VDPP, LLC v. Volkswagen Group of America, Inc.
Filing
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MEMORANDUM AND OPINION entered: Volkswagen's motion to dismiss, (Docket Entry No. 13), is granted, with prejudice. VDPPs motion for leave to amend, (Docket Entry No. 22), is denied because amendment would be futile. Final judgment is separately entered.(Signed by Judge Lee H Rosenthal) Parties notified. (lle4)
United States District Court
Southern District of Texas
ENTERED
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
VDPP, LLC,
Plaintiff,
v.
VOLKSWAGEN GROUP OF AMERICA,
INC.,
Defendant.
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March 27, 2024
Nathan Ochsner, Clerk
CIVIL ACTION NO. 4:23-cv-2961
MEMORANDUM AND OPINION
VDPP, LLC sued Volkswagen Group of America, Inc. for patent infringement.
Volkswagen moved to dismiss, and VDPP responded and moved in the alternative for leave to file
an amended complaint. Based on the pleadings, the motion and responses, the record, and the
applicable law, the court grants the motion to dismiss, (Docket Entry No. 13), with prejudice, and
denies the motion for leave to amend, (Docket Entry No. 22), because amendment would be futile.
The reasons for these rulings are set out below.
I.
Background
VDPP is the owner by assignment of U.S. Patent No. 9,426,452 (“the ‘452 Patent”).
(Docket Entry No. 1 ¶ 6). The ‘452 Patent, dated August 23, 2016, and titled “Faster State
Transitioning for Continuous Adjustable 3Deeps Filter Spectacles Using Multi-Layered Variable
Tint Materials,” claims an electrically controlled spectacle frame and optoelectronic lenses housed
in eyeglass frames. (Docket Entry Nos. 1 ¶ 7; 1-1 at 2). The invention related to a system called
3Deeps, which allowed users to use the spectacles to see movies with three-dimensional effects.
The ‘452 Patent expired on January 2, 2022. The ‘452 Patent was the final patent in a series of
continuing applications dating back to U.S. Patent No. 7,030,902, filed on January 22, 2002.
(Docket Entry Nos. 1-1 at 2; 13 at 8). See 35 U.S.C. § 154(a)(2) (specifying a patent’s term as
“ending 20 years from the date on which the application for the patent was filed in the United
States or, if the application contains a specific reference to an earlier filed application . . . , from
the date on which the earliest such application was filed”). (Docket Entry No. 1-1 at 2). Because
the ‘452 Patent was filed as a continuing application, the ‘452 Patent expired in January 2022 on
the date the ‘902 Patent expired.
VDPP filed this lawsuit on August 11, 2023, and effected service of process on August 25,
2023. (Docket Entry Nos. 1, 8). VDPP alleged that Volkswagen “maintains, operates, and
administers systems, products, and services in the field of motion pictures that infringes one or
more of [sic] claims of the ‘452 Patent.” (Docket Entry No. 1 ¶ 8). VDPP also claimed indirect
and willful infringement because Volkswagen “has and continues to induce infringement” and
“contributorily infringe[s]” on the Patent. (Docket Entry No. 1 ¶¶ 10–11). VDPP alleged that
Volkswagen has known of the ‘452 Patent and the underlying technology “from at least the filing
date of the lawsuit,” but “reserves the right to amend [this date] if discovery reveals an earlier date
of knowledge.” (Docket Entry No. 1 ¶¶ 10, 11, nn. 1–2).
Volkswagen has moved to dismiss under Rule 12(b)(3) for improper venue and Rule
12(b)(6) for failure to state a claim based on VDPP’s failure to comply with the patent marking
statute, 35 U.S.C. § 287(a). (Docket Entry No. 13 at 11–17). In its reply, VDPP dropped its
allegations of indirect and willful infringement but maintained its other infringement claims.
(Docket Entry No. 22 at 8–10).
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II.
