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Maxchief Investments Limited v. Plastic Development Group, LLC

United States District Court, E.D. Tennessee, Knoxville

August 14, 2017

MAXCHIEF INVESTMENTS LIMITED, Plaintiff,
v.
PLASTIC DEVELOPMENT GROUP, LLC, Defendant.

          MEMORANDUM OPINION

          THOMAS W. PHILLIPS, SENIOR UNITED STATES DISTRICT JUDGE

         Defendant Plastic Development Group, LLC (“PDG”) has filed a motion to dismiss this patent infringement action for improper venue pursuant to Fed.R.Civ.P. 12(b)(3) and/or Fed.R.Civ.P. 12(c) [Doc. 48]. The Court has carefully reviewed the pending motion and related pleadings [Docs. 49, 51, 56].

         I. Background

         As previously noted, this case involves plaintiff Maxchief Investments Limited's (“Maxchief”) claims of patent infringement as to a plastic bi-fold table manufactured by PDG and sold within the Eastern District of Tennessee. PDG previously filed a motion to transfer this case to the Eastern District of Michigan, where PDG is headquartered, pursuant to 28 U.S.C. § 1404(a).[1] After consideration of the § 1404(a) factors and the then- prevailing interpretation of venue law, the Court concluded that PDG had not shown by a preponderance of the evidence that a transfer was warranted [see Docs. 29, 30].

         II. TC Heartland LLC v. Kraft Foods Group Brands LLC

         The pending motion arises from the Supreme Court's recent decision in TC Heartland LLC v. Kraft Foods Group Brands LLC, 137 S.Ct. 1514 (2017). In TC Heartland, the Supreme Court considered the question of “where proper venue lies for a patent infringement lawsuit brought against a domestic corporation.” Id. at 1516. The Supreme Court noted the statutory direction in 28 U.S.C. § 1400(b), that a patent infringement action “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.” Id. In a prior decision, the Court held that for purposes of § 1400(b), a domestic corporation “resides” only in the State of incorporation. Id. at 1517, 1519 (discussing Fourco Glass Co. v. Transmirra Prods. Corp., 353 U.S. 222, 226 (1957)). Despite intervening revisions to the general venue statute, 28 U.S.C. § 1391(c), which equated “residence” with personal jurisdiction, the TC Heartland Court concluded that “amendments to § 1391 did not modify the meaning of § 1400(b) as interpreted by Fourco.”[2] Id. Further, the Court reversed the long-standing Federal Circuit holding that the definition of corporate residence in § 1391(c) was applicable to patent cases under § 1400(b). Id. at 1519-1520 (discussing VE Holding Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574 (Fed. Cir. 1990)). Accordingly, the Supreme Court unequivocally held that “[a]s applied to domestic corporations, ‘reside[nce]' in §1400(b) refers only to the State of incorporation.” Id. at 1521.

         Applying TC Heartland to the instant case, PDG first argues that it is not incorporated in this district and it does not have any regular and established place of business in Tennessee [Doc. 49 at pp. 6-7], points which are undisputed. Thus, PDG argues that it does not “reside” in this district and the case should be dismissed for improper venue pursuant to Fed.R.Civ.P. 12(b)(3).

         In response, Maxchief argues that PDG has misconstrued the TC Heartland case because its holding only applies to domestic corporations and explicitly does not apply to unincorporated associations, including limited liability companies like PDG [Doc. 51 at pp. 2-3 (citing TC Heartland, 137 S.Ct. at 1520)]. This is not quite true. The Supreme Court explicitly limited its analysis in TC Heartland: “we confine our analysis to the proper venue for corporations” and reserved the applicability of its holding to unincorporated entities. 122 S.Ct. at 1517, n.1.

         Maxchief argues that “residence” for unincorporated entities such as PDG means “where it is doing business” [Doc. 51 at pp. 4-5 (citing Denver & Rio Grande W.R. Co. v. Bhd. of R.R. Trainmen, 387 U.S. 556, 562 (1967))]. However, the cases on which Maxchief relies are interpretations of “residence” under § 1391, rather than § 1400(b). See, e.g., Douglas v. D.B. Va., LLC, No. 4:10CV80, 2010 WL 5572830, at *3-4 (E.D. Va. Dec. 13, 2010) (discussing “residence” of LLC under § 1391); Cal. Clippers, Inc. v. U.S. Soccer Football Ass'n, 314 F.Supp. 1057 (N.D. Cal. 1970) (discussing “residence” of an unincorporated associated under § 1391). In reply, PDG argues that Maxchief cites no authority for treating unincorporated associations differently for venue purposes in patent cases [Doc. 56 at pp. 3-5].

