Simpson Performance Products, Inc. v. NecksGen Inc.
ORDER adopting 15 Memorandum and Recommendations; denying as moot 11 First Motion to Dismiss; granting 20 Third Motion to Dismiss to the extent that this Court concludes that venue is improper in this District. The Clerk is DIRECTED to TRANSFER this action to the Southern District of California. Signed by District Judge Richard Voorhees on 8/22/2017. (tmg) [Transferred from North Carolina Western on 8/23/2017.]
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF NORTH CAROLINA
CASE NO. 5:16-CV-00153-RLV-DCK
SIMPSON PERFORMANCE PRODUCTS,
THIS MATTER IS BEFORE THE COURT on (1) Defendant NecksGen, Inc.’s First
Motion to Dismiss pursuant to Fed. R. Civ. P. 12(b)(6) (Doc. 11); (2) Magistrate Judge David C.
Keesler’s Memorandum and Recommendation on Defendant’s First Motion to Dismiss (Doc. 15);
and (3) Defendant NecksGen, Inc.’s Motion to Dismiss pursuant to Fed. R. Civ. P. 12(b)(3) or, in
the alternative, to transfer venue pursuant to 28 U.S.C. § 1404(a) (Doc. 20). Both motions have
been fully briefed. (Docs. 16-18, 20, 23-24). Neither party filed an objection to Magistrate Judge
Keesler’s Memorandum and Recommendation that recommended denying Defendant’s First
Motion to Dismiss pursuant to Fed. R. Civ. P. 12(b)(6) as moot, and the time to file objections has
elapsed. Accordingly, Defendant’s First Motion to Dismiss pursuant to Fed. R. Civ. P. 12(b)(6),
the Memorandum and Recommendation, and Defendant’s Motion to Dismiss pursuant to Fed. R.
Civ. P. 12(b)(3), are all ripe for disposition. For the following reasons, the Memorandum and
Recommendation (Doc. 15) is ADOPTED, Defendant’s First Motion to Dismiss pursuant to Fed.
R. Civ. P. 12(b)(6) (Doc. 11) is DENIED as moot, Defendant’s Motion to Dismiss pursuant to
Fed. R. Civ. P. 12(b)(3) or, in the alternative, to transfer venue pursuant to 28 U.S.C. § 1404(a)
(Doc. 20) is GRANTED to the extent that this Court (1) concludes that venue is improper in this
District and (2) exercises its discretion under 28 U.S.C. § 1406(a) to transfer this action to a district
where the action could have been brought, and this action is TRANSFERRED to the Southern
District of California.
PROCEDURAL AND FACTUAL BACKGROUND
In August of 2016, Plaintiff Simpson Performance Products, Inc. filed suit against
Defendant NecksGen, Inc. alleging one count of infringement of U.S. Patent No. 9,351,529 (the
“’529 Patent”). (Doc. 1 at 3-7; see also Doc. 12 at 3-12). The ’529 Patent relates to a restraint
device that is used in conjunction with a helmet to stabilize a driver’s head and neck in the event
of a crash while operating a motorsport vehicle. (See Doc. 12 at 3). Plaintiff alleges that it is
incorporated in Texas and has a principal place of business in Mooresville, North Carolina. Id. at
1. Plaintiff further alleges that Defendant is incorporated in California and that Defendant’s
principal place of business is in El Cajon, California. Id. This Court takes judicial notice that El
Cajon, California is a city in San Diego County, California, and is within the Southern District of
California. Finally, Plaintiff alleges venue was proper in this Court under 28 U.S.C. § 1391(b),
(c) and under 28 U.S.C. § 1400(b). Id. at 3.
On December 14, 2016, Defendant filed its first motion to dismiss under Fed. R. Civ. P.
12(b), arguing that Plaintiff’s Complaint failed to state a claim for purposes of Rule 12(b)(6).
