Simpson Performance Products, Inc. v. Mastercraft Safety, Inc. et al

Filing 30

ORDER adopting 19 Memorandum and Recommendations; denying as moot 10 Motion to Dismiss; Mastercraft Safety, Inc is terminated as a defendant in this action; granting 25 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)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF NORTH CAROLINA
STATESVILLE DIVISION
CASE NO. 5:16-CV-00155-RLV-DCK
SIMPSON PERFORMANCE PRODUCTS,
INC.,
Plaintiff,
v.
MASTERCRAFT SAFETY, INC. and
IMPACT RACING, INC.,
Defendants.

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ORDER

THIS MATTER IS BEFORE THE COURT on (1) Defendants Mastercraft Safety,
Inc.’s and Impact Racing, Inc.’s (collectively “Defendants”) Motion to Dismiss pursuant to Fed.
R. Civ. P. 12(b)(6) (Doc. 10); (2) Magistrate Judge David C. Keesler’s Memorandum and
Recommendation Defendants’ Motion to Dismiss (Doc. 19); and (3) Defendant Impact Racing,
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. 25). Both motions have been briefed. (Docs. 11, 17,
25-1, 28-29). No party filed an objection to Magistrate Judge Keesler’s Memorandum and
Recommendation that recommended denying Defendants’ Motion to Dismiss pursuant to Fed. R.
Civ. P. 12(b)(6) as moot and terminating Mastercraft Safety, Inc. as a defendant, and the time to
file objections has elapsed. Accordingly, Defendants’ Motion to Dismiss pursuant to Fed. R. Civ.
P. 12(b)(6), the Memorandum and Recommendation, and Defendant Impact Racing, Inc.’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. 19) is ADOPTED, Defendants’ Motion
to Dismiss pursuant to Fed. R. Civ. P. 12(b)(6) (Doc. 10) is DENIED as moot, the Clerk is

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DIRECTED to TERMINATE Mastercraft Safety, Inc. as a defendant in this action, Defendant
Impact Racing, 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. 25) 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.
I.

PROCEDURAL AND FACTUAL BACKGROUND
In August of 2016, Plaintiff Simpson Performance Products, Inc. filed suit against

Defendant Mastercraft Safety, Inc. (“Mastercraft Safety”) and Defendant Impact Racing, Inc.
(“Impact Racing”), alleging one count of infringement of U.S. Patent No. 9,351,529 (the “’529
Patent”). (Doc. 1 at 3-7; see also Doc. 16 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. 16 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 Amended Complaint further alleges that Defendant Impact Racing is incorporated in
California and that Impact Racing’s principal place of business is in Santee, 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 1, 2016, Defendants filed a 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. 10
(“first Rule 12(b) motion”)). Defendants’ first Rule 12(b) motion was referred to Magistrate Judge
David C. Keesler. (See Doc. 19). Within twenty-one days of Defendants filing the first Rule 12(b)

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motion, and while the first Rule 12(b) motion was before Magistrate Judge Keesler, Plaintiff
amended its complaint.

(Doc. 16).

Plaintiff’s Amended Complaint, although still listing

Mastercraft Safety as a defendant in the case caption, only alleges claims against Impact Racing.1
See id. at 1. In light of Plaintiff’s Amended Complaint, Magistrate Judge Keesler issued a
memorandum and recommendation recommending that Defendants’ Rule 12(b) motion be denied
as moot and that Mastercraft Safety be terminated as a defendant. (Doc. 19). No party objected
to Magistrate Judge Keesler’s memorandum and recommendation and the time to file objections
has elapsed.
On January 5, 2017, Defendant Impact Racing 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. 20 (“second Rule 12(b) motion”). Plaintiff filed a response to Defendant Impact
Racing’s second Rule 12(b) motion (Doc. 22) and Defendant Impact Racing filed a reply to
Plaintiff’s response (Doc. 23). 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 Impact Racing 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.
25 (“third Rule 12(b) motion” or “Rule 12(b)(3) motion”). As to venue being improper in the
Western District of North Carolina, Defendant Impact Racing argues that it (1) is incorporated in
California, not North Carolina, and (2) does not have a regular and established place of business

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In subsequent filings, Plaintiff acknowledges that its Amended Complaint does not raise any claims against
Mastercraft Safety and that Mastercraft Safety is not a party to this action under the Amended Complaint. (See Doc.
18 at 1, Doc. 22 at 1).

