Diem LLC v. BigCommerce, Inc.
ORDER ADOPTING REPORT AND RECOMMENDATIONS for 21 Report and Recommendations of the United States Magistrate Judge. The Report and Recommendation is hereby ADOPTED and Defendants Motion to Dismiss (Dkt. No. 14) is accordingly DENIED. Signed by Judge Rodney Gilstrap on 7/26/2017. (gsg)
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF TEXAS
CIVIL ACTION NO. 6:17-CV-00186
ORDER ADOPTING REPORT AND RECOMMENDATION
OF UNITED STATES MAGISTRATE JUDGE
The above entitled and numbered civil action was referred to United States Magistrate
Judge John D. Love pursuant to 28 U.S.C. § 636. The Report and Recommendation of the
Magistrate Judge (Dkt. No. 21), denying Defendant BigCommerce, Inc.’s (“BigCommerce” or
“Defendant”) Motion to Dismiss (Dkt. No. 14), is now before this Court. Defendant has filed
objections to the Report and Recommendation (Dkt. No. 22). The Court reviews the Magistrate
Judge’s conclusions de novo. Fed. R. Civ. P. 72(b); Davidson v. Georgia-Pac., L.L.C., 819 F.3d
758, 762 (5th Cir. 2016) (“[R]ulings by a magistrate judge on dispositive matters—motions to
dismiss and for entry of summary judgment being the common examples—are mere
recommendations subject to de novo review when properly challenged by the losing party.”).
On May 31, 2017, Defendant BigCommerce filed a Motion to Dismiss arguing that venue
is not proper in the Eastern District of Texas under 28 U.S.C. § 1400(b) (2012). (Dkt. No. 14.)
Although it is undisputed that Defendant is a domestic corporation incorporated in the State of
Texas, Defendant contends that “[i]t lacks any place of business in EDTX” and, accordingly, venue
is not proper here. (Dkt. No. 14 at 1.) In its response, Plaintiff argues that Defendant waived this
argument by failing to raise it in Defendant’s initial Motion to Dismiss. (Dkt. No. 16 at 1 (“On
April 13, 2017, BigCommerce filed a Motion to Dismiss under Rule 12(b)(6) for failure to state a
claim for relief which did not include any objection or defense based on improper venue.”).)
After considering the Parties’ arguments, Magistrate Judge Love ultimately concluded that
Defendant waived its underlying venue argument by failing to raise an objection to venue when it
filed its initial Motion to Dismiss. (Dkt. No. 21 at 2.)
a. Waiver of Defendant’s Arguments as to Venue
There is ample authority that a defendant waives its objection to venue by filing a motion
under Rule 12(b) without also objecting to venue. See, e.g., Elbit Sys. Land & C41 Ltd. v. Hughes
Network Sys., LLC, No. 2:15-cv-37-RWS-RSP, 2017 WL 2651618, at *19–20 (E.D. Tex. June 20,
2017). Defendant does not object to the Magistrate Judge’s conclusion in this respect. Instead,
Defendant argues that its waiver is excused because TC Heartland LLC v. Kraft Foods Grp. Brands
LLC, 137 S. Ct. 1514 (2017) was an intervening change in the law and any argument as to venue
being improper under 28 U.S.C. 1400(b) was previously “not known to be available.” (Dkt. No.
23 at 2–3.) Magistrate Judge Love rejected this argument. (Dkt. No. 21 at 3.) The Court agrees
that TC Heartland was not an intervening change in law. See Navico, Inc. v. Garmin Int’l, Inc.,
No. 2:16-cv-190-JRG-RSP, 2017 WL 2957882, at *2 (E.D. Tex. July 11, 2017) (“[T]he Supreme
Court itself expressly rejected the notion that venue law in patent cases changed after Fourco.”);
Koninklijke Philips NV et al v. ASUSTek Comput. Inc. et al, No. CV 15-1125-GMS, 2017 WL
3055517, at *4 (D. Del. July 19, 2017) (collecting cases and acknowledging “a growing consensus
[among district courts] that TC Heartland did not effect an intervening change in the law”);
Skyhawke Technologies, LLC v Deca International Corp., No. 3:10CV708TSL-RHW, 2017 WL
3132066, at *2 (S.D. Miss. July 21, 2017) (“By far, the majority of courts that have considered
this same argument have rejected it, finding that TC Heartland was not an intervening change in
the law . . . .”).
b. Defendant’s Arguments as to Venue
The Court is further persuaded that even if Defendant did not waive its venue arguments,
venue is still proper in the Eastern District of Texas. Under § 1400(b), the exclusive provision
governing venue in patent cases, 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). Defendant argues that it does not “reside”
in the Eastern District of Texas because it has no business presence in the Eastern District. (Dkt.
