Texas Patent Litigation Monthly Wrap-Up: September 2022

This post reviews three recent Texas district court opinions regarding venue under 28 U.S.C. § 1400 et seq.

Jawbone Innovations, LLC v. Samsung Electronics Co., Ltd., et al., 2:21-cv-00186 (E.D. Tex. August 31, 2022) (Roy Payne)

Plaintiff Jawbone Innovations sued Samsung Electronics Co., Ltd., and Samsung Electronics America, Inc., in the Eastern District of Texas for infringement of six patents generally related to acoustic noise suppression functionalities.[1] Samsung moved to transfer venue to the Northern District of California ("NDCA") for convenience.[2] The court denied Samsung's motion.

Before analyzing the private and public interest factors for transfer of venue, the court found that Samsung failed to meet two threshold requirements. First, the court found that Samsung's motion was untimely.[3] The court noted the Fifth Circuit emphasized that "'a party should not delay filing of a motion to transfer.'"[4] Samsung's motion was filed 13 months after the lawsuit was filed, a month after the claim construction process began, less than a week before Jawbone's opening claim construction brief was due, and the briefing on the motion to transfer was completed less than a week before the claim construction hearing.[5] The court also noted that since the motion was filed, the court had issued a claim construction order and heard arguments and issued rulings on multiple motions to compel.[6] The court found that Samsung did not offer any persuasive argument for why the motion was not timely filed and denied the motion on this ground alone.

Additionally, the court found that Samsung had failed to show that the suit could have been brought in the NDCA. Samsung argued that Jawbone's venue allegations were equally applicable to NDCA.[7] Essentially, Samsung Electronics America maintains a regular and established place of business in NDCA and sells products at the same retailers in NDCA.[8] The court found that "merely repeating Jawbone's pleaded venue theory" was insufficient for the court to determine whether the lawsuit might have been brought in the NDCA.[9] The court found that this alone was also grounds for denying the motion.[10]

Although the court denied Samsung's motion on two threshold issues, it proceeded with analysis of the private and public factors for transfer.[11] The court found that only one of the four private factors weighed "slightly" in favor of transfer and the public factors were all neutral.[12]

Regarding the private factors, the court found that relative ease of access to sources of proof weighed slightly in favor of transfer since once of the accused systems, Bixby, was developed entirely in the NDCA. However, the court noted this was only one of multiple accused systems and Samsung failed to identify any specific type of documents stored in the NDCA.[13]

For the private factor regarding availability of compulsory process to secure the attendance of witnesses, the court determined this factor was neutral. Samsung argued that there were potential witnesses from non-party Samsung Research America ("SRA"), three of the five named inventors, prosecution counsel for the patents, and third-party AliphCom in the NDCA. In response, Jawbone identified 10 former Samsung employees in the Eastern District of Texas, indicated that one of the patent prosecution counsel was in the district, and argued that the only inventor named in all of the asserted patents was also in the Eastern District of Texas.[14] The court found that SRA was a subsidiary of the Samsung defendants and any witnesses from SRA should be considered willing witnesses. Furthermore, Samsung only specifically identified one person from SRA who may be a witness. Since both the Eastern District of Texas and the NDCA had subpoena power over multiple witnesses, the court considered this factor neutral.[15]

For the final two private factors, the court found the cost of attendance for willing witnesses was neutral given that the increased convenience for the witnesses Samsung identified was offset by the increased travel distance for Jawbone's witnesses.[16] Additionally, the court stated that neither party offered any persuasive arguments regarding other practical problems. Thus, the last two factors were neutral.[17]

Under the public interest factors, Samsung argued that transfer would promote judicial economy since related cases against Google, Amazon, and Apple might be transferred to NDCA.[18] The court rejected this argument since none of the cases had actually been transferred at the time of the court's ruling and the court also noted that the real issue of judicial economy was Samsung's failure to move for transfer for more than a year of litigation in the court.[19] Finally, the court found that, under the local interest factor, Samsung had little connection to the NDCA and that neither party had offered persuasive arguments for the remaining public interest factors. Thus, since only one private interest factor slightly favored transfer and all of the public interest factors were neutral, the court found that Samsung had failed to carry its burden under the factors as well.

Westport Fuel Systems Canada, Inc. v. Mercedes-Benz USA, LLC, 2:21-cv-00454 (E.D. Tex. September 11, 2022) (Roy Payne)

Plaintiff Westport Fuel Systems Canada ("Westport") sued Mercedes-Benz USA, LLC ("MBUSA") for patent infringement, and MBUSA subsequently moved to dismiss the case for improper venue. Magistrate Judge Roy Payne recommended that the motion be granted and the complaint against MBUSA be dismissed without prejudice.[20]

To begin, the court noted that MBUSA was a Delaware corporation. For venue to be proper, Westport needed to establish that MBUSA committed acts of infringement and had a regular and established place of business in the Eastern District of Texas. Westport's arguments centered around the existence of dealerships in the Eastern District of Texas related to MBUSA. The court analyzed the Cray factors to determine "(1) whether dealership locations are regular and established places of business for MBUSA, or (2) whether MBUSA has established or ratified the dealerships as MBUSA's places of business."[21]