The Applicable Legal Standards
A. Rule 12(b)(3)
Federal Rule of Civil Procedure 12(b)(3) allows a defendant to move to dismiss for
improper venue. “Once a defendant files a Rule 12(b)(3) motion challenging venue, the burden of
sustaining venue lies with the plaintiff.” Fernandez v. Soberon, No. CIV.A. H-13-0325, 2013 WL
2483345, at *2 (S.D. Tex. June 10, 2013). “In deciding whether the venue is proper, the court may
look at evidence in the record beyond those facts alleged in the complaint and its admissible
attachments.” AllChem Performance Prod., Inc. v. Aqualine Warehouse, LLC, 878 F. Supp. 2d
779, 788 (S.D. Tex. 2012). “The court must accept as true all the allegations in the complaint and
resolve all factual conflicts in favor of the plaintiff.” Id.
For most claims brought in federal court, “[t]he general venue statute, 28 U.S.C. § 1391,
governs a plaintiff’s choice of venue.” Id. Patent infringement claims are an exception. Venue for
patent infringement claims is controlled by 28 U.S.C. § 1400(b). In re Cray, 871 F.3d 1355, 1360
(Fed. Cir. 2017) ((“Section 1400(b) is unique to patent law and constitutes the exclusive provision
controlling venue in patent infringement proceedings.”) (cleaned up) (citing TC Heartland LLC v.
Kraft Foods Grp. Brands LLC, 581 U.S. 258, 259 (2017))). “Federal Circuit law, rather than
regional circuit law, governs [the court’s] analysis of what § 1400(b) requires.” Id.
Under the patent venue statute, “[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.” 28 U.S.C. § 1400(b).“[A]
domestic corporation ‘resides’ only in its State of incorporation for purposes of the patent venue
statute.” TC Heartland LLC v. Kraft Foods Grp. Brands LLC, 581 U.S. 258, 262 (2017). Under
the statute, “a regular and established place of business must be (1) a physical place in the district;
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(2) regular and established; and (3) the place of the defendant.” Tiare Tech., Inc. v. Dine Brands
Global, Inc., No. 2:22-CV-00490-JRG-RSP, 2024 WL 607407, at *3 (E.D. Tex. Jan. 4, 2024)
(quoting In re Cray, 871 F.3d at 1360) (internal quotation marks omitted).
B. Rule 12(b)(6)
Rule 12(b)(6) allows dismissal if a plaintiff fails “to state a claim upon which relief can be
granted.” Fed. R. Civ. P. 12(b)(6). Rule 12(b)(6) must be read in conjunction with Rule 8(a),
which requires “a short and plain statement of the claim showing that the pleader is entitled to
relief.” Fed. R. Civ. P. 8(a)(2). A complaint must contain “enough facts to state a claim to relief
that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). Rule 8 “does
not require ‘detailed factual allegations,’ but it demands more than an unadorned, the-defendantunlawfully-harmed-me accusation.”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting
Twombly, 550 U.S. at 555). “A claim has facial plausibility when the plaintiff pleads factual
content that allows the court to draw the reasonable inference that the defendant is liable for the
misconduct alleged.” Id. (citing Twombly, 550 U.S. at 556). “The plausibility standard is not akin
to a ‘probability requirement,’ but it asks for more than a sheer possibility that a defendant has
acted unlawfully.” Id. (quoting Twombly, 550 U.S. at 556).
To withstand a Rule 12(b)(6) motion, a complaint must include “more than labels and
conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Lincoln
v. Turner, 874 F.3d 833, 839 (5th Cir. 2017) (quoting Twombly, 550 U.S. at 555). “Nor does a
complaint suffice if it tenders ‘naked assertion[s]’ devoid of ‘further factual enhancement.’” Iqbal,
556 U.S. at 678 (alteration in original) (quoting Twombly, 550 U.S. at 557). “A complaint ‘does
not need detailed factual allegations,’ but the facts alleged ‘must be enough to raise a right to relief
above the speculative level.’” Cicalese v. Univ. of Tex. Med. Branch, 924 F.3d 762, 765 (5th Cir.
