National Products, Inc v. Arkon Resources, Inc

MOTION to Dismiss of Transfer, for Improper Venue

W.D. Wash.November 30, 2017

Fox Rothschild LLP 1001 Fourth Avenue, Suite 4500 Seattle, Washington 98154-1192 206.624.3600 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 DEFENDANT ARKON RESOURCES, INC.’S MOTION TO DISMISS FOR IMPROPER VENUE - (No. 15-cv-01984-JLR) - 1 229187\00002\52111781.v1 THE HONORABLE JAMES L. ROBART UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON AT SEATTLE NATIONAL PRODUCTS INC., Plaintiff, v. ARKON RESOURCES, INC., Defendant. CONSOLIDATED CASE Lead Case No. 2:15-cv-01984-JLR DEFENDANT ARKON RESOURCES, INC.’S MOTION TO DISMISS OR, IN THE ALTERNATIVE, TRANSFER, FOR IMPROPER VENUE PURSUANT TO RULE 12(B)(3) Noted for Hearing: December 22, 2017 I. INTRODUCTION Defendant Arkon Resources, Inc. (“Arkon”) moves under Fed. R. Civ. P. 12(b)(3) to dismiss the complaint for patent infringement brought by Plaintiff National Products Inc. (“NPI”) because venue in this Court is improper. The patent venue statute, 28 U.S.C. §1400(b), explicitly provides that patent cases may be brought in the judicial district where the defendant resides, or where the defendant has a regular and established place of business and has committed acts of infringement. In its recent decision in TC Heartland LLC v, Kraft Foods Group Brands, 581 U.S. ___; 137 S. Ct. 1514, 197 L. Ed. 2d 816 (2017), the U.S. Supreme Court held that the term “resides” in section 1400(b) refers only to a domestic corporation’s state of incorporation. Arkon is a California company and does not have a regular and established place of business in the Western District of Washington. Accordingly, venue is improper in this judicial Case 2:15-cv-01984-JLR Document 107 Filed 11/30/17 Page 1 of 8 Fox Rothschild LLP 1001 Fourth Avenue, Suite 4500 Seattle, Washington 98154-1192 206.624.3600 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 DEFENDANT ARKON RESOURCES, INC.’S MOTION TO DISMISS FOR IMPROPER VENUE - (No. 15-cv-01984-JLR) - 2 229187\00002\52111781.v1 district under section 1400(b). When a case is brought in the wrong venue, 28 U.S.C. § 1406(a) provides that the matter shall be dismissed or transferred. II. FACTUAL BACKGROUND A. The Parties According to the complaint, Plaintiff NPI is a corporation organized and existing under the laws of the State of Washington, having its principal place of business at 8410 Dallas Ave S., Seattle, Washington 98108. (Dkt. No. 1, ¶1.) Defendant Arkon is a corporation organized under and existing under the laws of the State of California with a principal place of business at 20 La Porte Street, Arcadia, California 91006. (Dkt. No. 1, ¶3; Declaration of Paul Brassard (“Brassard Decl.”), ¶3.) B. Procedural Background NPI filed the complaint on December 17, 2015 alleging patent infringement. (Dkt. No. 1.) The case was assigned to the Judge Jones and Arkon timely filed its answer to the complaint on January 11, 2016. (Dkt. No. 6.) This case was consolidated along with three other cases before Judge Robart for purposes of claim construction and discovery. (Dkt. No. 24.) Although the Court has issued a claim construction order (Dkt. No. 96), discovery remains open until April 6, 2018 and no dates have been set for dispositive motions, a pre-trial conference or trial. (Dkt. No. 105.)1 Although the case has been pending a long time and substantive discovery and claim construction have occurred, the case is to be reassigned to Judge Jones for dispositive motions and trial. Judge Jones has had no substantive involvement in the case and will need to familiarize himself with the case. 1 The parties filed a stipulated motion to continue expert and discovery deadlines, but the previous discovery cut-off was not until February 1, 2018. Case 2:15-cv-01984-JLR Document 107 Filed 11/30/17 Page 2 of 8 Fox Rothschild LLP 1001 Fourth Avenue, Suite 4500 Seattle, Washington 98154-1192 206.624.3600 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 DEFENDANT ARKON RESOURCES, INC.’S MOTION TO DISMISS FOR IMPROPER VENUE - (No. 