(Doc. 11 (“first Rule 12(b) motion”)). Defendant’s first Rule 12(b) motion was referred to
Magistrate Judge David C. Keesler. (See Doc. 15). Within twenty-one days of Defendant filing
its first Rule 12(b) motion, and while Defendant’s first Rule 12(b) motion was before Magistrate
Judge Keesler, Plaintiff amended its Complaint. (Doc. 12). In light of Plaintiff’s Amended
Complaint, Magistrate Judge Keesler issued a memorandum and recommendation recommending
that Defendant’s first Rule 12(b) motion be denied as moot. (Doc. 15). Neither party objected to
Magistrate Judge Keesler’s memorandum and recommendation and the time to file objections has
On January 25, 2017, Defendant filed a second motion to dismiss under Rule 12(b), arguing
that Plaintiff’s Amended Complaint failed to state a claim for purposes of Rule 12(b)(6). (Doc. 16
(“second Rule 12(b) motion”). Plaintiff filed a response to Defendant’s second Rule 12(b) motion
(Doc. 17) and Defendant filed a reply to Plaintiff’s response (Doc. 18). On May 22, 2017, the
United States Supreme Court issued its decision in TC Heartland LLC v. Kraft Foods Grp. Brands
LLC, a case addressing “where proper venue lies for a patent infringement lawsuit brought against
a domestic corporation.” 137 S. Ct. 1514, 1516 (2017). Relying on TC Heartland, Defendant
filed a third Rule 12(b) motion, this time seeking dismissal for improper venue under Rule 12(b)(3)
or, in the alternative, a transfer of this case to the Southern District of California pursuant to 28
U.S.C. § 1404(a). (Doc. 20 (“third Rule 12(b) motion” or “Rule 12(b)(3) motion”). As to venue
being improper in the Western District of North Carolina, Defendant argues that it (1) is
incorporated in California, not North Carolina, and (2) does not have a regular and established
place of business in North Carolina. (Doc. 20-1 at 8-13). In response, Plaintiff argues Defendant
waived its defense of improper venue by failing to raise the venue issue in its two prior Rule 12(b)
motions to dismiss. (Doc. 23 at 3-6). Defendant argues that an exception to the general rule of
waiver applies because TC Heartland represents an intervening change in the law governing venue
for patent litigation and that the venue defense was not available to it until the Supreme Court
issued its decision in TC Heartland because binding precedent from the United States Court of
Appeals for the Federal Circuit foreclosed the venue argument raised in its Rule 12(b)(3) motion.
(Doc. 20-1 at 14-16; Doc. 24 at 7-15); see also VE Holding Corp. v. Johnson Gas Appliance Co.,
917 F.2d 1574, 1584 (Fed. Cir. 1990), cert denied, 499 U.S. 922 (1991).
Standard of Review
In considering a motion to dismiss under Fed. R. Civ. P. 12(b)(3), this Court must
determine whether venue is improper in the Western District of North Carolina. “To survive a
motion to dismiss for improper venue when no evidentiary hearing is held, the plaintiff need only
make a prima facie showing of venue.” Mitrano v. Hawes, 377 F.3d 402, 405 (4th Cir. 2004). “In
assessing whether there has been a prima facie venue showing, [the court] view[s] the facts in the
light most favorable to the plaintiff.” Aggarao v. MOL Ship Mgmt. Co., Ltd., 675 F.3d 355, 366
(4th Cir. 2012). A court reviewing a Rule 12(b)(3) motion may “consider evidence outside the
pleadings. Id. at 365-66.
It is against the following backdrop that Defendant filed its third Rule 12(b) motion,
seeking dismissal based on improper venue under Rule 12(b)(3). In patent infringement actions,
venue is proper “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.” 28 U.S.C.
§ 1400(b). Section 1400(b) does not include its own definitional provisions; meanwhile, 28 U.S.C.
§ 1391(c), a subsection within the general venue statute, defines the term “residency.” The
interaction between the patent venue statute and the general venue statute, particularly with respect
to the effect of § 1391(c) of the general venue statute on the definition of the word “resides” in
§ 1400(b), has been a source of controversy in patent litigation for some time. See TC Heartland,
137 S. Ct. at 1518-19 (discussing various patent venue rulings and stating that “courts reached
differing conclusions regarding whether § 1400(b)’s use of the word ‘resides’ incorporated
§ 1391(c)’s definition of ‘residence.’”). In 1957, the Supreme Court, in Fourco Glass, “squarely
rejected” the United States Court of Appeals for the Second Circuit’s determination that
§ 1391(c)’s definition of residency applied to § 1400(b) and went on to hold that “§ 1400(b) ‘is
the sole and exclusive provision controlling venue in patent infringement actions, and . . . is not to
be supplemented by . . . § 1391(c).’” Id. at 1519 (quoting Fourco Glass Co. v. Transmirra Prods.
Corp., 353 U.S. 222, 229 (1957)).