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2019) (quoting Twombly, 550 U.S. at 555). “Conversely, when the allegations in a complaint,
however true, could not raise a claim of entitlement to relief, this basic deficiency should be
exposed at the point of minimum expenditure of time and money by the parties and the court.”
Cuvillier v. Taylor, 503 F.3d 397, 401 (5th Cir. 2007) (alterations omitted) (quoting Twombly, 550
U.S. at 558).
A court reviewing a motion to dismiss under Rule 12(b)(6) may consider “(1) the facts set
forth in the complaint, (2) documents attached to the complaint, and (3) matters of which judicial
notice may be taken under Federal Rule of Evidence 201.” Inclusive Cmtys Project, Inc. v. Lincoln
Prop. Co., 920 F.3d 890, 900 (5th Cir. 2019).
III.
Analysis
A. Improper Venue under Rule 12(b)(3)
VDPP alleges that Volkswagen is incorporated in Delaware and has a “regular and
established place of business located at 1 Lone Star Pass, San Antomio [sic], Texas 78264.”
(Docket Entry No. 1 ¶ 2). Both statements are incorrect and neither make venue proper in the
Southern District of Texas.
Volkswagen is a New Jersey corporation with its principal place of business in Reston,
Virginia. It does not have a regular and established business at the location VDPP alleges in San
Antonio. (Docket Entry No. 13 at 16–17). VDPP compounds its error by filing this case in the
Southern District of Texas; San Antonio is in the Western District. See 28 U.S.C. § 124(d)(4)
(establishing and defining the San Antonio Division of the Western District of Texas); Gov. of
Canal Zone v. Burjan, 596 F.2d 690, 693 (5th Cir. 1979) (“In addition, this court has consistently
adhered to the rule that venue as a jurisdictional fact is a proper subject for judicial notice.”)
(collecting cases). Although Volkswagen concedes “that it has an established place of business in
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Houston, Texas,” VDPP did not plead venue based on Volkswagen’s business operations in the
Southern District. (Docket Entry No. 13 at 17, n. 4).
VDPP acknowledges that there was “a typographical error in the original complaint” but
argues that given Volkswagen’s admission of having a place of business in Houston, venue is
proper. (Docket Entry No. 22 at 10). The court agrees that given Volkswagen’s admission, venue
could be proper if the defect in pleading was cured by amendment. However, because VDPP has
failed to state a claim under Rule 12(b)(6), amendment would be futile on grounds other than
improper venue.
B. Failure to State a Claim under 12(b)(6)
Patent Marking under 35 U.S.C. § 287(a)
Volkswagen argues that VDPP has not stated a claim because it failed to provide
constructive or actual notice of alleged infringement before the ‘452 Patent expired and cannot
obtain relief for infringement of an expired patent. The court agrees.
The patent marking statute, 35 U.S.C. § 287(a), sets out the requirements for obtaining presuit damages in an infringement action. “[A] patent owner is ‘entitled to damages from the time
when it either began marking its product in compliance with section 287(a)[, i.e., by providing
constructive notice,] or when it actually notified the accused infringer of its infringement,’ such as
by filing suit.” Denneroll Holdings Pty Ltd. v. Chirodesign Grp., LLC, No. 4:15-CV-740, 2016
WL 705207, at *7 (S.D. Tex. Feb. 23, 2016) (quoting Am. Med. Sys., Inc. v. Med. Eng’g Corp., 6
F.3d 1523, 1537 (Fed. Cir. 1993)). “If there is no marking, actual notice of infringement must
consist of an ‘affirmative communication of a specific charge of infringement by a specific accused
product or device . . . It is irrelevant . . . whether the defendant knew of the patent or knew of his
own infringement.’” DynaEnergetics Europe GmbH v. Hunting Titan, Inc., 629 F. Supp. 3d 548,
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591 (S.D. Tex. 2022) (quoting Amsted Indus. Inc. v. Buckeye Steel Castings Co., 24 F.3d 178, 187
(Fed. Cir. 1994)). Without this affirmative communication, “damages are limited to those incurred
after the date the suit was filed.” Id.; 35 U.S.C. § 287(a) (“Filing of an action for infringement shall
constitute such notice.”). “A patentee’s licensees must also comply with § 287.” Arctic Cat Inc.
