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.
Meaning of “Regular and Established Place of Business”
In West View Research, LLC v. BMW of North America, LLC, No. 16-cv-2590 (S.D. Cal. Feb. 5, 2018), the court addressed whether a distribution agreement with a third party can give rise to venue. This dispute centered on the third In re Cray factor (see our analysis of Cray here), the place of business being that “of the defendant.” In particular, the court addressed whether automobile dealerships that distributed the defendant’s cars pursuant to an operating agreement were “owned or controlled” by that defendant when the agreement allowed the defendant to exert a significant amount of contractual control over the operations of the dealerships. The court determined that under either the “alter ego” or “formal corporate separateness” theories, there was no evidence that the defendant owned any interest in the dealerships. Thus, the dealerships could not be “places of the defendant” no matter how stringent the terms of the operating agreement.
In Palomar Technologies, Inc. v. MRSI Systems, LLC, No. 15-cv-1484 (S.D. Cal. Feb. 5, 2018), the court granted the defendant’s motion to dismiss for improper venue, transferring the case to the District of Massachusetts. After determining that the defendants had not waived their venue defense, the court analyzed whether the defendant had a “regular and established place of business” in the district. The dispute centered on whether the defendant could have a regular and established place of business “by virtue of its former status as an entity within a separate corporation” that may have had “employees in the Southern District when the alleged acts of infringement took place.” The court determined that the plaintiff’s venue argument failed for two reasons. First, the court did not find any reason to ignore the formal corporate separateness of the defendant and the prior corporation. Second, the plaintiff’s theory was not based on facts as they existed at the time of the filing of the complaint. On this second issue, the court noted that even if it were to follow a line of cases that has allowed venue to be tested “at the time the cause of action accrued,” plaintiff’s venue theory would still fail because plaintiff waited 18 months to file the suit, which “[was] not a reasonable time after the action accrued.”
TC Heartland Transfer Issues
In Sioux Steel Co. v. Sukup Manufacturing Co., No. 17-cv-2193 (C.D. Ill. Feb. 20, 2018), the court granted a motion to transfer for convenience under 28 U.S.C. § 1404(a) to the Northern District of Iowa.
The court rejected the plaintiff’s argument that “a case that is properly venued under the patent-specific venue statute, 28 U.S.C. § 1400(b), should not be transferred based on mere convenience after TC Heartland.” The court reasoned that “[b]y its clear terms, 28 U.S.C. § 1404(a) applies to ‘any civil action,’” and thus, that it “applie[d] to patent infringement actions.”
In Realtime Data LLC v. Nexenta Systems, Inc., No. 2:17-07690 (C.D. Cal. Jan. 23, 2018), the Central District of California granted a motion to transfer for improper venue, sending the case to the Northern District of California. The motion had “present[ed] a single, discrete question,” which was “[i]n which judicial districts do domestic corporations ‘reside’ in multi-district states under the patent venue statute?” The plaintiff had mainly relied on the language of the TC Heartland decision to argue that “for purposes of § 1400(b) a domestic corporation ‘resides’ only in its State of incorporation,” and thus, venue was proper in any district in a multi-district state where a corporation “resides.” The court rejected this argument, reasoning that a corporation residing “only in its state of incorporation” was merely a “necessary condition for venue,” and “not a sufficient condition.” “While venue may only be proper within the state of incorporation, a patent case must also be brought in the judicial district containing a corporation’s principal place of business.” The court found its view in express agreement with the language of § 1400(b), which provides that “[a]ny civil action for patent infringement may be brought in the judicial district where the defendant resides.” Therefore, “in the context of 28 U.S.C. § 1400(b), a corporate defendant ‘resides’ only in the state of its incorporation and, within that state, only in the judicial district in which it maintains its principal place of business.”