Subsequent to the Supreme Court’s decision in Fourco Glass, Congress, in 1988, amended
§ 1391(c). Id. (citing Judicial Improvements and Access to Justice Act, §1013(a), 102 Stat. 4669).
Relying on language in the 1988 congressional amendment, the Federal Circuit concluded that
Congress intended to supersede the Supreme Court decision in Fourco Glass and that § 1391(c)’s
amended language served to impart § 1391(c)’s definition of “residency” into the term “resides”
in § 1400(b). VE Holding, 917 F.2d at 1578. The Federal Circuit’s VE Holding decision stood for
twenty-seven years, with the Federal Circuit affirming VE Holding multiple times, including after
Congress again amended § 1391 in 2011, and with the Supreme Court denying certiorari on
multiple writs seeking to challenge the VE Holding decision. See In re TC Heartland LLC, 821
F.3d 1338, 1341-43 (Fed. Cir. 2016); Trintec Indus., Inc. v. Pedre Promotional Prods., Inc., 395
F.3d 1275, 1280 (Fed. Cir. 2005) (citing VE Holding and stating, “although [defendant] moved to
dismiss for lack of personal jurisdiction and improper venue, the venue point is a non-issue. Venue
in a patent action against a corporate defendant exists wherever there is personal jurisdiction . . .
Therefore, no separate venue inquiry is necessary.”); Century Wrecker Corp. v. Vulcan Equip. Co.,
923 F.2d 870 (Fed. Cir. 1990) (unpublished), cert denied, 499 U.S. 962 (1991).1 Then, in TC
See also Delta Sys., Inc. v. Indak Mfg. Corp., 4 F. App’x 857, 859 (Fed. Cir. 2001) (noting, with approval, VE
Holding’s holding that § 1391(c) defines “resides” in § 1400(b)); In re Mini Micro Stencil, Inc., 232 F. 3d 905, 2000
WL 290354, at *1 (Fed. Cir. 2000) (unpublished) (same); West v. Terry Bicycles, Inc., 230 F.3d 1382, 2000 WL
152805, at *3 (Fed. Cir. 1996) (unpublished) (concluding that district court erred where it dismissed action based on
improper venue without applying § 1391(c)’s definition of residency to § 1400(b), as required by VE Holding); N.
Am. Philips Corp. v. Am. Vending Sales, Inc., 35 F.3d 1576, 1577 n.1 (Fed. Cir. 1994) (citing VE Holding with
approval relative to venue issue); SGS-Thomson Microelectronics, Inc. v. Int’l Rectifier Corp., 31 F.3d 1177, 1994
Heartland, the Supreme Court abrogated VE Holding and held that the 1988 congressional
amendments to § 1391 did not render § 1391(c)’s definition of “residency” applicable to § 1400(b).
TC Heartland, 137 S. Ct. at 1520-21.
Pursuant to TC Heartland, § 1400(b) is the sole and exclusive venue statute governing
patent litigation. Id. at 1521. As previously noted, § 1400(b) states that “[a]ny 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.” For purposes of the patent venue statute, a corporate defendant is said to “reside” only
in its state of incorporation. TC Heartland, 137 S. Ct. at 1521. “[I]n determining whether a
corporate defendant has a regular and established place of business in a district, the appropriate
inquiry is whether the corporate defendant does its business in that district through a permanent
and continuous presence there.” In re Cordis Corp., 769 F. 2d 733, 737 (Fed. Cir. 1985).
In response to Defendant’s motion to dismiss for improper venue, Plaintiff does not attempt
to argue that venue is proper in the Western District of North Carolina. (See Doc. 23). Nor could
Plaintiff successfully advance such an argument in light of TC Heartland. Construing “resides”
to only include a defendant’s place of incorporation, it is apparent that venue is not proper under
the first clause of § 1400(b) given that Plaintiff alleges that Defendant is incorporated in California.
As to the section clause of § 1400(b), while Plaintiff’s Amended Complaint contains allegations
supporting the conclusion that Defendant conducts some business in the North Carolina by selling
products in and shipping products to North Carolina, Plaintiff’s allegations fall far short of
permitting the inference that Defendant maintains a “permanent and continuous presence” in North
WL 374529, at *3 (Fed. Cir.) (unpublished) (relying on VE Holding to state that, within context of venue challenge in
patent litigation, “[u]nder 28 U.S.C. § 139(c), a corporate defendant resides where it is subject to personal
jurisdiction”), cert denied, 513 U.S. 1052 (1994); In re Traveler’s Club Luggage, Inc., 935 F.2d 279 (Fed. Cir. 1991)
(unpublished) (citing VE Holding with approval relative to venue issue).