No. 14 at 1.) However, there is no dispute that Defendant is incorporated in the State of Texas.
(Id.) Under TC Heartland, therefore, venue is proper in the Eastern District of Texas because
Defendant resides in Texas. TC Heartland, 137 S. Ct. at 1517 (“[A] domestic corporation
resides . . . in its State of incorporation for purposes of the patent venue statute.” (emphasis added
and internal quotation marks omitted).). This Court holds that a domestic corporation resides in
the state of its incorporation and if that state contains more than one judicial district, the corporate
defendant resides in each such judicial district for venue purposes.
Defendant’s reliance on Stonite Products Co. v. Melvyn Lloyd Co., 315 U.S. 561 (1942) is
misplaced. (Dkt. No. 14 (“BigCommerce is today’s Stonite . . . venue is therefore improper.”).)
This issue was not before the Court in Stonite. There, the district court only discussed the extent
to which the defendant had a regular and established place of business in the Western District of
Pennsylvania. See Melvin Lloyd Co. v. Stonite Prod. Co., 36 F. Supp. 29, 29 (W.D. Pa. 1940)
(“[V]enue in patent suits may be laid only in a district where the acts of infringement occurred,
and where the infringer has a regular and established place of business.”), rev’d, 119 F.2d 883 (3d
Cir. 1941), rev’d, 315 U.S. 561 (1942); Melvin Lloyd Co. v. Stonite Prod. Co., 119 F.2d 883, 884
(3d Cir. 1941) (“The district court granted the motion . . . as to Stonite for the reason that the venue
as to it was not laid in the district where acts of infringement are alleged to have occurred and
where Stonite has a regular and established place of business.”), rev'd, 315 U.S. 561. Indeed, the
Supreme Court noted in the first sentence of its opinion in Stonite that “[t]he only question
presented . . . is whether Section 48 of the Judicial Code . . . is the sole provision governing the
venue of patent infringement litigation.” Stonite, 315 U.S. at 561 (emphasis added). It is this
holding that was reaffirmed in Fourco Glass Co. v. Transmirra Products Corp., 353 U.S. 222
(1957) and TC Heartland.1
Defendant also relies on Action Communication Systems, Inc. v. Datapoint Corp., 426
F.Supp. 973 (N.D. Tex. 1977), which concluded that under § 1400(b) a defendant resides “only in
the judicial district where its principal place of business is located.” 426 F. Supp. 974–75.
Defendant also argues that numerous other cases reaching a different result are “suspect” because
they fail to address Stonite. However, Action Communications itself only provides a cursory
review of Stonite, id. at 974 at n.1, and many courts have since rejected Action Communications.
See, e.g., B.W.B. Controls, Inc. v. C.S.E. Automation Eng’g & Servs., Inc., 587 F. Supp. 1027,
1028–29 (W.D. La. 1984) (“The Action Communication Systems opinion is well reasoned, but the
Court nonetheless does not find its logic compelling.”). See also Byrnes v. Jetnet Corp., No. CV
The Court in Fourco explained that “[t]he question [in Stonite] . . . was whether the venue statute applying
specifically to patent infringement litigation . . . was the sole provision governing venue in those cases.” 353 U.S. at
224. See also TC Heartland, 137 S. Ct. at 1518 (“This Court [in Stonite] rejected the plaintiff’s venue choice on the
ground that the patent venue statute constituted the exclusive provision controlling venue in patent infringement
proceedings . . . .” (internal quotation marks omitted).)
84-0-661, 1986 WL 15148, at *1 (D. Neb. June 2, 1986) (citing B.W.B. Controls); Steelcase, Inc.
v. Smart Techs., Inc., 336 F. Supp. 2d 714, 719 (W.D. Mich. 2004) (citing Byrnes).