v. Bombardier Recreational Prods. Inc., 950 F.3d 860, 864 (Fed. Cir. 2020) (“Arctic Cat II”).
The § 287(a) marking and notice requirements “do not apply where the patent is directed
to a process or method.” Am. Med. Sys., Inc. v. Med. Eng’g Corp., 6 F.3d 1523, 1538 (Fed. Cir.
1993) (collecting cases). “Where the patent contains both apparatus and method claims, however,
to the extent that there is a tangible item to mark by which notice of the asserted method claims
can be given, a party is obliged to do so if it intends to avail itself of the constructive notice
provisions of section 287(a).” Id. at 1538–39.
The ‘452 Patent is subject to the requirements of § 287(a). This patent contains one
“system” claim and three “apparatus” claims. (Docket Entry No. 1-1 at 55–56). VDPP alleges
infringement related to all four claims but asserts only the second claim (an apparatus claim) in its
“Patent Claims Analysis.” (Docket Entry Nos. 1 ¶¶ 10–11; 1-2 at 2–7). Whether or not VDPP
alleges infringement of all four claims or just of Claim 2, the § 287(a) marking and notice
requirements apply to both VDPP and its licensees because the ‘452 Patent claims an apparatus.
See Am. Med. Sys., Inc., 6 F.3d at 1538–39.
When § 287(a) applies, “an alleged infringer who challenges the patentee’s compliance
with § 287 bears an initial burden of production to articulate the products it believes are unmarked
‘patented articles’ subject to § 287.” DynaEnergetics, 629 F. Supp. 3d at 591 (quoting Arctic Cat
Inc. v. Bombardier Recreational Prods., Inc. 876 F.3d 1350, 1366 (Fed. Cir. 2017) (“Arctic Cat
I”)). This burden of production, “not one of persuasion or proof,” is a “low bar.” Arctic Cat I,
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876 F.3d at 1368. “The alleged infringer need only put the patentee on notice that he or his
authorized licensees sold specific unmarked products which the alleged infringer believes practice
the patent.” Id. The patentee then “bears the burden of pleading and proving he complied
with § 287(a)’s marking requirement.” DynaEnergetics, 629 F. Supp. 3d.
As the alleged infringer challenging VDPP’s compliance with § 287, Volkswagen has the
initial burden to put VDPP on notice of its sale of unmarked products that use the ‘452 Patent.
Volkswagen meets this low bar. Volkswagen identifies several VDPP lawsuits against alleged
infringers of the ‘452 Patent, including Facebook’s Portal device, Acer’s Liquid Smartphones and
Iconia One tablets, and TTE Technology’s Alcatel mobile phones and tablets. (Docket Entry No.
13 at 13); see Arctic Cat I, 876 F.3d at 1368 (finding that the alleged infringer met its burden when
it produced a licensing agreement that identified unmarked products that it alleged should have
been marked).
By contrast, VDPP fails to plead compliance with the § 287(a) marking requirement.