Carolina. (See Doc. 12 at 2-3). Accordingly, venue is improper in the Western District of North
Availability of Venue Defense
Rather than challenging the propriety of venue in this District, Plaintiff argues that
Defendant waived its venue defense by not raising it in either of its first or second Rule 12(b)
motion. (Doc. 23 at 3-6). The defense of improper venue is an affirmative defense that a defendant
waives if it does not raise it in a timely manner. See Dee-K Enters., Inc. v. Heveafil Sdn. Bhd., 985
F. Supp. 640, 642-43 (E.D. Va. 1997). A defendant waives a defense of improper venue if it does
not include its venue defense in a motion as part of, or prior to, its responsive pleading. Fed. R.
Civ. P. 12(h)(1). Relevant to raising a venue defense, Rule 12(g) provides that “a party that makes
a motion under this rule must not make another motion under this rule raising a defense or
objection that was available to the party but omitted from its earlier motion.” Fed. R. Civ. P.
12(g)(2). Thus, “Rule 12(g) operates in conjunction with Rule 12(h) to require that all defenses
permitted to be raised by motion, which are then available, must be included in the same [Rule
12(b)] motion.” Bromfield v. McBurney, 2009 WL 674517, at *5 (W.D. Wash. Mar. 12, 2009)
(internal quotation marks omitted). In other words, a defendant “who does not initially raise
certain defenses – lack of personal jurisdiction, improper venue, improper process, and improper
service of process – cannot invoke those defenses later on.” Paleteria La Michoacana v. Productos
Lacteos, 905 F. Supp. 2d 189, 192 (D.D.C. 2012).
Rule 12(g)’s limitation on raising a 12(b) defense after an initial 12(b) motion was filed is
premised on the belated defense being “available” to the defendant. As a result, an exception to
the general rule of waiver exists “when there has been an intervening change in the law recognizing
an issue that was not previously available.” Holland v. Big River Minerals Corp., 181 F.3d 597,
605 (4th Cir. 1999).2 “[A] defense is unavailable if its legal basis did not exist at the time of the
answer or pre-answer motion . . . .” Chatman-Bey v. Thornburgh, 864 F. 2d 804, 813 n.9 (D.C.
Cir. 1988) (citing Holzager v. Valley Hosp., 646 F.2d 792, 796 (2nd Cir. 1981)). Fully stated,
[t]he intervening law exception to the general rule that the failure to raise an issue
timely in the district court waives review of that issue . . . applies when ‘there was
strong precedent’ prior to the change . . . such that the failure to raise the issue was
not unreasonable and the opposing party was not prejudiced by the failure to raise
the issue sooner.
Big River Minerals Corp., 181 F.3d at 605-06 (quoting and citing Curtis Publ’g Co. v. Butts, 388
U.S. 130, 143, 145 (1967)); see also Gucci Am., Inc. v. Weixing Li, 768 F.3d 122, 135-36 (2d Cir.
2014) (“[A] defendant does not waive a personal jurisdiction argument . . . if the ‘argument that
the court lacked jurisdiction over the defendant would have been directly contrary to controlling
precedent in this Circuit.’” (emphasis added) (brackets omitted) (quoting Hawknet, Ltd. v.
Overseas Shipping Agencies, 690 F.3d 87, 92 (2d Cir. 2009))); Hand Held Prods., Inc. v. Code
Corp., 2017 WL 3085859, at *3 (D.S.C. July 18, 2017) (“Of course, a litigant’s reasonable but
mistaken belief should waive a late challenge to venue if prejudice to the plaintiff would result.”
However, since “litigation in [the] matter ha[d] just begun . . . [plaintiff] [would] not be prejudiced
by litigating [the] matter for the first time in a proper venue.”); Ironburg Inventions Ltd. v. Valve
Corp., 2017 WL 3307657, at *3 (N.D. Ga. Aug. 3, 2017) (considering undue prejudice to the
plaintiff as a factor in granting the defendant’s motion to transfer).
The law of the regional circuit where a case arises governs “procedural matters that are not unique to patent law.”
