP argues that these witnesses have little relevant testimony to offer
because each of their respective prior art references have been considered by the Patent and
Trademark Office during the original prosecution of the ’730 patent or during reexamination.
(Resp. at 10.) In reply, Twitter belatedly speculates that Mr. Maisel, Mr. Gersho, and Mr.
Bennett may offer testimony regarding prior art products made by their former employers.
(Reply at 2-3.)
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Although Twitter has shown that these inventors may offer testimony relevant to the
issue of prior art, there is little showing that the testimony they may offer is material. The
principal evidentiary value of the patents and printed publications that are the subjects of their
proposed testimony lies in the content of the patents and publications themselves. With respect
to Mr. Maisel and Mr. Bennett, Twitter’s suggestion that they may offer testimony regarding
prior art products of their respective assignees is wholly speculative.4 There is no suggestion that
any of the inventors have evidence to offer that is not reflected in the writings, such as evidence
establishing a prior public use or an on-sale bar. That the Patent and Trademark Office has had
the opportunity to consider each of these references, and in particular Mr. Maisel’s (which was
“central” to the reexamination), reduces the value of these references as a practical consequence
of the presumption of validity.
Subject Matter Experts
Martin Hellman is a professor at Stanford University.
According to Twitter, he is
“known as [the] co-inventor of public-key cryptography, which is relevant to the methods TQP
accuses of infringement.” (Mot. at 8.)
Taher Elgamal is the co-founder and chief identity officer of IndentityMind in Palo Alto,
California. Mr. Elgamal is “purportedly recognized as the ‘father of SSL’” and is relevant
because “Secure Sockets Layer is specifically identified in the [complaint] as a component of
TQP’s infringement allegation.” (Mot. at 8-9.)
Bruce Schneier is the CTO of Counterpane in Santa Clara, California. According to
Twitter, he is “[r]enowned for his work and authorship in encryption technology” and “[h]is
4
In its sur-reply, TQP observes that there is no explanation for why the companies that
allegedly made the prior art products are not listed as sources of proof. (Sur-Reply at 3.) TQP
notes that Mr. Bennett’s patent was last assigned to a Pennsylvania corporation, and that Mr.
Maisel’s patent was last assigned to a Utah corporation. (Id.)
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book, Applied Cryptography, has been relied upon by parties in other cases filed by TQP.” (Mot.
at 9.)
According to TQP, it appears that Twitter intends to use Prof. Hellman, Mr. Elgamal, and
Mr. Schneier to provide “background knowledge regarding public-key cryptography, SSL, and
encryption.” (Resp. at 10.) TQP argues that Twitter cannot compel these witnesses to provide
expert testimony, and any fact testimony they may offer will duplicate the sort of testimony that
will be provided by the parties’ experts witnesses. (Resp. at 10-11.) Twitter admits that it has
not retained any of the witnesses as experts, but contends that the proposed testimony “will lay
out the historic development of relevant technology by those who developed it.” (Reply at 3.)
Although the parties are correct that Prof. Hellman, Mr. Elgamal, and Mr. Schneier are
subject to the subpoena power of the Northern District of California, the suggestion that it would
be a proper exercise of a court’s subpoena power to compel non-material subject matter experts
to testify regarding the “historic development of the relevant technology” cannot be seriously
countenanced. Encryption, public-key cryptography, and SSL are general techniques that have
been widely adapted and independently implemented by numerous programmers and engineers
over the years. The fact that these individuals are knowledgeable of the application of these
general principles at an expert level cannot justify requiring them to testify in every legal dispute
that touches upon a particular application or implementation of those principles. For example, in
a products liability case involving a claim that a car’s airbag was defectively designed, clearly
the car’s manufacturer could be compelled to provide an engineer familiar with the airbag’s
design to testify. If the manufacturer’s principal designer of the airbag was no longer employed
by the car company, perhaps a court may issue a subpoena to compel the principal designer to
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testify. However, no court would require the “father” of the modern car airbag, who works for a
different car company, to testify regarding the proper design of modern airbags as a fact witness.
Twitter fails to articulate any connection between these subject matter experts and the
issues in this case that renders them material witnesses. For example, the fact Mr. Schneier’s
book was “relied upon by parties in other TQP cases” cannot be enough. Mr. Schneier’s book
was also offered as evidence relevant to claim construction in an entirely unrelated case, and
cited by this Court in a claim construction memorandum a few short months ago. (See Claim
Construction Order at 17, Achates Reference Publ’g, Inc. v. Symantec Corp., et al., Case No.
2:11-CV-294 (E.D. Tex. Jan. 3, 2013).)
F5 Networks
F5 Networks is a licensee of TQP, and was previously accused of infringing the ’730
patent. Twitter argues that F5 Networks is relevant because it has “provided licensed product
supplying encryption functionality accused of infringement to many operators of large websites,
including a number of [other] defendants.”
(Mot. at 9.)
Twitter has not submitted any
competent evidence that it is a customer of F5 Networks, or shown that the products are related
to the alleged infringement in this case. Twitter contends that “relevant witnesses regarding the
license with TQP and licensed products presumably are located in F5’s headquarters in Seattle,
and may also be in F5’s San Jose office, within the Northern District of California.” (Mot. at
10.) In support of this contention, Twitter attaches a page from F5’s website listing U.S. offices
in Seattle, Washington; Spokane, Washington; New York City, San Jose, California; Boston,
Massachusetts; Chicago, Illinois; and Washington, D.C. (Mot. Ex. T, Dkt. No. 25-21.)
