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Maz Encryption Technologies LLC v. Hewlett-Packard Co.

United States District Court, D. Delaware

March 6, 2014

MAZ ENCRYPTION TECHNOLOGIES LLC, Plaintiff,
v.
HEWLETT-PACKARD COMPANY, Defendant.

REPORT AND RECOMMENDATION

CHRISTOPHER J. BURKE, Magistrate Judge.

Plaintiff MAZ Encryption Technologies LLC ("Plaintiff" or "MAZ") filed the instant patent infringement suit against Defendant Hewlett-Packard Company ("Defendant" or "HP"). Presently pending before the Court is Defendant's motion to transfer venue to the Northern District of California ("Motion"). (D.I. 20) For the reasons that follow, the Court recommends that Defendant's Motion be DENIED.[1]

I. BACKGROUND

A. Procedural History

The instant case was filed on February 22, 2013, and was one of seven cases filed by Plaintiff on that day in this Court, each alleging patent infringement against a different defendant.[2] On April 25, 2013, Plaintiff filed two additional patent infringement suits in this Court, again each against a different defendant.[3] On February 21, 2014, Plaintiff filed another patent infringement suit in this Court, asserting an additional patent against a defendant previously sued in February 2013.[4] In total, of the other nine related cases Plaintiff filed in this Court, seven of the cases involve allegations of infringement of one or both of the patents-in-suit; the other two cases involve allegations regarding a related patent to the patents-in-suit. (D.I. 33 at 3); see also Civil Action No. 14-228-LPS, D.I. 1 at ¶ 1 (D. Del. Feb. 21, 2014). All ten cases are assigned to Judge Leonard P. Stark.

In this case, Plaintiff alleges that Defendant directly and indirectly infringes the patents-in-suit - patents Plaintiff asserts "cover[] novel technologies relating to encryption." (D.I. 33 at 2) Plaintiff's First Amended Complaint ("FAC") avers that Defendant has been and is directly infringing these patents by "among other things, making, using, importing, offering for sale, and/or selling" certain computer encryption products and systems, including Defendant's: (1) HP-UX 11i Encrypted Volume and File System ("EVFS"); and (2) HP ProtectTools and fingerprint readers. (D.I. 14 at ¶¶ 9, 18) Plaintiff also alleges indirect infringement, inter alia, via Defendant's sale or offers for sale to its customers of certain software and hardware products. ( Id. at ¶¶ 11-12, 20-21)

On May 23, 2013, HP answered the FAC. (D.I. 16) A joint proposed Scheduling Order that would govern all but the most recently filed case, including this one, has subsequently been submitted to Judge Stark by the parties in each of those related cases. ( See, e.g., D.I. 43)

On February 4, 2014, Judge Stark referred the instant Motion to the Court for resolution. (D.I. 44) The Court held oral argument on the Motion on February 24, 2014. (D.I. 52 (hereinafter, "Tr."))

B. The Parties and Related Facts, Persons and Entities

Plaintiff MAZ is a Delaware limited liability company ("LLC") and owns, via assignment, the patents-in-suit: United States Patent Nos. 6, 185, 681 and 8, 359, 476. (D.I. 14 at ¶¶ 1-2, 8, 17) The filing dates regarding the patents-in-suit were in 1998 and 2010, respectively, and they were issued in 2001 and 2013, respectively. ( Id., exs. A & B)

Plaintiff was formed on February 13, 2013. (D.I. 26 ("Allen Decl."), ex. A) Plaintiff's LLC has two members (Daniel Mitry and Timothy Salmon); one lives in New York City and the other in Basking Ridge, New Jersey. (D.I. 36 ("Mitry Decl.") at ¶¶ 2-3; D.I. 37 ("Salmon Decl.") at ¶¶ 2-3) Plaintiff's members both assert, as to Plaintiff's current financial condition, only that Plaintiff "does not currently have any revenue." (Mitry Decl. at ¶ 2; Salmon Decl. at ¶ 2)

Stephen J. Zizzi is the inventor of the patents-in-suit. (D.I. 14 at ¶ 1; D.I. 38 ("Zizzi Decl.") at ¶ 2) In 1996, Mr. Zizzi and Chris Mahne launched MAZ Technologies, Inc., in order to develop security products; it was during his work with this company that Mr. Zizzi developed the patented technologies. (D.I. 14 at ¶ 1; Zizzi Decl. at ¶ 3) MAZ Technologies, Inc. was a Delaware corporation whose offices appear to have been located in Marina Del Rey, California. (D.I. 34 ("Chung Decl."), ex. A; Allen Decl., ex. B) Mr. Zizzi now lives in Glenville, New York, and Mr. Mahne currently resides in Miami, Florida. (D.I. 35 ("Mahne Decl.") at ¶ 4; Zizzi Decl. at ¶ 4)

MAZ Technologies, Inc. assigned the rights to the patents-in-suit to a Texas entity with which Mr. Mitry and Mr. Salmon are affiliated, Empire IP LLC, in October 2012. (D.I. 40 ("Yang Decl."), exs. A & C) Empire IP LLC, in turn, assigned the patents-in-suit to Plaintiff on February 14, 2013. ( Id., ex. B)

Defendant HP, which bills itself as the "world's largest technology company[, ]" is a Delaware corporation; its principal place of business is in Palo Alto, California, which is located in the Northern District of California ("Northern District"). (D.I. 14 at ¶ 3; D.I. 21 at 4; Chung Decl., ex. B) It employs approximately 331, 800 persons worldwide, and had (as of fiscal year 2012) annual revenue exceeding $120 billion (placing it at number 10 in the Fortune 500 rankings). (Chung Decl., ex. B) Substantial portions of Defendant's operations and approximately 11, 000 of its employees are located in Northern California, including a significant portion of its research and development, marketing, sales and finance operations. (D.I. 25 ("Harrold Decl.") at ¶¶ 4-9) Defendant has only a few employees in Delaware in these functions, and none affiliated with this case. ( Id. at ¶¶ 7-9)