Beverly Hills Fan Co. v. Royal Sovereign Corp., 21 F.3d 1558, 1564 (4th Cir. 1994) (citing Panduit Corp. v. All States
Plastic Mfg. Co., 744 F.2d 1564, 1574-75 (Fed. Cir. 1984) (overruled on other grounds by Richardson-Merrell, Inc.
v. Koller, 472 U.S. 424 (1985))). While the venue statute at issue in this case, 28 U.S.C. § 1400, is unique to patent
law, the ability belatedly to raise a defense under the intervening change in law exception to the general rule of waiver
is not unique to patent law. In any event, however, this Court’s research has not uncovered any Federal Circuit
authority contrary to Big River Minerals Corp.’s statement of the law with respect to the considerations governing the
intervening change in law exception to the general rule of waiver.
Conversely, “[a] defense is ‘available’ where circuit precedent does not foreclose it at the
relevant time, regardless of any later Supreme Court ruling resolving a circuit split.” CG Tech.
Dev., LLC v. Fanduel, Inc., 2017 WL 3207233, at *1 (D. Nev. Jul. 27, 2017) (citing Am. Fid.
Assur. Co. v. Bank of N.Y. Mellon, 810 F.3d 1234, 1241 (10th Cir. 2016)). This is true even when
subsequent developments provide a legal footing for the argument not raised or lend significant
credence to the argument not raised. See Big River Minerals Corp., 181 F.3d at 606-07 (Supreme
Court decision that served as basis for untimely defense did not constitute intervening change in
law for purposes of exception to the general rule of waiver because the decision did not specifically
address the statutory provision at issue and because the Fourth Circuit had not previously
addressed the validity of the untimely defense).
Based on the preceding statement of the law governing waiver, this Court must consider
three issues when considering Plaintiff’s waiver argument: (1) did TC Heartland constitute an
intervening change in the law subsequent to Defendant filing its first and second Rule 12(b)
motions; (2) did VE Holding constitute a strong and controlling precedent against the position
ultimately adopted by the Supreme Court in TC Heartland, such that it was not unreasonable for
Defendant to not raise the venue defense before TC Heartland; and (3) was Plaintiff prejudiced by
Defendant’s failure to raise the venue defense earlier. As previously discussed, in TC Heartland,
the Supreme Court held that the patent venue statute, § 1400(b), was not incorporated by the
general venue statute, § 1391(c), for the purposes of defining where a corporation was said to
“reside.” TC Heartland, 137 S. Ct. at 1517. In so ruling, the Supreme Court abrogated the Federal
Circuit’s holding in VE Holding and significantly narrowed the number of venues that a given
patent suit could be properly brought in, relative to the venues available under VE Holding. In
light of the fact that rulings of the Federal Circuit provide binding authority on all patent litigation
in all federal district courts, on its face, TC Heartland’s rejection of VE Holding represents an
intervening change in the law.
Plaintiff, however, argues that TC Heartland merely reaffirmed Fourco Glass such that
Fourco Glass always controlled the venue issue Defendant now seeks to raise, and that VE Holding
was merely a misguided attempt by the Federal Circuit to effectively overrule the Supreme Court’s
Fourco Glass decision. (See Doc. 23 at 5-6). Other district courts presented with belated venue
arguments based on TC Heartland have reached opposite conclusions regarding whether TC
Heartland constituted an intervening change in law, or merely a reaffirmance of Fourco Glass.
Compare Cobalt Boats, LLC v. Sea Ray Boats, Inc., ___ F. Supp. 3d ___, 2017 WL 2556679, at
*3 (E.D. Va. June 7, 2017) (holding that VE Holding improperly disregarded Fourco Glass such
that TC Heartland merely reaffirmed existing Supreme Court precedent as stated in Fourco Glass,
and did not constitute an intervening change in the law); Amax, Inc. v. ACCO Brands Corp., 2017
WL 2818986, at *3 (D. Mass. June 29, 2017) (relying on Cobalt Boats, LLC); iLife Techs., Inc. v.
