The IP Litigation Team at Fried Frank is continuously tracking the impact of TC Heartland. Every week, we provide a roundup of the courts’ latest orders and opinions concerning venue-related issues in patent infringement cases.
The summaries below are grouped by topic and cover the period October 28 – November 3, 2017.
Meaning of “Regular and Established Place of Business”
This week, there were three interesting cases touching on whether the operations of a corporate affiliate or agent can be imputed to a defendant in determining whether the defendant maintains a “regular and established place of business” sufficient to create venue under 28 U.S.C. § 1400(b). As we noted in a previous article, here, this issue is likely to arise with some frequency following the TC Heartland decision. Notably, in the cases this week, the courts each refused to base venue on the in-state operations of a corporate agent or affiliate.
In Soverain IP, LLC, v. AT&T, Inc., AT&T Services, Inc., No. 2:17-cv-00293-RWS-RSP (E.D. Tex. Oct. 31, 2017), the court reached a split decision on the defendants’ motion to dismiss for improper venue. First, the court determined that venue was improper with respect to AT&T, Inc. because the company does not have a “regular and established place of business” in the Eastern District of Texas. In so holding, the court refused to treat AT&T, Inc. and AT&T Services, Inc. as a “single entity” for purposes of venue. The court noted that so long as a subsidiary and its corporate parent maintain “formal corporate separateness,” a “subsidiary’s presence in a venue cannot be imputed to the parent.” (Slip op. at 2, citing Cannon Mfg. Co. v. Cudahy Packing Co., 267 U.S. 333, 334-35 (1925).) While the court granted AT&T Inc.’s motion to dismiss, the court refused to dismiss AT&T Services, Inc. The court noted that AT&T Services Inc. based its venue challenge on the assertion that Soverain had not adequately alleged acts of infringement in the district. The court explained, however, that the burden of establishing improper venue lies with the defendant. As such, the defendant must present “affidavits, declarations, or other evidence” showing venue is improper. By contrast, it is not sufficient for a defendant, as AT&T Services did here, to merely point to alleged deficiencies in the complaint.
In Newpark Mats & Integrated Services LLC v. Equipotential Matting, LLC, et al., No. 4:17-cv-00304- brw (E.D. Ark. Oct. 26, 2017), the court held that having an agent with a place of business in the Eastern District of Arkansas was insufficient to establish venue. The defendant – Equipotential Matting, LLC (“EPZ”) – had a contract to purchase a component of the allegedly infringing product from an Arkansas Company – Swain Distribution Co. (“Swain”). Swain also had the right to sell EPZ’s allegedly infringing product in Arkansas after EPZ completed assembly of the product. Citing the recent decision in In re Cray, 871 F.3d 1355 (Fed. Cir. 2017), the court first noted that a “regular and established place of business” under 28 U.S.C. § 1400(b) must be the place “of the defendant.” Additionally, the court noted that in § 1400(a), Congress specifically permitted venue for copyright and trademark suits “in the district in which the defendant or his agent resides or may be found.” 28 U.S.C 1400(a) (emphasis added). Given that Congress did not include similar language in § 1400(b), the Court concluded that patent-infringement suits cannot be brought based on where a defendant’s agent has a place of business.
In Post Consumer Brands, LLC v. General Mills, Inc., et al., No. 4:17-cv-2471-SNLJ (E.D. Mo. Oct. 27, 2017), the court transferred the case to the District of Minnesota because General Mills did not have a “regular and established place of business” in Missouri. The court specifically held that a Missouri plant owned by an affiliate of General Mills belonged to a separate corporate entity and therefore could not be imputed to General Mills. Interestingly, the court was unmoved by several facts highlighted by the plaintiff, including that (i) the Missouri plant is the largest plant in the nation producing General Mills products; (ii) the sign on the plant reads “General Mills,” not “General Mills Operations LLC” (the name of the subsidiary that runs the plant); (iii) the plant is listed on documents found on government websites as an address of “General Mills, Inc.”; and (iv) General Mills lists the plant as one of its “principal production facilities” in its Form 10-K. Rather, the court reasoned that as long as General Mills, Inc. and General Mills Operations, LLC preserved their formal corporate separation, the facilities of the subsidiary could not be imputed to the parent.
In Patent Holder LLC, v. Lone Wolf Distributors, Inc., et al., No. 17-cv-23060 (S.D. Fla. Oct. 31, 2017), the court transferred venue to the District of Idaho because the defendant, Lone Wolf Distributors, did not have a “regular and established place of business” in Florida. Citing the recent decision in In re Cray, 871 F.3d 1355 (Fed. Cir. 2017), the court rejected the plaintiff’s argument that deriving revenue from sales in the district was sufficient for venue. The court also held that including a link on a website seeking distributors for the State of Florida was insufficient to create venue. Finally, the court denied the plaintiff’s request for venue-specific discovery. The court cited Symbology Innovations, LLC v. Lego Sys., No. 2:17-0086-Civ, 2017 WL 432481, at *12 (E.D. Va. Sept. 28, 2017) for the principle that allowing a plaintiff to file suit without evidence of proper venue and then demand discovery on venue would undermine the purpose of venue rules – to prevent defendants from having to litigate in an inconvenient forum.