HP-UX is an operating system on certain HP server products, which Defendant developed and first released in the early 1980s. (D.I. 22 ("Huck Decl.") at ¶ 3) EVFS is a software component for the HP-UX 11i v2 and HP-UX 11i v3 operating systems, which provides certain encryption features. ( Id. at ¶ 4) It was initially designed and developed in the 2000s by two engineers on the HP-UX team: Mehmet Musa and Hemant Mittal. ( Id. at ¶ 5; D.I. 23 ("Musa Decl.") at ¶¶ 6-7) Mr. Musa and Mr. Mittal are no longer employed by Defendant, but are located in the Northern District. (Musa Decl. at ¶¶ 3-4, 6) The current Chief Architect of HP-UX is an employee of Defendant, based out of Defendant's Palo Alto headquarters. (Huck Decl. at ¶ 2)

HP ProtectTools (a suite of software providing security-related features) and fingerprint readers are included with certain HP commercial notebook products. (D.I. 24 ("Ali Decl.") at ¶ 3) Substantial portions of these products are supplied to Defendant by third party corporations located in California. ( Id. at ¶¶ 4-7) The chief architect for early versions of HP ProtectTools is an HP employee based out of HP's offices in Houston, Texas. ( Id. at ¶¶ 2-3)

II. DISCUSSION

A. Legal Standard

Section 1404(a) of Title 28 provides the statutory basis for a transfer inquiry. It 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 or to any district or division to which all parties have consented." 28 U.S.C. § 1404(a).

1. Appropriateness of Transferee Venue

The first step in the transfer analysis is to determine whether this action could have been brought in the proposed transferee venue. "The party moving for transfer bears the burden of proving that the action properly could have been brought in the transferee district in the first instance." Mallinckrodt Inc. v. E-Z-Em Inc., 670 F.Supp.2d 349, 356 (D. Del. 2009) (internal quotation marks and citations omitted). Here, there is no dispute that this infringement action could have been properly brought in the Northern District. (D.I. 21 at 10); see also 28 U.S.C. § 1400(b).

2. Applicable Legal Standards

"[S]ection 1404(a) was intended to vest district courts with broad discretion to determine, on an individualized, case-by-case basis, whether convenience and fairness considerations weigh in favor of transfer." Jumara v. State Farm Ins. Co., 55 F.3d 873, 883 (3d Cir. 1995) (citing Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 30-31 (1988)). The United States Court of Appeals for the Third Circuit has emphasized that when considering a motion to transfer venue pursuant to Section 1404(a), "courts normally defer to a plaintiff's choice of forum" and thus "the plaintiff's choice of venue should not be lightly disturbed." Id. at 879-80 (internal quotation marks and citations omitted). This general principle, drawn from the historic respect accorded a plaintiff's choice of venue, suggests that "a transfer is not to be liberally granted." Shutte v. Armco Steel Corp., 431 F.2d 22, 25 (3d Cir. 1970) (internal quotation marks and citation omitted).

The party seeking a transfer has the burden "to establish that a balancing of proper interests weigh[s] in favor of the transfer[.]" Id. ; see also Jumara, 55 F.3d at 879. That burden is a heavy one: "unless the balance of convenience of the parties is strongly in favor of defendant, the plaintiff's choice of forum should prevail." Shutte, 431 F.2d at 25 (internal quotation marks and citation omitted) (emphasis added); see also CNH Am. LLC v. Kinzenbaw, C.A. No. 08-945(GMS), 2009 WL 3737653, at *2 (D. Del. Nov. 9, 2009). Accordingly, "transfer will be denied if the factors are evenly balanced or weigh only slightly in favor of the transfer." Angiodynamics, Inc. v. Vascular Solutions, Inc., C.A. No. 09-554-JJF, 2010 WL 3037478, at *2 (D. Del. July 30, 2010); see also Illumina, Inc. v. Complete Genomics, Inc., Civil Action No. 10-649, 2010 WL 4818083, at *2 (D. Del. Nov. 9, 2010).

The Third Circuit has observed that, in undertaking this transfer analysis, "there is no definitive formula or list of... factors to consider[.]" Jumara, 55 F.3d at 879. Instead, courts must analyze "all relevant factors" to determine whether "the litigation would more conveniently proceed and the interests of justice be better served by transfer to a different forum." Id. (internal quotation marks and citation omitted). Nevertheless, in Jumara, the Third Circuit identified a set of private interest and public interest factors that should be taken into account in this analysis (the " Jumara factors"). The private interest factors to consider include:

[1] [The] plaintiff's forum preference as manifested in the original choice, [2] the defendant's preference, [3] whether the claim arose elsewhere, [4] the convenience of the parties as indicated by their relative physical and financial condition, [5] the convenience of the witnesses - but only to the extent that the witnesses may actually be unavailable for trial in one of the fora... and [6] the location of books and records (similarly limited to the extent that the files could not be produced in the alternative forum).

Id. The public interest factors to consider include:

[1] [T]he enforceability of the judgment, [2] practical considerations that could make the trial easy, expeditious, or inexpensive, [3] the relative administrative difficulty in the two fora resulting from court congestion, [4] the local interest in deciding local controversies at home, [5] the public policies of the fora, ... and [6] ...

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