Nintendo of Am., Inc., 2017 WL 2778006, at *5-7 (N.D. Tex. June 27, 2017) (concluding that VE
Holding improperly overruled Fourco Glass where it held that congressional amendment
implicitly, rather than explicitly, superseded Fourco Glass.); Infogation Corp. v. HTC Corp., 2017
WL 2869717, at *4 (S.D. Cal. July 5, 2017) (agreeing with earlier courts holding that TC Heartland
was not an intervening change in the law but doing so without providing any analysis), with
Maxchief Invs. Ltd. v. Plastic Dev. Grp., LLC, 2017 WL 3479504, at *3-4 (holding that TC
Heartland represented an intervening change in law where VE Holding was based on interpretation
of 1988 congressional amendment to § 1391 following decision in Fourco Glass); Valspar Corp.
v. PPG Indus. Inc., 2017 WL 3382063, at *4 (D. Minn. Aug. 4, 2017) (same); Ironburg Inventions
Ltd., 2017 WL 3307657, at *2 (rejecting position that VE Holding attempted to overturn Fourco
Glass and noting that VE Holding viewed issue as matter of “first impression” based on 1988
congressional amendment); CG Tech. Dev., LLC, 2017 WL 3207233, at *2 (same as Maxchief
Invs. Ltd.); OptoLum, Inc. v. Cree, Inc., 2017 WL 3130642, at *3-4 (D. Ariz. Jul. 24, 2017) (same
as Maxchief Invs. Ltd.); Westech Aerosol Corp. v. 3M Co., 2017 WL 2671297, at *2 (W.D. Wash.
Jun. 21, 2017) (describing TC Heartland as a “sea change” that patent-litigation defendants “could
not have reasonably anticipated,” and noting that TC Heartland allowed defendants to raise
credible argument to venue “[f]or the first time in 27 years”).
Having considered the opposing arguments and district court opinions, this Court
concludes that TC Heartland constitutes an intervening change in the law. The Federal Circuit in
VE Holding made clear it was hearing the case as a matter of first impression, in order to determine
if the 1988 congressional amendments superseded the Supreme Court’s decision in Fourco Glass.
VE Holding, 917 F.2d at 1579. Specific to that point, the Federal Circuit in VE Holding stated:
The issue, then, is not whether the prior cases, including Supreme Court cases,
determined that under different statutory language Congress' intent was that
§ 1400(b) stood alone. The issue is, what, as a matter of first impression, should we
conclude the Congress now intends by this new language in the venue act.
Id. (first emphasis added). VE Holding, therefore, was not an attempt to “overrule” the Supreme
Court, it was merely an attempt by the Federal Circuit to interpret a newly amended statute.
Though the Supreme Court ultimately disagreed with the Federal Circuit’s interpretation of the
effect of the 1988 congressional amendments on the patent venue statute, the Supreme Court’s
rejection of VE Holding does not necessitate the conclusion that VE Holding was nothing more
than an attempt by the Federal Circuit impermissibly to overturn Fourco Glass.
This conclusion is buttressed by language in TC Heartland. Notably, the Supreme Court,
when describing the Federal Circuit’s VE Holding decision, emphasized that “[the venue]
landscape remained effectively unchanged until 1988, when Congress amended the general venue
statute, § 1391(c) . . . .” TC Heartland, 137 S. Ct. at 1519 (emphasis added). The Supreme Court
further explained that the “Federal Circuit concluded that subsequent statutory amendments had
effectively amended § 1400(b) as construed in Fourco Glass, with the result that § 1391(c) now
supplies the definition for ‘resides’ in § 1400(b).” Id. at 1517. Therefore, both the Federal Circuit
and the Supreme Court identified the fact that the venue landscape had changed significantly in
the post-Fourco Glass/pre-TC Heartland period as the basis for the Federal Circuit’s decision in
VE Holding. Accordingly, where TC Heartland was decided after Defendant filed its first and
second Rule 12(b) motions to dismiss, TC Heartland constitutes an intervening change in the law.
The next question, then, is whether the prevailing argument in TC Heartland was available
to Defendant prior to the decision in TC Heartland. This Court concludes that VE Holding,
undoubtedly constituted strong and controlling precedent against the prevailing position in TC
Heartland. VE Holding remained binding precedent on this Court, and every other district court
relative to patent litigation, for twenty-seven years, with the Federal Circuit reaffirming its ruling
in VE Holding multiple times prior to TC Heartland. In addition to the Federal Circuit recognizing
the binding nature of VE Holding, some members of Congress recognized the binding nature of
VE Holding. See OptoLum, Inc., 2017 WL 3130642, at *4 (citing S. Rep. No. 110-259, at 25
(2008), H.R. Rep. No. 114-235, at 34 (2015)).