15-cv-01984-JLR) - 3 229187\00002\52111781.v1 III. VENUE FOR ARKON IS IMPROPER IN THIS COURT A. Legal Standard “The structure of the federal venue provisions confirms that they alone define whether venue exists in a given forum.” Atl. Marine Const. Co. v. U.S. Dist. Court for W. D. of Texas, 134 S. Ct. 568, 578 (2013). The statutory remedy for improper venue provides that when a case is brought in the wrong venue, the district court “shall dismiss, or if it be in the interest of justice, transfer such case to any district or division in which it could have been brought.” Id. (citing 28 U.S.C. § 1406(a)). Congress promulgated a specific statutory section, 28 U.S.C. § 1400(b), to address the issue of venue in patent infringement litigation. That section states, inter alia, that: “Any civil action for patent infringement may be brought in the judicial district where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business.” In 1957, the U.S. Supreme Court in Fourco Glass Company. v Transmirra Products Corporation, 353 U.S. 222 (1957) held that under § 1400(b) a domestic corporation “resides” only in its state of incorporation. At the time of the Fourco decision, the Supreme Court declined to apply to patent infringement cases the broader definition of residence found in the then current general venue statue, 28 U.S.C. § 1391(c). Congress amended 28 U.S.C. §1391(c) in 1988 to provide that: “[f]or purposes of venue under this chapter, a defendant that is a corporation shall be deemed to reside in any judicial district in which it is subject to personal jurisdiction at the time the action is commenced.” Judicial Improvements and Access to Justice Act, Section 1013(a), 192 Stat. 4669. The Federal Circuit considered the 1988 change to the general venue statute two years later in VE Holding Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574 (Fed. Cir. 1990). It held that the addition of the phrase “under this chapter” in section 1391(c) changed the definition of “resides” under section 1400(b) to mean that venue in patent infringement cases was proper in any location where a corporation was subject to personal jurisdiction. The Supreme Court denied Case 2:15-cv-01984-JLR Document 107 Filed 11/30/17 Page 3 of 8 Fox Rothschild LLP 1001 Fourth Avenue, Suite 4500 Seattle, Washington 98154-1192 206.624.3600 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 DEFENDANT ARKON RESOURCES, INC.’S MOTION TO DISMISS FOR IMPROPER VENUE - (No. 15-cv-01984-JLR) - 4 229187\00002\52111781.v1 certiorari thus allowing the Federal Circuit’s decision in VE Holding to stand. Johnson Gas Appliance Co. v. VE Holding Corp., 499 U.S. 922 (1991). VE Holding has been operative law for 27 years, and no district court after VE Holding followed Fourco. In fact, the Federal Circuit routinely repeated that VE Holding was the law. Trintec Industries, Inc. v. Pedre Promotional Products., Inc., 395 F. 3d 1275, 1280 (Fed. Cir. 2005). On May 22, 2017 the Supreme Court issued its opinion in TC Heartland in which it reversed the Federal Circuit’s VE Holding decision finding that the 1988 amendment to section 1391(c) did not change the meaning of §1400(b). The Supreme Court held that a domestic corporation “resides” only in its State of incorporation within the meaning of section 1400(b). B. Venue Is Improper in This Judicial District. NPI’s complaint alleges “[v]enue is proper in this district pursuant to 28 U.S.C. sections 1391 and 1400(b).” (Dkt. No. 1 at ¶ 8). However, the only appropriate venue provision for patent infringement is section 1400(b). TC Heartland, slip op. at 7-8. Under section 1400(b), in order for venue to be proper in a patent infringement litigation brought against Arkon in the Western District of Washington, Arkon must either: (1) be incorporated in Washington, or (2) have a regular and established place of business and committed acts of infringement in this district. Neither bases of venue is proper in this case. C. Arkon Does Not Reside in Washington. As attested in the Brassard Declaration, and evidenced by the records of the