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002152706 Ontario Limited v. Changer & Dresser Inc.

United States District Court, N.D. Alabama

July 19, 2018


          HARTER, SECREST AND EMERY LLP Attorneys for Plaintiffs DANIEL J. ALTIERI, MICHAEL J. BERCHOU, Lauren R. Mendolera, of Counsel.

          BURR & FORMAN LLP Attorneys for Defendant RYAN M. CORBETT, HARVEY S. KAUGET, of Counsel.




         This matter was referred to the undersigned for all dispositive and non-dispositive motions by Order of District Judge William M. Skretny, filed November 16, 2017 (Dkt. 98). It is presently before the court on Defendant's motion, filed December 11, 2017, to dismiss pursuant to Fed.R.Civ.P. 12(b)(1) for lack of subject matter jurisdiction, Fed.R.Civ.P. 12(b)(3) for lack of proper venue, and, alternatively, pursuant to 28 U.S.C. § 1406(a), to transfer the case to the Northern District of Alabama.[1] (Dkt. 101) (“Defendant's motion”).


This patent infringement action alleges Defendant's infringement of Plaintiffs' '281, '609 and '639 patents for Plaintiffs' spot welding cap changer invention facilitates spot welding. Plaintiffs' '609 continuation patent was added by stipulation in Plaintiffs' Third Amended Complaint; Plaintiffs' '639 and '814 continuation patents were added by court permission, over Defendant's opposition, in Plaintiff's Fourth and Fifth Amended Complaints. See 002152706 Ontario Limited, et al. v. Changers & Dresser, Inc., 2016 WL 9488725, *1 (W.D.N.Y. Oct. 31, 2016) (permitting Fourth Amended Complaint); 002152706 Ontario Limited, et al. v. Changers & Dresser, Inc., 15-CV-00020S(F), Dkt. 97, Nov. 13, 2017 (permitting Fifth Amended Complaint). In the original Complaint, the Amended Complaint (Dkt. 5), and Plaintiffs' First, Second, Third, and Fourth Amended Complaints, Plaintiffs alleged venue was proper in this district under 28 U.S.C. § 1391 (the general venue statute) and § 1400(b) (the patent venue statute). In Defendant's motion to dismiss the Amended Complaint, filed March 31, 2015 (Dkt. 8), Defendant did not object to Plaintiffs' asserted venue in this district. The parties stipulated to permit Plaintiffs to file a Second Amended Complaint (Dkt. 11), which Judge Skretny approved on April 21, 2015 (Dkt. 13). In Defendant's answer to the Second, Third, and Fourth Amended Complaints, which asserted the same basis for venue, Defendant admitted venue was proper.[3] See, e.g., Dkt. 55 ¶ 13. Defendant further asserted venue was proper for Defendant's invalidity counterclaims asserted in Defendant's Answers to Plaintiffs' Second, Third, and Fourth Amended Complaints. See, e.g., Dkt. 55 (Answer to Fourth Amended Complaint) ¶ 7 (“Venue is proper in this district.”). By papers filed June 6, 2017 (Dkt. 71), Defendant moved, pursuant to Fed.R.Civ.P. 12(b)(3) (“Rule 12(b)(3)”), together with Memorandum of Law in support (Dkt. 71-1), to dismiss Plaintiffs' Fourth Amended Complaint for lack of proper venue, or transfer the case to the Northern District of Alabama pursuant to 28 U.S.C. § 1406(a) (“§ 1406(a)”), based on the Supreme Court's recent decision in TC Heartland LLC v. Kraft Foods Grp. Brands, LLC, 137 S.Ct. 1514 (2017) (“TC Heartland”), decided May 22, 2017, in which the Court held that patent cases are required to satisfy the patent venue requirements of 28 U.S.C. § 1400(b) and may not be venued pursuant to the general venue provisions of 28 U.S.C. § 1391(c) (“Defendant's motion”). Plaintiffs' Memorandum of Law In Opposition To Defendant's Motion was filed June 30, 2017 (Dkt. 81); Defendant's Reply Memorandum was filed July 7, 2017 (Dkt. 82).

