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Intellectual property lawyers say a recent Eastern District of Texas order that shipped some defendants to California while keeping the local defendants in the district highlights the traditionally plaintiff-friendly Texas district’s increasing tendency to reject cases that belong in other venues. Lawyers say the Sept. 15 order in Balthaser Online Inc. v. Art Star Design LLC, which transferred most defendants to the Northern District of California, follows the lead set by two U.S. Court of Appeals for the Federal Circuit decisions and a 5th Circuit ruling that criticized the Texas federal court for not transferring cases. The Federal Circuit’s Dec. 29 decision in In re TS Tech USA Corp. and its May 22 decision in In re Genentech Inc. concluded that the Eastern District of Texas abused its discretion by denying the defendants’ transfer motion. The Eastern District of Texas is considered one of several rocket dockets where cases move quickly through the system. It’s also become known for astronomical monetary judgments for plaintiffs. The Federal Circuit decisions followed a similar October 2008 en banc decision by the 5th Circuit, In re Volkswagen of America Inc. In that case, the 5th Circuit ordered the Eastern District of Texas to transfer a products liability case to a district where the witnesses and evidence were clustered. In the Balthaser order, District Judge David Folsom wrote that Balthaser “has failed to show a sufficient connection to this district to override the conveniences gained by transferring” the California defendants. But Folsom also wrote that it would be “extremely inconvenient and unfair” to move the Texas defendants added after the TS Tech ruling. “These Defendants were apparently added to the lawsuit for the purpose of maintaining venue in this district,” Folsom wrote. Michael Sacksteder, a San Francisco litigation partner at Mountain View, Calif.-based Fenwick & West who argued the joint defense motion for the California defendants, said Balthaser added several extremely small Texas-based defendants shortly after the TS Tech decision. Sacksteder said the defendants that fought for the transfer also recognized that it was unfair to these small Texas companies to move with the other defendants. “We raised the argument that if you [transfer the whole case], then no Texas company is safe from a patent infringement suit even though it has nothing to do with them,” Sacksteder said. Sacksteder also said that severing the case made sense for the California defendants and the plaintiff. “I told the judge that Balthaser’s address is across the street from where I catch my bus to go home at night in San Francisco,” Sacksteder said. “We’re really seeing the contours of what it’s going to take to get a case transferred from the Eastern District of Texas.” Balthaser’s amended lawsuit, filed in January, accused 28 defendants of infringing its patent that enables Internet users to purchase and create rich-media applications on a hosted Web site. The four Texas defendants the judge allowed to stay in Texas include a Christian social networking community, Web site design companies with one or two employees and a 325-member video-sharing Web site. Alfred Fabricant, a New York-based intellectual property partner at Washington’s Dickstein Shapiro who argued for Balthaser at the transfer motion hearing, was not available for comment. Balthaser’s local attorneys at Dallas-based McKool Smith and company officials also did not return calls for comment. The Balthaser ruling represents one of the rare times the Eastern District of Texas has transferred some parties and left some behind, said Steve Bauer, who heads the Boston litigation practice and co-leads the patent litigation practice group at New York-based Proskauer Rose. Bauer wasn’t involved in Balthaser but expects it to “provide a lot of guidance going forward” on Eastern District of Texas venue fights after the TS Tech and Genentech Federal Circuit rulings. “It’s just one more step in letting people know what the [Eastern District] of Texas court is thinking,” Bauer said.

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