First, Westport argued that MBUSA's alleged interim control made the dealers and their employees agents of MBUSA. The court noted that this argument echoed the arguments raised in Volkswagen and that Westport had not shown interim control to the extent required by Volkswagen.[22] Westport argued the contractual provisions such as standards for the appearance of the dealerships, training requirements, required tools and software, and warranty obligations were evidence that MBUSA exercised interim control over the dealerships.[23] However, the court found that these contractual provisions were substantially similar to the provisions that the Federal Circuit found to be insufficient in Volkswagen.[24] The court noted that the provisions were "merely reflective of the ordinary desire of manufacturers to set sufficient minimum performance and quality standards to protect the good name of their trademark that they are allowing another to display' and that penalties for noncompliance "are not the something 'more'" Westport needed to show agency.[25]

Second, Westport argued that venue was proper due to the frequency with which MBUSA employees visited and conducted MBUSA business at dealerships in the district.[26] The evidence presented indicated that six MBUSA employees visited five Mercedes-Benz dealerships in the district.[27] One employee visited the dealerships 18 times between the fall of 2018 and May 2022 and another visited the dealerships at least 12 times between September 2020 and April 2022.[28] The court rejected this argument stating that at best this showed "a frequency that is 'sporadic' as opposed to 'steady, uniform, orderly and methodical.'"[29] The court further noted that there was no showing that "any room or space, or even a desk, is set aside and identified as the place for MBUSA employees" when they were at the dealerships.[30] Finally, the court concluded that the fact that MBUSA owned and leased hardware and software kit in connection with warranties, recalls, diagnostics, and repairs was not sufficient to show that MBUSA had an employee with a regular physical presence.[31]

Mov-ology, LLC v. BigCommerce Holdings, Inc., et al, 6:22-cv-00084 (W.D. Tex. September 16, 2022) (Alan Albright)

Plaintiff Mov-ology sued BigCommerce Holdings, Inc., BigCommerce Pty. Ltd., and BigCommerce, Inc., in the Western District of Texas for the alleged infringement of two patents relating to collecting data from website visitors who have abandoned electronic forms and utilizing that data to remarket to the lost customers.[32] The BigCommerce defendants moved to transfer venue to the Northern District of California ("NDCA"). The court denied defendants' motion.[33]

The court's analysis centered entirely on whether the NDCA would have been a proper venue as it relates to the BigCommerce Holdings, Inc., defendant ("Holdings"). The court began by noting that a claim for patent infringement "must 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.'"[34] The court stated that since Holdings is a Delaware corporation, it lacked venue in California under the first prong.[35] Thus, the determination rested on whether Holdings had a regular and established place of business in California.

Based on defendants' own statements, Holdings was a non-operating entity, did not have any employees, products, or assets, and did not conduct any business anywhere.[36] Relying on the Cray factors, the court concluded that (1) Holdings did not have a physical location anywhere, much less in the NDCA; (2) Holdings lacked any regular business operations in the NDCA; and (3) the NDCA was not a place of Holdings.[37] Thus, transfer was not appropriate. Although the defendants argued that Holdings was an irrelevant party, the court noted they had not filed a motion to either sever Holdings or dismiss it as irrelevant to the case. Without first severing or dismissing Holdings, the court declined to find that Holdings was an irrelevant party for venue purposes and concluded that "[i]n an action with multiple defendants, 'venue and jurisdiction requirements must be met as to each defendant.'"[38]

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[1] Jawbone Innovations, LLC v. Samsung Electronics Co., Ltd. et al., 2:21-cv-00186, Dkt. 164 at 1.

[2] Id.

[3] Id. at 4.

[4] Id. (citing In re Wyeth, 406 F.App'x 475, 477 (Fed. Cir. 2010).

[5] Id. at 5.

[6] Id.

[7] Id.

[8] Id.

[9] Id.

[10] Id.

[11] Id. at 6.

[12] Id. at 6, 12.

[13] Id. at 7.

[14] Id. at 7-8.

[15] Id. at 8.

[16] Id. at 10.

[17] Id.

[18] Id.

[19] Id. at 10-11.

[20] Westport Fuel Systems Canada Inc. v. Mercedes-Benz USA, LLC, 2:21-cv-00454, Dkt. 44 at 1.

[21] Id. at 3.

[22] Id. (citing In re Volkswagen Group of America, Inc. 28 F.4^th 1203, 1208-14 (Fed. Cir. March 9, 2022).

[23] See id.

[24] Id. at 3-4.

[25] Id. at 4 (citing Volkswagen, 28 F.4th at 1213).

[26] Id. at 5.

[27] Id.

[28] Id.

[29] Id. at 6 (citing In re Cray, Inc., 871 F.3d 1355, 1362 (Fed. Cir. 2017)).

[30] Id.

[31] Id.

[32] Mov-ology LLC v. BigCommerce Holdings, Inc. et al, 6:22-cv-00084, Dkt. 58 at 1.

[33] Id. at 5.

[34] Id. at 4.

[35] Id.

[36] Id.

[37] Id. at 5.

[38] Id. (citing Magnacoustics Inc. v. Resonance Tech Co., No. 97-1247, 1997 U.S. App. LEXIS 26498, at *3—4 (Fed. Cir. Sept. 25, 1997)).