Plaintiff, nevertheless, argues that the defense of improper venue was available to
Defendant before TC Heartland in the sense that Defendant could have raised the very argument
that the defendant in TC Heartland raised. (Doc. 23 at 3, 5 n.3). While Plaintiff is technically
correct, in that Defendant could have raised the issue of venue for purposes of preserving the issue
for a writ of certiorari to the Supreme Court, Plaintiff’s argument overlooks how courts understand
and interpret the word “available” within the context of Fed. R. Civ. P. 12(g) and the intervening
law exception to the general rule of waiver. Put simply, to establish that an argument was
unavailable, a defendant who failed to raise a defense earlier only needs to show the existence of
binding or strong precedent foreclosing it from raising the belated argument earlier, such that it
was not unreasonable for defendant not to have raised the argument earlier. See Big River Minerals
Corp., 181 F.3d at 605-06, Gucci Am., Inc., 768 F.3d at 135-36.
Here, the precedent set by the Federal Circuit in VE Holding clearly foreclosed any
reasonable argument Defendant could have made in assertion of a defense of improper venue. Up
until the day the Supreme Court issued its decision in TC Heartland, this Court would have been
required to apply VE Holding to any venue challenge raised by Defendant and conclude that venue
was proper in any district where Defendant was subject to personal jurisdiction. See Trintec Indus.,
Inc., 395 F.3d at 1280 (citing to VE Holding when emphasizing that the defendant’s motion for
improper venue was a “non-issue” because “[v]enue in a patent action against a corporate
defendant exists wherever there is personal jurisdiction”). To that point, Plaintiff fails to identify
a single district court case in the twenty-seven years between VE Holding and TC Heartland where
a district court disregarded VE Holding and applied Fourco Glass to conclude that venue was
improper. Nor do any of the recent district cases favoring Plaintiff’s position identify a single
district court case of the like.3 Furthermore, Plaintiff’s own Amended Complaint implicitly
acknowledges that VE Holding provided binding precedent relative to venue in patent litigation as
Plaintiff’s allegation regarding venue specifically relies on 28 U.S.C. § 1391(c) to establish proper
venue in the Western District of North Carolina. (Doc. 12 at 3). Accordingly, this Court concludes
Unsurprisingly, this Court’s own research yielded but a single case of the like and that lone district court opinion
was reversed by the Federal Circuit in an unpublished, per curiam opinion. See West, 230 F.3d 1382, 2000 WL
152805, at *3 (reversing district court where district court did not apply VE Holding and instead relied only on state
of incorporation to determine where defendant resided for purposes of venue).
that it was reasonable for Defendant not to raise the improper venue defense earlier in light of the
binding precedent established by VE Holding that foreclosed the defense.
Having concluded that TC Heartland constitutes an intervening change in the law, and that
the prevailing argument in TC Heartland was not available to Defendant when Defendant filed its
first and second Rule 12(b) motions, this Court turns to whether Plaintiff was prejudiced by
Defendant’s failure to raise the improper venue defense earlier. Defendant filed its motion to
dismiss based on improper venue two weeks after the Supreme Court issued its decision in TC
Heartland. Thus, Defendant acted promptly once the improper venue defense became available.
See Ironburg Inventions, 2017 WL 3307657, at *3 (finding no undue prejudice or intentional delay
on the part of the defendant since it filed its motion to transfer a little over a month after TC
Heartland was decided). Additionally, this case is at an early stage in litigation and Defendant’s
second Rule 12(b) motion remains pending, so it is not apparent how entertaining the improper
venue defense now would prejudice Plaintiff.4 Furthermore, Plaintiff does not make any argument
regarding how it was prejudiced by Defendant having not raising the improper venue defense at
an earlier stage. (See Doc. 23). Finally, as discussed in the next section, to the extent that this
Court transfers this case rather dismisses this case, Plaintiff is at no risk of being barred by the
While the courts concluding that a defendant cannot rely on TC Heartland to overcome the waiver issue have not
explicitly discussed or relied on prejudice to the plaintiff when reaching their conclusions, the majority of courts so
holding have noted that the defendant filed its motion to dismiss for improper venue in close proximity to trial, or at
least after the court had ruled on Rule 12 motions and other pre-trial matters. See, e.g., Cobalt Boats, LLC, 2017 WL
2556679, at *2 (venue defense raised a few weeks before trial); Infogation Corp., 2017 WL 2869717, at *3 (venue
defense raised after denial of Rule 12(c) motion, after court issued claim construction order construing terms of patent,
and after court resolved dispute over asserted priority date for patent); iLife Techs., 2017 WL 2778006, at *1 (venue
defense raised three months before trial); Amax, Inc., 2017 WL 2818986, at *1 (venue defense raised after scheduling
conference and after defendant filed motion for summary judgment). This Court declines to rely on the fact that this
case is in the early stage of proceedings as a way of distinguishing this case from Cobalt Boats, LLC, Infogation Corp.,
iLife Techs, and the like, with respect to discreet issue of whether TC Heartland was or was not an intervening change
in the law. However, in light of Big River Mineral Corp.’s suggestion that court’s must consider prejudice to the
plaintiff when applying the intervening change in the law exception to the general rule of waiver, differences in the
stage of the proceedings at which the improper venue defense is first raised may be a proper basis for reaching contrary
conclusions as to whether a defendant may rely on TC Heartland to overcome the general rule of waiver.