         On December 11, 2017, Defendant moved to dismiss Plaintiffs' Fifth Amended Complaint filed on November 27, 2017 (Dkt. 100) pursuant to Fed.R.Civ.P. 12(b)(2) (“Rule 12(b)(2)”) for lack of subject matter jurisdiction based on Plaintiffs' lack of standing as well as improper venue in this district under Rule 12(b)(3) (“Defendant's Rule 12(b)(2) motion”). Plaintiffs' Memorandum of Law in opposition was filed January 5, 2018 (Dkt. 105); Defendant's Reply Memorandum was filed January 19, 2018 (Dkt. 108). Defendant's December 2017 Rule 12(b)(2) motion asserts that because the Plaintiffs' original patent assignee, Copperhead Industrial, Inc. (“Copperhead”), an Ontario corporation, is not the named Plaintiff, the Plaintiff 002152706 Limited Ontario corporation lacks standing. By papers filed December 22, 2016, Plaintiffs' cross-moved to substitute Copperhead as the real party in interest as plaintiff in this action, in lieu of 002152706 Ontario Limited, which corporation Plaintiffs contend was mistakenly named as assignee of the original patent and one of the Plaintiffs in this action. (Dkt. 65) (“Plaintiffs' Cross-Motion). Plaintiff JEC Distributors Inc. is a U.S. distributor of Plaintiffs' spot welding cap changers whose standing is also subject to Defendant's motion. In Plaintiffs' Cross-Motion Plaintiffs also sought a stay of Defendant's parallel declaratory action based on the same patent infringement claims Defendant commenced in 2016 in the Northern District of Alabama (“the Alabama action”), which action has been stayed by the district court in the Alabama action pending determination of Plaintiffs' and Defendant's motions in this district. See Dkt. 71-1 at 9 n. 4. Defendant's motion to dismiss or transfer is predicted on the fact, not disputed by Plaintiffs, that Defendant is neither a New York State corporation nor does it have a principal place of business in this district as required by § 1406(b) for proper venue of a patent case. Oral argument on Defendant's motion was deemed unnecessary.


         1. Improper Venue.

         In TC Heartland, the Supreme Court reaffirmed its decision in Fourco Glass Co. v. Transmirra Products Corp., 353 U.S. 222, 226 (1957), that 28 U.S.C. § 1400(b), the patent venue statute, controls the question of the proper venue for a patent infringement claim against a defendant corporation. TC Heartland Products Corp., 137 S.Ct. at 1520-21. Specifically, the Court held that § 1400(b)'s requirement that a corporate defendant be sued either where it “resides, ” i.e., its place of incorporation or corporate domicile, or where it both has infringed and maintains a principal place of business, does not include the broader definition of corporate residence enacted by later amendment to the general venue statute as enacted in 1988 and 2011, 28 U.S.C. § 1391(a)(c) (“§ 1391__”), viz., corporation is a resident of “any district in which [the defendant] is subject to the court's personal jurisdiction with respect to the civil action in question.” § 1391(c). The Court further held that subsequent decisions, particularly VE Holding Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574 (Fed.Cir. 1990) (“VE Holding Corp.”), that § 1391(c)'s then recently enacted broader definition of corporate residence also redefined the term “resides” as used in § 1400(b), were erroneous thereby requiring that the term as used in § 1400(b) means the defendant's domicile, or, in the case of a defendant corporation, the defendant's “‘state of incorporation only.'” TC Heartland, LLC, 137 S.Ct. at 1519 (quoting Fourco Glass Co., 353 U.S. at 226). Here, the parties agree that Defendant, a subsidiary of Kyokutoh Co. Ltd., a Japanese entity, is an Alabama corporation with its principal place of business in Birmingham, Alabama within the Northern District of Alabama. Dkt. 100 ¶ 8. Plaintiffs do not allege Defendant maintains a principal office in this district. See Dkt. 11 ¶¶ 12-17. Thus, unless Defendant, by failing to assert improper venue for the Fifth Amended Complaint as a defense either by pleading it as an affirmative defense pursuant to Fed.R.Civ.P. 12(b)(3) or by motion pursuant to Fed.R.Civ.P. 12(b)(3), is found to have waived such defense as provided in Fed.R.Civ.P. 12(h)(1)(A), the action is subject to dismissal or transfer under § 1406(a).[4] However, for such a waiver to occur, a later asserted defense of improper venue, not included in a defendant's responsive pleading or Rule 12(b)(3) motion, the defense must have been “‘available to the [defendant]' when the defendant made the initial Rule 12(b) motion.” In re Micron Technology, Inc., 875 F.3d 1091, 1096 (Fed.Cir. 2017 (quoting Fed.R.Civ.P. 12(g)(2) (“Rule 12(g)(2)”)) (“In re Micron Technology”).