Having reviewed the text of § 1400(b), the Court is not persuaded that “resides” in this
context refers to anything more than a defendant’s state of incorporation.2 That conclusion has
now been emphasized twice by the Supreme Court. Fourco, 353 U.S. at 226 (concluding that
“‘inhabitant’ and ‘resident,’ as respects venue [in patent cases] . . . and, in respect of corporations,
mean the state of incorporation only.”); TC Heartland, 137 S. Ct. at 1517 (“We therefore hold that
a domestic corporation ‘resides’ only in its State of incorporation for purposes of the patent venue
statute.”). This Court therefore sees no basis to impose an additional requirement, neither present
in the statute nor discussed by the Supreme Court in TC Heartland, absent a clear directive to do
so. B.W.B. Controls, 587 F. Supp. at 1029.
This Court also notes that BigCommerce was granted a corporate charter by the State of
Texas rather than by a particular subdivision or judicial district thereof. It exists under Texas law
throughout the State of Texas, not only in specific locations where it has a primary place of
Section 1400(b) derives from an older venue statute that defined venue based on where a defendant was an
“inhabitant.” In Fourco, Supreme Court held that the word “resident,” as used in § 1400(b), was “synonymous” with
the word “inhabitant.” 353 U.S. at 226. However, the definition of “resident” established in Fourco and reaffirmed
in TC Heartland is in tension with the definition of “inhabitant” that the Supreme Court applied in pre-Fourco cases
such as Stonite, Shaw v. Quincy Mining Co., 145 U.S. 444 (1892), and Galveston, H. & S.A. Ry. Co. v. Gonzales, 151
U.S. 496 (1894). Under these earlier cases, inhabitance was not defined as a corporation’s state of incorporation.
Rather, the Supreme Court distinguished a corporation’s inhabitance from a corporation’s “citizenship.” Citizenship
was defined by the “state in which the corporation is domiciled” and “the place where it is located by or under the
authority of its charter.” Shaw, 145 U.S. at 451–52. Based on this distinction, the Supreme Court held, at least under
the general venue statute in existence at that time, that if a defendant is incorporated in a state with multiple judicial
districts, then it is “an inhabitant of that district [in its state of incorporation] in which its general offices are situated,
and in which its general business, as distinguished from its local business, is done.” Galveston, 151 U.S. at 504.
However, the Supreme Court held in TC Heartland, based on Fourco and with reference to the patent venue statute
only, that a domestic corporation resides in (and is therefore an inhabitant of) its state of incorporation. TC Heartland,
137 S. Ct. at 1517; Fourco, 353 U.S. at 226 (holding that the words “inhabitant” and “resident” mean “the state of
incorporation only”). TC Heartland and Fourco reflect the Supreme Court’s most recent interpretation of “residence”
and, unlike Galveston and Shaw, these cases address venue under § 1400(b), which is the sole and exclusive provision
governing patent cases. See TC Heartland, 137 S. Ct. at 1517 (rejecting the view that definitions in the patent venue
statute should be supplemented with reference to the general venue statute). Accordingly, this Court follows the
Supreme Court’s recent guidance in TC Heartland and concludes that a corporation’s “residence” is its “state of
business or where it was engaged in commerce when it was incorporated.
In fact, many
corporations are chartered by the State before they begin business operations or without ever
engaging in any operations in Texas at all. Under the logic asserted by BigCommerce, a sole
proprietor operating in Waco, Texas who then incorporated would only be protected by the
corporate shield in that existing location, and by extension he would have to seek another and
separate grant of authority from the State if he later decided to open another location in Dallas
where he desired the same protections. A Texas corporation is chartered by the State to pursue
lawful commercial pursuits anywhere in Texas. It therefore resides in all the judicial districts of
that state where it may pursue its commercial objectives.
For the reasons discussed above, the Court finds that Defendant’s objections are
OVERRULED. The Report and Recommendation is hereby ADOPTED and Defendant’s
Motion to Dismiss (Dkt. No. 14) is accordingly DENIED.
SIGNED this 19th day of December, 2011.
So ORDERED and SIGNED this 26th day of July, 2017.
UNITED STATES DISTRICT JUDGE
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