statute of limitations or by any other procedural bar that would not already potentially defeat
Dismissal vs. Transfer
Having concluded that venue is improper in the Western District of North Carolina and
that Defendant’s belated Rule 12(b)(3) motion falls within an exception to the general rule of
waiver, this Court must address whether Plaintiff’s action should be dismissed or should be
transferred to an appropriate venue, namely the Southern District of California. Although Rule
12(b)(3) is a motion to dismiss, where a district court finds that venue is improper, it is within the
court’s discretion, under 28 U.S.C. § 1406(a), to transfer a case to a district court where the suit
could have been brought if the interests of justice favor transfer rather than dismissal. The
“interests of justice” warrant transfer, in lieu of dismissal, when “time-consuming and justice
defeating technicalities would penalize the plaintiff or prevent the case from being heard on the
merits in the proper venue. Dubin v. United States, 380 F.2d 813, 815 (5th Cir. 1967); see also
Valspar Corp., 2017 WL 3382063, at *5 (emphasizing that dismissal “would serve only to delay
the progress of justice to require [plaintiff] to start again from square one”). A transfer, rather than
dismissal, is also appropriate where the plaintiff is certain to “almost immediately” refile the action
in the proper venue. Giroir v. MBank Dallas, N.A., 676 F. Supp. 915, 923 (E.D. Ark. 1987).
The decision to transfer or dismiss “is a matter within the sound discretion of the district
court. Nation v. United States Gov’t, 512 F. Supp. 121, 126 (S.D. Ohio 1981) (citing 1 Moore’s
Fed. Prac. § 0.146(5). However, transfer is “generally considered to be more in the ‘interest of
justice’ than dismissal and, therefore, doubts should be resolved in favor of preserving the action,
particularly where it appears that venue may be properly laid in the proposed transferee district.”
Id. at 126-27 (citing 1 Moore’s Fed. Prac. § 0.146(5); Phillip Gall & Son v. Garcia Corp., 340 F.
Supp. 1255 (E.D. Ky. 1972)). In light of the belated nature of Defendant’s Rule 12(b)(3) motion,
the fact that this case was filed nearly a year ago, and that briefing is complete on Defendant’s
second Rule 12(b)(6) motion to dismiss, this Court concludes that the interests of justice favor
transferring, rather than dismissing, this action.5
IT IS, THEREFORE, ORDERED THAT:
The Magistrate Judge’s Memorandum and Recommendation (Doc. 15) is
Defendant NecksGen, Inc.’s First Motion to Dismiss, pursuant to Fed. R. Civ. P.
12(b)(6), (Doc. 11) is DENIED as moot;
Defendant NecksGen Inc.’s Third Motion to Dismiss, pursuant to Fed. R. Civ. P.
12(b)(3), (Doc. 20) is GRANTED to the extent that this Court (a) concludes that venue is improper
in this District and (b) exercises its discretion under 28 U.S.C. § 1406(a) to transfer this action to
a district where the action could have been brought; and
Pursuant to 28 U.S.C. § 1406(a), the Clerk is DIRECTED to TRANSFER this
action to the Southern District of California.
Signed: August 22, 2017
In resolving Defendant’s improper venue argument under Rule 12(b)(3) and 28 U.S.C. § 1406(a), this Court finds it
unnecessary to consider Defendant’s alternative argument for transfer under 28 U.S.C. § 1404(a).
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