         In this case, Plaintiffs contend that Defendant's failure to include Plaintiffs' improper, i.e., in violation of § 1400(b), venue defense in any of Defendant's answers to Plaintiffs' amended complaints or in Defendant's prior motion to dismiss pursuant to Rule 12(b)(2) for lack of subject matter jurisdiction based on Plaintiffs' lack of standing, filed December 1, 2016 (Dkt. 59), Defendant has waived such defense. Dkt. 81 at 8. Plaintiffs further contend that even if such waiver by Defendant has not occurred, Defendant by failing to assert improper venue as an affirmative defense in Defendant's previous answers, and by asserting this district is a proper venue for its invalidity counterclaims, has consented to venue in this district. Dkt. 81 at 11-12. However, in In re Micron Technology, the Federal Circuit held that because its 1990 ruling in VE Holding Corp., approving venue in a patent case using the broader definition of a corporation's residence as currently defined in § 1391(c) was, up to the date, May 22, 2016, of the Supreme Court's decision in TC Heartland, controlling precedent in pending patent cases, an improper venue defense based on a lack of compliance with the special venue requirements of § 1400(b) was not “available to defendant, ” for purposes of Rule 12(g)(2) and therefore could not be waived pursuant to Rule 12(h)(1) as any motion prior to TC Heartland seeking to assert such a defense would have been considered futile. In re Micron Technology, LLC, 875 F.3d at 1097-98. Plaintiffs alternatively argue Defendant nevertheless waived the venue defense by not challenging venue through a motion pursuant to 28 U.S.C. § 1404(a) (permitting transfer based on convenience of witnesses).[5] Dkt. 81 at 10-11. This creative argument however, ignores the fundamental purpose of § 1400(b), i.e., to provide defendants with a greater degree of venue protection in a patent infringement case. See In re Cray, Inc., 871 F.3d 1355, 1361 (Fed. Cir. 2017) (“Congress adopted the predecessor to § 1400(b) as a special venue statute in patent infringement actions to eliminate the ‘abuses engendered' by previous venue provisions allowing such suits to be brought in any district in which the defendant could be served.” (quoting Schnell v. Peter Eckrich & Sons, Inc., 365 U.S. 260, 262 (1961))). A change of venue pursuant to § 1404(a) provides an entirely different form of relief not comparable to improper venue which requires either dismissal or transfer under § 1406(a). For example, relief under § 1404(a) is discretionary and, with the advent of video conference technology which can obviate the need for long-distance travel for witnesses to the court for trial, has become problematic. See, e.g., JetBlue Airways Corp. v. Helferich Patent Licensing, LLC, 960 F.Supp.2d 383, 399 (E.D.N.Y. 2013) (noting available use of video-conferencing to reduce inconvenience to witnesses) (citing Longo v. Wal-Mart Stores, Inc., 79 F.Supp.2d 169, 172 (E.D.N.Y 1999)). On the other hand, if the facts support that venue is improper under § 1400(b), the case will be removed from the wrong venue either by dismissal or transfer pursuant to § 1406(a). Plaintiffs' theory that because § 1404(a) relief is always available Defendant was not prevented from raising the venue issue thus unacceptably blurs the distinct functions of § 1404(a) and § 1400(b), and as such, does not establish Defendant should be found to have waived its improper venue defense.

