Fifth Circuit grants motion to transfer in TikTok case

The US Court of Appeals for the Fifth Circuit has granted a writ of mandamus ordering the transfer of a case, finding that the district court’s denial of the motion to transfer “was so patently erroneous” that the extreme measure was appropriate (TikTok Inc, Case 23/50575, 31 October 2023, Smith, Southwick, Wilson, JJ).

Case background

Beijing Meishe Network Technology sued TikTok in the US District Court for the Western District of Texas, alleging infringement, false advertising and trade secret misappropriation. All claims were based on the theory that a former Meishe employee disclosed copyrighted source code for video and audio editing software to TikTok, which then implemented these into its app.

Meishe and TikTok are both Chinese companies. Both the alleged disclosure and TikTok’s alleged code implementation occurred in China, assisted by TikTok engineers in California. TikTok has no engineers in Texas but it does maintain a business office there, although not within the Western District.

TikTok moved under Section 1404 Title 28 of the US Code to transfer the case to the Northern District of California. The district court took 11 months to rule on the motion; in the meantime the case continued through discovery. After the district court denied the motion, TikTok petitioned the Fifth Circuit for a writ of mandamus.

Questions for the court

The sole issue was the propriety of the district court’s refusal to transfer venue. To succeed on a writ of mandamus, a petitioner must satisfy the court with regard to the following:

• Are there other ways to obtain the desired relief?
• Is the reviewing court’s right to issue the writ ‘clear and indisputable’?
• Is the writ appropriate, given the circumstances?

The Fifth Circuit focused on the right to issue the writ. The 2008 Volkswagen case mandates an eight-factor test that a district court must consider when deliberating a transfer motion. No single factor is dispositive, and the Fifth Circuit has cautioned against tallying the results or denying transfer just because most factors are neutral. Unsurprisingly, in the 15 years since Volkswagen, district courts have yielded inconsistent results when applying these factors – even the Fifth Circuit has reached “conflicting outcomes”. Therefore, the Fifth Circuit took the opportunity to address each factor, finding that two weighed in favour of transfer: the relative ease of access to sources of proof and the cost of attendance of willing witnesses.

Regarding ease of access to proof, the Fifth Circuit clarified that factfinders analyse “relative ease of access, not absolute ease of access” to documents and other physical evidence. The district court had determined that this factor was neutral, given that most documentation was electronic. The Fifth Circuit disagreed, explaining that while the source code was electronically stored, it was protected by a high level of security clearance. Only certain TikTok employees based in California and China were able to access the code. Using the relative metric, the court found that it was easier for the team of engineers to gather in Northern California rather than Western Texas, since no employee with source code access worked there.

The second factor favouring transfer was the cost of attendance for willing witnesses. All parties recognised that the key witnesses were in China. The district court concluded that there was no real difference between Texas and California, since neither was a convenient location in relation to China. However, the Fifth Circuit disagreed, since travel from China to Texas would require substantial additional time and expense compared to travel to California.

The Fifth Circuit also found that the lower court had abused its discretion in determining that these two factors were neutral, when in fact each favoured transfer to California.

The Fifth Circuit determined that the remaining six factors were neutral. For several, this determination was in accord with the district court’s ruling, but for others the court found clear abuse of discretion where the district court had determined that a factor weighed against transfer. These six factors were:

• the availability of compulsory process;
• the administrative difficulties flowing from court congestion;
• the interest in having decisions made locally;
• the forum’s familiarity with the law that governs the case;
• the avoidance of unnecessary conflict of laws; and
• all other practical problems.

For several of these factors, the district court analysed the practical and administrative issues at the time that it denied transfer – almost a year after TikTok filed its motion. The Fifth Circuit penalised the district court for counting post-filing accumulated costs and difficulties against TikTok when it was the district court’s inaction that caused these factors to eventually tip against transfer. The Fifth Circuit observed that such a ruling was especially egregious because the district court had not “offered any adequate explanation for why this motion lingered on the docket for such a long period of time in contravention” of Fifth Circuit law, which dictates that transfer motions be given “top priority”.

Key takeaways

Having determined that two factors favoured transfer and six were “at most” neutral, the Fifth Circuit affirmed that it had a “clear and indisputable” right to grant TikTok’s writ. The court briefly addressed the other two questions necessary for granting mandamus, explaining that the lack of another remedy was automatically satisfied, as was the appropriateness of the writ because of the inconsistent case law in the Fifth Circuit and the instructive benefits of this opinion.

The Fifth Circuit granted the writ, ordering the district court to transfer the case to the Northern District of California. While successful writs of mandamus on transfer motions are rare, they may be worth pursuing – especially in cases where the motion was filed early but not decided promptly.