(Docket Entry No. 1). VDPP argues—and seeks to amend its complaint to add allegations—that
it is “a non-practicing entity, with no products to mark.” (Docket Entry No. 22-1 at 2). But even
if VDPP “never makes or sells a patented article” subject to the marking requirement, the court
“may consider whether [VDPP] made reasonable efforts to ensure [its licensees’] compliance with
the marking statute” unless the licensing agreement “expressly states that [licensee] had no
obligation to mark.” Arctic Cat II, 950 F.3d at 864. VDPP’s assertion that it never made or sold
a patented product is therefore irrelevant, and VDPP offers no showing that the settlement
agreements contain any such express statement. VDPP settled cases against Facebook, Acer, and
TTE Technology, which continue to sell the technology, subject to undisclosed agreement with
VDPP. “[C]ourts have previously found that § 287’s marking requirement applies to a patentee’s
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authorization of other persons to make and sell patented items in whatever form the authorization
was given, regardless of whether the authorizations are settlement agreements, covenants not to
sue or licenses.” U.S. Ethernet Innovations, LLC v. Acer, Inc., No. 10-CV-724, 2013 WL 4456161,
at *8 (C.D. Cal. Aug. 16, 2013). VDPP must make at least a preliminary showing that these entities
marked the patent, but VDPP instead argues incorrectly that it has no such obligation.
In order to obtain pre-suit damages without marking, VDPP must show that it made an
affirmative communication to Volkswagen of specific instances of alleged infringement. See
DynaEnergetics, 629 F. Supp. 3d at 591 (quoting Amsted Indus. Inc. v. Buckeye Steel Castings
Co., 24 F.3d 178, 187 (Fed. Cir. 1994)). The only communication VDPP pleads is the filing of
this lawsuit. (Docket Entry No. 1 ¶¶ 10, 11, nn. 1–2). VDPP cannot recover damages against
Volkswagen for alleged infringement before the date VDPP filed this lawsuit. See DynaEnergetics,
629 F. Supp. 3d at 591–92 (S.D. Tex. 2022) (“Absent such a communication, damages are limited
to those incurred after the date the suit was filed” (citing 35 U.S.C. § 287(a))).
Nor can VDPP recover damages incurred after it filed this lawsuit. A patentee cannot
recover damages—equitable or monetary—on an expired patent. See Lans v. Dig. Equip. Corp.,
252 F.3d 1320, 1328 (Fed. Cir. 2001) (finding that the district court correctly granted the alleged
infringer’s motion to dismiss because the patentee “did not inform the [alleged infringer] of
infringement before the expiration of [the patent at issue], § 287(a) prevents [the patentee] from
collecting damages from the [alleged infringer],” and “the district court cannot enjoin the [alleged
infringer] from infringing an expired patent.”). The ‘452 Patent had expired 18 months before
VDPP filed this lawsuit. See 35 U.S.C. § 154(a)(2); (Docket Entry Nos. 1-1 at 2; 13 at 2). VDPP
does not dispute this.
VDPP has not shown that its licensees marked products covered by the ‘452 Patent. Nor
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has VDPP shown that it gave Volkswagen actual notice of its alleged infringement before the ‘452
Patent expired. VDPP lacks a basis for its patent infringement claims. See e-Watch Inc. v. Avigilon
Corp., No. H–13–0347, 2013 WL 5231521, at *3 (S.D. Tex. Sept. 16, 2013) (“The Federal Circuit
. . . specifically allows addressing the § 287(a) issue through a motion to dismiss.”) (dismissing a
claim for pre-suit damages under Rule 12(b)(6)); Lans, 252 F.3d at 1328 (affirming a Rule 12(b)(6)
dismissal on the same grounds under § 287(a)). The court grants Volkswagen’s motion to dismiss
based on VDPP’s failure to comply with § 287(a).
Indirect and Willful Infringement
“Whoever actively induces infringement of a patent shall be liable as an infringer.” 35
U.S.C. § 271(b). Under § 271(c), “[c]ontributory infringement occurs if a party sells or offers to
sell, a material or apparatus for use in practicing a patented process, and that ‘material or apparatus’
is material to practicing the invention, has no substantial non-infringing uses, and is known by the
party ‘to be especially made or especially adapted for use in an infringement of such patent.’” In
re Bill of Lading Transmission & Processing Sys. Patent Litig., 681 F.3d 1323, 1337 (Fed. Cir.