         Plaintiffs further argue that because Defendant did not, in Defendant's answers, dispute Plaintiffs' venue allegations Defendant, notwithstanding the recent holding in TC Heartland, consented to venue in this district. Dkt. 81 at 11-12. This argument also has several obvious deficiencies. First, while it is true that in Defendant's prior answers Defendant arguably acquiesced in Plaintiffs' venue allegations, it is also the case that in Defendant's Answer to Plaintiffs' Second, Third, and Fourth Amended Complaints Defendant specifically stated it had not “knowingly or intentionally waived any applicable defenses” and reserved its rights to advance such defenses “that may become available . . . during the course of this action.” See Dkt. 55 at 9 (underlining added). Additionally, the operative pleading at this time is not the Complaint or any of the prior amended complaints but, see Bethpage Water District v. Northrop Grumman Corp., 884 F.3d 118, 124 n. 8 (2d Cir. 2018) (noting the most recently amended complaint was the operative pleading), rather, Plaintiffs' Fifth Amended Complaint is the operative pleading to which Defendant has not yet answered and, instead, moved against in lieu of an answer pursuant to Rule 12(b)(3) for improper venue on June 6, 2017 shortly after the TC Heartland case was decided on May 26, 2017. Moreover, there is no indication of any contractual relationship between the parties with a forum selection clause specifying this district for any potential lawsuit. Defendant therefore cannot be said to have consented to venue based on a non-existent answer to Plaintiffs' Fifth Amended Complaint. Finally, the very notion of consent, as Plaintiffs posit, which implies a degree of knowledge of the probable effect of the asserted consent (assuming there is in fact any real distinction between a waiver and a consent) flies in the face of the relevant facts. Here, it is plainly evident, as acknowledged by the Federal Circuit's recent decision in In re Micron Technology, that patent litigators in pending cases should not be held to the knowledge that its long-standing precedent in VE Holding Corp. was for 27 years in error and that the issue should have been relitigated. As the Federal Circuit in In re Micron Technology observed, “a sufficiently sharp change in the law sometimes is a ground for permitting a party to advance a position that it did not advance earlier in the proceeding when the law at the time was strongly enough against that position.” In re Micron Technology, Inc., 875 F.3d at 1097 (citing Supreme Court caselaw). Therefore, it is not persuasive to urge, as do Plaintiffs, that Defendant's failure to oppose Plaintiffs' assertion of venue in this district at an earlier point in this case and reliance on such venue for Defendant's counterclaims constitutes a consent to such venue. Although Plaintiffs also contend Defendant's reliance on this district's venue for Defendant's counterclaims established Defendant's consent to venue in this district, Dkt. 105 at 20 (“in bringing its counterclaims, Defendant affirmatively availed itself of venue in this District” under § 1391 and § 1400(b)), defendant in In re Micron Technology also interposed a counterclaim, yet the Federal Circuit in its decision did not allude to such procedural fact as providing any indicia of defendant's consent to improper venue. See In re Micron Technology, Inc., 875 F.3d 1091 (passim). Accordingly, reliance by Defendant on Plaintiffs' asserted venue for Defendant's counterclaims does not establish Defendant's consent to such improper venue. Plaintiffs' contention that Defendant somehow waived its now proffered improper venue defense or consented to such improper venue in this district is therefore without merit.

         Finally, Plaintiffs advances a policy-based argument, Dkt. 81 at 13; Dkt. 105 at 21, in further support of a finding that Defendant consented to venue in this district because, under a contrary holding, agreements to a specific venue will be placed in doubt thereby resulting in a plethora of transfers “disrupting judicial efficiency.” However, as Defendant correctly observes, Dkt. 82 at 12, TC Heartland has already resulted in a large number of such motions. Moreover, if the Supreme Court believed such disruption was unacceptable, it could have indicated its decision was not applicable to pending cases, but it did not. Additionally, there is no factual basis for Plaintiffs' contention that existing forum selection agreements, containing consensually established venue provisions, will be invalidated by a finding in this case that Defendant did not consent to venue in this district as there is no indication in the record of any such agreement by the parties. Nor ...

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