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in North Carolina. (Doc. 25-1 at 8-16). In response, Plaintiff argues Defendant Impact Racing
waived its defense of improper venue by failing to raise the venue issue in its two prior Rule 12(b)
motions to dismiss. (Doc. 28 at 3-6). Defendant Impact Racing argues that an exception to 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 Defendant Impact
Racing 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. 25-1 at 16-17; Doc. 29 at 7-13); 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).
II.

DISCUSSION
A.

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.
B.

Venue Analysis

It is against the following backdrop that Defendant Impact Racing filed its third Rule 12(b)
motion, seeking dismissal based on improper venue under Rule 12(b)(3). In patent infringement

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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

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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).2 Then, in TC
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

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
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[1](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).
2

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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 Impact Racing’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.
28 at 1-6). Accordingly, in the absence of any argument by Plaintiff that venue is proper in the
Western District of North Carolina subsequent to TC Heartland, Plaintiff has failed to make a
prima facie showing of proper venue.
C.

Availability of Venue Defense

Rather than challenging the propriety of venue in this District, Plaintiff argues that
Defendant Impact Racing 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

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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).3 “[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

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.
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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).
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 the filing of the 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
Impact Racing to not raise the venue defense before TC Heartland; and (3) was Plaintiff prejudiced
by Defendant Impact Racing’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

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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 Impact Racing 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

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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
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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 the filing of the 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 Impact Racing 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)).

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Plaintiff, nevertheless, argues that the defense of improper venue was available to
Defendant Impact Racing before TC Heartland in the sense that Defendant Impact Racing 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 Impact Racing 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 Impact Racing 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
Impact Racing and conclude that venue was proper in any district where Defendant Impact Racing
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 twentyseven 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

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cases favoring Plaintiff’s position identify a single district court case of the like.4 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 that it was reasonable for Defendant Impact
Racing 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 Impact Racing when the
first and second Rule 12(b) motions were filed, this Court turns to whether Plaintiff was prejudiced
by Defendant Impact Racing’s failure to raise the improper venue defense earlier. Defendant
Impact Racing filed its motion to dismiss based on improper venue two weeks after the Supreme
Court issued its decision in TC Heartland. Thus, Defendant Impact Racing 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 Impact Racing’s second Rule 12(b) motion remains
pending, so it is not apparent how entertaining the improper venue defense now would prejudice
Plaintiff.5 Furthermore, Plaintiff does not make any argument regarding how it was prejudiced by

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).
5
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
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Defendant Impact Racing 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 statute of limitations or by
any other procedural bar that would not already potentially defeat Plaintiff’s claims.
D.

Dismissal vs. Transfer

Having concluded that venue is improper in the Western District of North Carolina and
that Defendant Impact Racing’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”

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.

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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 Impact Racing’s Rule
12(b)(3) motion, the fact that this case was filed nearly a year ago, and that briefing is complete
on Defendant Impact Racing’s second Rule 12(b)(6) motion to dismiss, this Court concludes that
the interests of justice favor transferring, rather than dismissing, this action. 6
III.

DECRETAL
IT IS, THEREFORE, ORDERED THAT:
(1)

The Magistrate Judge’s Memorandum and Recommendation (Doc. 19) is

ADOPTED;
(2)

Defendants Mastercraft Safety, Inc.’s and Impact Racing, Inc.’s Motion to Dismiss

under Fed. R. Civ. P. 12(b)(6) (Doc. 10) is DENIED as moot;

In resolving Defendant Impact Racing’s improper venue argument under Rule 12(b)(3) and 28 U.S.C. § 1406(a),
this Court finds it unnecessary to consider Defendant Impact Racing’s alternative argument for transfer under 28
U.S.C. § 1404(a). Furthermore, to the extent that Plaintiff, in arguing against Defendant Impact Racing’s alternative
motion to transfer under § 1404(a), asserts that Defendant Impact Racing now has a primary place of business is now
in Indianapolis, Indiana, (Doc. 28 at 8), this assertion is not relevant to (1) where Defendant Impact Racing resides
for purposes of the first clause of 28 U.S.C. § 1400(b) because a defendant’s residence is determined solely based on
a defendant’s place of incorporation and (2) the district to which this Court may transfer this action under 28 U.S.C.
§ 1406(a) because that provision focuses exclusively on the “district or division in which [the action] could have been
brought” at the inception of litigation and not on where venue might become proper at a latter juncture in the litigation.
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(3)

The Clerk is DIRECTED to TERMINATE Mastercraft Safety, Inc. as a defendant

in this action;
(4)

Defendant Impact Racing Inc.’s Motion to Dismiss under Fed. R. Civ. P. 12(b)(3)

(Doc. 25) 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
(5)

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

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