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Cutsforth, Inc. v. LEMM Liquidating Co., LLC

United States District Court, D. Minnesota

August 4, 2017

Cutsforth, Inc., Plaintiff,
v.
LEMM Liquidating Company, LLC, et al., Defendants.

          CONRAD A. GOSEN, JOSEPH A. HERRIGES, MATHIAS W. SAMUEL, MICHAEL E. FLOREY, AND ROB COURTNEY, FISH & RICHARDSON P.C., FOR PLAINTIFF.

          ALAN L. BARRY, BENJAMIN E. WEED, DEVON CURTIS BEANE, JASON A. ENGEL, K&L GATES LLP, ROBERT D. BROWNSON, AND OLIVIA MORELAND COOPER, BROWNSON & LINNIHAN, PLLP, FOR DEFENDANTS.

          MEMORANDUM OPINION AND ORDER

          SUSAN RICHARD NELSON, UNITED STATES DISTRICT JUDGE

         I. INTRODUCTION

         Before the Court is Defendants' Motion to Transfer for Improper Venue [Doc. No. 403]. For the reasons stated herein, Defendants' Motion is granted, and this case is transferred to the Western District of Pennsylvania.

         II. BACKGROUND

         This long-running dispute concerns allegations that Defendants have infringed various patents held by Plaintiff Cutsforth, Inc. (“Cutsforth”) for the design and manufacture of “brush holders” used by utility companies to facilitate the generation of electricity. (See, e.g., Second Am. Compl. [Doc. No. 45] (“SAC”) ¶ 27.) Cutsforth filed suit on May 17, 2012, asserting, among other things, that venue in this district was proper “pursuant to at least 28 U.S.C. §§ 1391(b) and (c) and 1400(b).” (See Compl. [Doc. No. 1] ¶ 8.) Defendants answered this first complaint on July 6, 2012, admitting Cutsforth's venue allegations. (See Westinghouse Air Brake Techs. Corp. (“Wabtec”) Answer [Doc. No. 17] ¶ 8; Fulmer Co. LLC (“Fulmer”) Answer [Doc. No. 18] ¶ 8.) The complaint was subsequently amended on July 13, 2012, and again on September 25, 2012-in both instances, Defendants agreed that venue was proper in Minnesota. (See, e.g., LEMM Liquidating Co. (“LEMM”) Answer to Am. Compl. [Doc. No. 47] ¶ 18; MotivePower, Inc. (“MotivePower”) Answer to Am. Compl. [Doc. No. 48] ¶ 18; Wabtec Answer to Am. Compl. [Doc. No. 49] ¶ 18.)

         At Defendants' request, a stay was entered in the case on June 6, 2013 to facilitate inter partes review before the U.S. Patent Trial and Appeal Board. (See generally June 6, 2013 Order [Doc. No. 88].) The stay remained in place until it was lifted on September 28, 2016, at which time the litigation rapidly picked up pace. The Court held a technology tutorial and claim construction hearing on March 10, 2017, and heard the parties' cross-motions for summary judgment on May 26, 2017. Just as the Court was preparing to issue its claim construction order, however, Defendants filed the present motion seeking permission to amend their answers to deny that venue was proper in this district, and to dismiss or transfer this case for improper venue. See Fed. R. Civ. P. 12(b)(3), 15(b)(2). As justification for the untimeliness of the motion, Defendants assert that while venue had been proper in Minnesota under prevailing law at the time suit was filed, it was no longer in the wake of the Supreme Court's May 22, 2017 decision in TC Heartland LLC v. Kraft Foods Grp. Brands LLC, 137 S.Ct. 1514 (2017). (See Defs.' Mem. in Supp. of Mot. to Transfer [Doc. No. 404] (“Defs.' Mem. in Supp.”) at 1.) In Defendants' view, TC Heartland upended the law of venue in patent cases, should be applied retroactively, and represents an intervening change in the law such that any waiver of the improper venue argument should be excused. (See generally id.)

         Despite the lateness of the request and the advanced state of this litigation, the Court agreed to consider Defendants' motion on an expedited basis, without a hearing. (See June 12, 2017 Order [Doc. No. 397] at 2.) The parties completed their briefing on July 17, 2017, and the matter is now ripe for a decision.

         III. DISCUSSION

         A. Change in the Law of Venue

         In patent suits, venue is governed by 28 U.S.C. § 1400(b), which provides that “[a]ny civil action for patent infringement may be brought in [1] the judicial district where the defendant resides, or [2] where the defendant has committed acts of infringement and has a regular and established place of business.” In 1957, the Supreme Court determined that for purposes of corporate defendants, a corporation “resides” only in its state of incorporation. See Fourco Glass Co. v. Transmirra Prods. Corp., 353 U.S. 222, 226 (1957). In so holding, the Court rejected the argument that § 1400(b) incorporates the broader definition of corporate “residence” contained in the general venue statute, 28 U.S.C. § 1391(c). See Id. at 228.

         Congress has not amended § 1400(b) since Fourco was decided. It has, however, amended § 1391 twice. In 1988, Congress amended that statute 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.” See TC Heartland, 137 S.Ct. at 1519 (emphasis added) (citation omitted). Interpreting this change, the Federal Circuit concluded that Congress meant to amend the definition of “resides” as it appears in § 1400(b), because that section falls in the same chapter as § 1391(c). See VE Holding Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574, 1584 (Fed. Cir. 1990). Accordingly, the Federal Circuit held that in a patent case, a corporation resided anywhere it was subject to personal jurisdiction-greatly expanding the venue options for plaintiffs. In so holding, it found that Congress had effectively legislatively abrogated Fourco's prior venue standard. See Id. at 1583-84.

         For twenty-seven years, from 1990 until 2017, VE Holding was the governing standard on the matter of venue in patent litigation, and neither party here disputes that fact. Indeed, as recently as 2016, the Federal Circuit reaffirmed its holding in that case and stated explicitly that the argument that Congress had meant by its 2011 amendments to return to the rule in Fourco was “utterly without merit or logic.” See In re TC Heartland LLC, 821 F.2d 1338, ...


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