         The Court agrees with PDG on this point. Unincorporated associations, such as limited liability companies, are generally treated like corporations for purposes of venue, whereby the “residence” is the association's principle place of business. Roberts v. Paulin, No. 07-CV-13207, 2007 WL 3203969, at *2 (E.D. Mich. Oct. 31, 2007) (citing Denver & Rio Grande, 387 U.S. at 559)). Now that the Supreme Court has reinforced that “residence” for corporate defendants in a patent infringement case is limited to the state of incorporation, Maxchief is hard-pressed to present a reason why unincorporated associations should be treated differently. Indeed, the language of § 1400(b) refers to a “defendant” and is not limited only to corporate defendants. Moreover, inasmuch as TC Heartland appears to reject the broader personal jurisdiction basis for residence of corporate defendants in patent cases, it seems contrary to allow such a basis for unincorporated entities. Accordingly, the Court agrees, in light of TC Heartland, that venue is not proper in this district per 28 U.S.C. § 1400(b).

         III. Waiver

         However, we are not starting from a clean slate and, as Maxchief notes, a defense of improper venue can be waived [Doc. 51 at pp. 5-7]. PDG contends that it has not waived the venue defense because it was included in PDG's answer to the complaint [Doc. 49. at p. 7 (citing Doc. 16 at pp. 3, 9)]. Maxchief argues that PDG has waived its venue defense because the parties have engaged in “substantial litigation activities” since the Court's ruling on PDG's transfer motion [Id.]. PDG argues that the progress of litigation has no bearing on whether venue is proper [Doc. 56 at p. 8].

         Citing three post-TC Heartland cases, Maxchief further argues that TC Heartland is not an intervening change in the law, but rather a reaffirmation of the Fourco decision [Doc. 51 at pp. 7-9]. These courts have noted that the Supreme Court's Fourco decision has been binding since it was issued in 1957, notwithstanding the Federal Circuit's decision in VE Holding to the contrary. See Cobalt Boats, LLC v. Sea Ray Boats, Inc., No. 2:15CV21, 2017 WL 2556679, at *3 (E.D. Va. June 7, 2017); ILife Tech., Inc. v. Nintendo of Am., Inc., No. 3:13-cv-04987, 2017 WL 2778006, at *7 (N.D. Tex. June 27, 2017); Elbit Sys. Land & C4I Ltd. v. Hughes Network Sys., LLC, No. 2:15-CV-00037-RWS-RSP, 2017 WL 2651618, at *20 (E.D. Tex. June 20, 2017). Thus, Maxchief argues and these cases concur that the prevailing argument in TC Heartland was always available.

         PDG argues that its improper venue argument was not “available” prior to TC Heartland based on the long-standing precedent of VE Holding [Id. at pp. 5-6], relying on two courts which reach this conclusion [Doc. 56 at pp. 7-8 (citing Westech Aerosol Corp. v. 3M Co., No. C17-5067-RBL, 2017 WL 2671297, at *2 (W.D. Wash. June 21, 2017), and Stuebing Auto. Mach. Co. v. Gavronsky, et al., No. 1:16-cv-576, 2017 WL 3187049 (S.D. Ohio June 12, 2107))]. Since the conclusion of the briefing on this motion, district courts have been split on this issue. See, e.g., Hand Held Prods., Inc. v. Code Corp., No. 2:17-167-RMG, 2017 WL 3085859, at *3 (D.S.C. July 18, 2017) (“[t]he clear trend … is to hold that TC Heartland is not an intervening change in the law”); Tinnus Enter., LLC v. Telebrands Corp., No. 6:15-CV-00551-RC, 2017 WL 3084268, at *3 (E.D. Texas July 5, 2017) (“TC Heartland does not qualify as an intervening change in law”); but see The Valspar Corp. v. PPG Indus., Inc., No. 16-cv-1429, 2017 WL 3382063, at *4 (D. Minn. Aug. 4, 2017) (“to hold that Fourco remained good law at all times over the last twenty-seven years, and thus that PPG should have raised the improper venue defense at the time this case was filed, effectively ignores reality”); Cutsforth, Inc. v. LEMM Liquidating Co., No. 12-cv-1200, 2017 WL 3381816, at *4 (D. Minn. Aug. 4, 2017) (same); Ironburg ...


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