TQP argues that no witness from F5 Networks is necessary because “TQP will not be
pursuing any infringement claims at trial based on functionality provided by licensed products.”
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(Resp. at 11.)
The Court finds that Twitter’s identification of F5 Networks is somewhat
speculative. First, the only basis for assuming that F5 Networks’ products may be used by
Twitter is attorney argument. Second, there is no explanation of why the San Jose office of F5
Networks may house the relevant information sought by Twitter, when its headquarters are in
Seattle, Washington, and the San Jose office is but one of seven offices in the United States.
Therefore, less weight is given to the identification of F5 Networks.
It appears to the Court that only Mr. Prasad, Mr. Bidzos, and perhaps a few other
unwilling witnesses are properly subject to the subpoena power of the Northern District of
California. Because no identified witnesses are subject to compulsory process in the Eastern
District of Texas, this factor weighs in favor of transfer.
4.
All Other Practical Problems that Make Trial of a Case Easy, Expeditious,
and Inexpensive
Twitter makes the sweeping declaration that “[d]espite the fact that TQP has filed a
number of cases in this District, no judicial economy would result from denying transfer of this
case.”
(Mot. at 11.) (emphasis added)
Twitter argues that none of the judges that have
substantive knowledge of the earlier-filed TQP cases are available because they have since
retired or were sitting by designation (referring to Judges Ward, Folsom and Bryson). (Id.) If
transfer is granted, Twitter argues that the Northern District of California is equally able to apply
rulings from the prior cases. (Id.) Twitter stresses that it is better able compel prior art witnesses
to testify live at trial in the Northern District of California, which is an important consideration
because the Supreme Court has indicated a strong preference for live testimony. (Id. at 13.)
TQP argues that there are significant judicial economy reasons for not transferring the
case. TQP observes that all of the TQP cases (which all involve the same asserted ’730 patent),
are assigned to the same magistrate judge and district judge. A transferee “judge in the Northern
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District of California would [] be required to repeat this Court’s investment of time and energy to
learn about the ‘730 patent and the accused technology to adjudicate case-dispositive motions
and at trial.” (Resp. at 6-7.) TQP also observes that the great majority of defendants have not
moved to transfer these claims, which means a transfer in this case will result in at least two
courts resolving the same issues. (Id. at 7-8.)
The Court finds that considerations of judicial economy strongly weigh against transfer.
At the time the instant case was filed, over sixty cases involving the same asserted patent were
pending in this District. Although it is true that the currently assigned judges were not involved
in the prior TQP cases, it was clear from the outset of the litigation that the same judges would
be expected to handle all of the then pending TQP cases, reducing the amount of judicial
resources spent on learning the technology and the ’730 patent’s history prior to claim
construction. These economies have already been realized, with this Court holding the first of
several consolidated claim construction hearings in March 2013.
Nor is it likely that a
significant number of other courts will otherwise be involved in TQP litigation. Since this case
has been filed, a number of new cases have been filed, and only a relatively small number of
defendants have sought transfer. Given that the patent has since expired, it appears that litigation
involving the ’730 patent will wind down as this Court tries the previously filed TQP cases.
C.
Public Interest Factors
1.
Administrative Difficulties Flowing From 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 court’s “less congested docket” and “[ability] to resolve this
dispute more quickly” is a factor to be considered. In re Hoffman-La Roche, 587 F.3d 1333,
1336 (Fed. Cir. 2009). 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
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district court should not alone outweigh all of those other factors.” In re Genentech, 566 F.3d at
1347.
Twitter argues that the weighted filings per judge in 2011 favors the Northern District of
California (631) over the Eastern District of Texas (847). (Mot. at 14.) Twitter observes that the
median time to disposition for civil cases was quicker in the Northern District of California (11.8
months) than the Eastern District of Texas (16.5 months). (Id.) TQP argues that the time to trial
is faster in the Eastern District of Texas (25.1 months) as compared to the Northern District of
California (25.3 months). TQP notes that it would take time for this case to be transferred, and
Twitter waited several months before filing this motion, adding to the delay. (Resp. at 13.) The
Court finds that this factor weighs against transfer.
2.
Local Interest in Having Localized Interests Decided at Home
This factor considers the interest of the locality of the chosen venue in having the case
resolved there. Volkswagen I, 371 F.3d at 205-06. 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.”
Twitter argues that “this case centers on the Northern District of California”, where
Twitter is based, and where much of the accused encryption technology was developed. (Mot. at
14.) TQP argues that the Northern District of California has no greater interest in this case
because the infringement by Twitter is nationwide. (Resp. at 13.) The Court finds that this
factor is neutral.
3-4.
Familiarity of the Forum With the Law that Will Govern the Case and
Avoidance of Unnecessary Problems of Conflict of Laws or in the
Application of Foreign Law
These factors are neutral.
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.
CONCLUSION
The Court finds that Movants have not established that the Northern District of California
is a clearly more convenient forum than the Eastern District of Texas. Accordingly, Defendant
Twitter, Inc’s Transfer Venue to the Northern District of California Pursuant to 28 U.S.C. §
1404(a) and to Stay Any Other Proceeding Pending Disposition of the Transfer Motion (Dkt. No.
25) is DENIED.
SIGNED this 3rd day of January, 2012.
SIGNED this 29th day of September, 2013.
____________________________________
ROY S. PAYNE
UNITED STATES MAGISTRATE JUDGE
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