California Secretary of State appended to thereto as Exhibit 1, Arkon is a corporation organized and existing under the laws of the State of California. Hence, Arkon does not reside in Washington under section 1400(b) and TC Heartland. D. Arkon Does Not Have a Regular and Established Place of Business In The Western District of Washington. Under the TC Heartland holding, this case should be transferred. Given the ostensible controlling precedent of VE Holding for nearly three decades (that venue existed where a Case 2:15-cv-01984-JLR Document 107 Filed 11/30/17 Page 4 of 8 Fox Rothschild LLP 1001 Fourth Avenue, Suite 4500 Seattle, Washington 98154-1192 206.624.3600 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 DEFENDANT ARKON RESOURCES, INC.’S MOTION TO DISMISS FOR IMPROPER VENUE - (No. 15-cv-01984-JLR) - 5 229187\00002\52111781.v1 defendant was subject to personal jurisdiction), the question of whether a defendant had a regular and established place of business (REPB) in a particular judicial district has been dormant. One early line of cases traces back to the Supreme Court’s decision in W.S. Tyler Co. v. Ludlow- Saylor Wire Co., 236 U.S. 723 (1915). In these cases, the focus was on whether the defendant maintains, controls and pays for a physical location in the district from which sales are made. University of Illinois Foundation v. Channel Master Corp., 382 F.2d 514, 516 (7th Cir. 1967); General Radio Co. v. Superior Electric Co., 293 F.2d 949, 951 (1st Cir. 1961); Mastantuono v. Jacobsen Mfg. Co., 184 F. Supp. 178, 180 (S.D.N.Y. 1960). Other courts adopting a relatively restrictive reading of section 1400(b) held that in order for a defendant to have a regular and established place of business within a district it must be shown that the defendant is engaged in carrying on in a continuous manner a substantial part of its ordinary business in such district. Phillips et. al. v. Baker et. al., 121 F.2d 752, 756 (9th Cir. 1941). As the American economy changed, another line of cases developed in which the REPB analysis noted above was refined to require a “permanent and continuous presence” within the district. No physical location paid for and controlled by the defendant from which sales are made was required, but other factual circumstances were examined such as whether employees could consummate orders, maintain inventory and provide technical assistance even while working out of their places of residence. In re Cordis Corp., 769 F.2d 733, 737 (Fed. Cir. 1985); Minnesota Mining & Manufacturing v. Johnson & Johnson Prods., Civ. 4-86-359, 1987 WL 10997, at *3 (D. Minn. Jan. 2, 1987) (finding an REPB where the defendant had employees in the district who maintained home offices, demonstrated products and provided technical support); London v. Carson Pirie Scott & Co., 4 U.S.P.Q. 2d 1148 (N.D. Ill. 1987) (local employees of defendant operated out of home offices, provided demonstrations, offered training seminars and other technical services). Despite the differing tests, Courts have been in in general agreement that the regular and established place of business standard requires more than the minimum contacts necessary for Case 2:15-cv-01984-JLR Document 107 Filed 11/30/17 Page 5 of 8 Fox Rothschild LLP 1001 Fourth Avenue, Suite 4500 Seattle, Washington 98154-1192 206.624.3600 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 DEFENDANT ARKON RESOURCES, INC.’S MOTION TO DISMISS FOR IMPROPER VENUE - (No. 15-cv-01984-JLR) - 6 229187\00002\52111781.v1 establishing personal jurisdiction or for satisfying the ‘doing business’ standard of the general venue provision. See Phillips v. Baker, 121 F.2d at 755; Johnston v. IVAC Corp., Civ. A. No. 86- 1884-MA, 681 F. Supp. 959, 962 (D. Mass. 1987) (citations omitted). Regardless of the test applied, venue is improper in this case. As set forth in the Brassard Declaration, Arkon has no property, infrastructure, inventory, offices or other physical presence in this District. It has no employees and makes no representations that it has a presence in the Western District