2012) (quoting 35 U.S.C. § 271(c)). “To state a claim for contributory infringement, therefore, a
plaintiff must, among other things, plead facts that allow an inference that the components sold or
offered for sale have no substantial non-infringing uses.” Id. To assert a claim of willful
infringement, the patent holder must allege facts that allow an inference “(1) that the accused
infringer acted despite an objectively high likelihood that its actions constituted infringement of a
valid patent; and (2) that this objectively defined risk was either known or so obvious that the
accused infringer should have known about it.” e-Watch Inc., 2013 WL 5231521, at *2 (quoting
K-TEC, Inc. v. Vita-Mix Corp., 696 F.3d 1364, 1378 (Fed. Cir. 2012)) (internal quotation marks
omitted).
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VDPP alleges that Volkswagen indirectly infringes the ‘452 Patent by inducing its
customers or customers of related companies to infringe or by contributing to their infringement.
(Docket Entry No. 1 at ¶¶ 10–11). VDPP alleges that Volkswagen “actively encouraged or
instructed others . . . on how to use its products and services” that VDPP asserts are related to the
‘452 Patent. (Id.). These conclusory statements are insufficient to provide Volkswagen fair notice
of the indirect and willful infringement claims. And, as Volkswagen notes, VDPP abandoned its
allegations of indirect and willful infringement in its response to Volkswagen’s motion to dismiss
and in VDPP’s proposed amended complaint. (Docket Entry No. 23 at 6); see (Docket Entry Nos.
22 at 6; 22-1). Although VDPP sets out a brief statement of law on indirect and willful
infringement in its response, VDPP’s proposed amended complaint “eliminate[s] allegations of
willful and indirect infringement.” (Docket Entry No. 22 at 8, 10). Because VDPP fails to allege
a basis for its indirect and willful infringement claims and appears to forego the claims in response
to Volkswagen’s motion, the court dismisses VDPP’s claims of indirect and willful infringement.
C. Motion for Leave to Amend
In VDPP’s response to the motion to dismiss, it asks in the alternative for leave to amend.
(Docket Entry No. 22 at 10). Although leave of court to amend pleadings “shall be freely given
when justice requires,” Fed. R. Civ. P. 15(a), the decision to grant or deny leave “is entrusted to
the sound discretion of the district court,” Pervasive Software Inc. v. Lexware GmbH & Co. KG,
688 F.3d 214, 232 (5th Cir. 2012) (internal quotation marks omitted). When reviewing a motion
to amend pleadings under Rule 15(a), a district court “should consider factors such as ‘undue delay,
bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by
amendments previously allowed undue prejudice to the opposing party, and futility of
amendment.’” In re Am. Int’l Refinery, Inc., 676 F.3d 455, 466–67 (5th Cir. 2012) (quoting In re
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Southmark Corp., 88 F.3d 311, 315 (5th Cir. 1996)) (internal quotation marks omitted). A
proposed amendment is futile if “the amended complaint would fail to state a claim upon which
relief can be granted.” Stripling v. Jordan Prod. Co., LLC, 234 F.3d 863, 873 (5th Cir. 2000).
VDPP’s proposed amended complaint does cure the deficiencies and state a claim for
relief, because VDPP has not alleged facts showing patent marking before the patent expired. The
court denies VDPP’s motion for leave to amend.
IV.
Conclusion
Based on the above, Volkswagen’s motion to dismiss, (Docket Entry No. 13), is granted,
with prejudice. VDPP’s motion for leave to amend, (Docket Entry No. 22), is denied because
amendment would be futile. Final judgment is separately entered.
SIGNED on March 27, 2024, at Houston, Texas.
________________________________
Lee H. Rosenthal
United States District Judge
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