of Washington. Arkon does not provide any localized customer support, technical services or targeted marketing efforts in this District. (Brassard Decl., ¶¶4-6.) None of the factors relied on by prior courts to support a finding of a regular and established place of business are present in this case. E. TC Heartland Is Intervening Law. This motion is timely because TC Heartland is intervening law, as already held by several courts. See e.g. Westech Aerosol Corp. v. 3M Co., No. C17-5067-RBL, 2017 WL 2671297, at *2 (W.D. Wash. June 21, 2017) (“TC Heartland changed the venue landscape. . . Defendants could not have reasonably anticipated this sea change, and so did not waive the defense of improper venue by omitting it from their initial pleading and motions.”); Columbia Sportswear N. Am., Inc. v. Seirus Innovative Accessories, Inc., No. 3:15-cv-00064-HZ, 2017 WL 3877858, at *9-10 (D. Or. Sept. 5, 2017) (TC Heartland warranted transfer in case where the parties had already filed dispositive motions, engaged in claim construction and fully litigated the case up to the eve of trial); CAO Lighting, Inc. v. Light Efficient Design, No. 4:16-cv-00482- DCN, 2017 WL 4556717, at *5 (D. Idaho Oct. 11, 2017) (“In sum, the Court finds TC Heartland was an intervening change in law that excused Defendants' prior waiver of their challenge to venue”); Boston Sci. Corp. & Boston Sci. SciMed, Inc. v. Cook Grp. Inc. & Cook Med. LLC, C.A. No. 15-980-LPS-CJB, 2017 WL 3996110, at *8 (D. Del. Sept. 11, 2017). However, some district courts had held that TC Heartland did not establish intervening law that excuses waiver. Case 2:15-cv-01984-JLR Document 107 Filed 11/30/17 Page 6 of 8 Fox Rothschild LLP 1001 Fourth Avenue, Suite 4500 Seattle, Washington 98154-1192 206.624.3600 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 DEFENDANT ARKON RESOURCES, INC.’S MOTION TO DISMISS FOR IMPROPER VENUE - (No. 15-cv-01984-JLR) - 7 229187\00002\52111781.v1 On November 15, 2017, the United States Court of Appeals, Federal Circuit held that TC Heartland changed the controlling law so that a Federal Rule 12(h)(1)(A) waiver is inapplicable. In re Micron Tech., Inc., No. 2017-138, 2017 WL 5474215, at *6 (Fed. Cir. Nov. 15, 2017). Accordingly, any waiver of the defense to improper venue is excused by the intervening law of TC Heartland. F. This Action Should Be Dismissed or Transferred. As provided in 28 U.S.C. § 1406(a), when a case is filed in the wrong district, the Court “shall dismiss, or if it be in the interest of justice, transfer such case to any district or division in which it could have been brought.” Because Arkon resides in Los Angeles County, clearly, under 28 U.S.C. section 1400(b), this action could have been brought in the Central District of California. (“Any civil action for patent infringement may be brought in the judicial district where the defendant resides”.) (Dkt. No. 1, ¶3; Brassard Decl., ¶3.) Accordingly, this case should be dismissed or transferred to the Central District of California, where Arkon has its principal place of business. IV. CONCLUSION Arkon thus respectfully requests dismissal pursuant to Rule 12(b)(3) or transfer to the Central District of California. A proposed Order is submitted herewith. Respectfully submitted this 29th day of November, 2017. KARISH & BJORGUM PC By: /s/ Marc Karish Marc Karish (admitted pro hac vice) KARISH & BJORGUM PC 119 E. Union Street, Suite B Pasadena, CA 91103 Tel: (213) 785-8070 Fax: (213) 995-5010 E-Mail: marc.karish@kb-ip.com Case 2:15-cv-01984-JLR Document 107 Filed 11/30/17 Page 7 of 8 Fox Rothschild LLP 1001 Fourth Avenue, Suite 4500 Seattle, Washington 98154-1192 206.624.3600 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 DEFENDANT ARKON RESOURCES, INC.’S MOTION TO DISMISS FOR IMPROPER VENUE - (No. 15-cv-01984-JLR) - 8 229187\00002\52111781.v1 -AND- James E. Breitenbucher (WSBA No. 27670) FOX ROTHSCHILD LLP 1001 Fourth Avenue, Suite 4500 Seattle, WA 98154-1192 Attorneys for Defendant ARKON RESOURCES, INC. Case 2:15-cv-01984-JLR Document 107 Filed 11/30/17 Page 8 of 8