InsideSales.com v. SalesLoft

Filing 88

MEMORANDUM DECISION AND ORDER denying Defendant's 70 Rule 12(b)(3) Motion to Dismiss or Transfer for Improper Venue. Signed by Judge Dale A. Kimball on 9/26/2017. (eat)

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF UTAH
CENTRAL DIVISION

INSIDESALES.COM, INC.,
Plaintiff,

MEMORANDUM DECISION
AND ORDER

vs.
Case No. 2:16CV859DAK
SALESLOFT, INC.,
Judge Dale A. Kimball
Defendant.

This matter is before the court on Defendant SalesLoft’s Rule 12(b)(3) Motion to Dismiss
or Transfer for Improper Venue. On September 13, 2017, the court held a hearing on the
motions. At the hearing, Plaintiff was represented by Paul B. Gaffney and Samuel C. Straight,
and Defendant was represented by H. Dickson Burton. The court took the motion under
advisement. After carefully considering the parties’ memoranda and the law and facts relevant to
the pending motion, the court issues the following Memorandum Decision and Order.
BACKGROUND
On August 4, 2016, InsideSales filed its Complaint for alleged patent infringement
against SalesLoft. In the Complaint, InsideSales alleges that venue is proper in this district
because SalesLoft was subject to personal jurisdiction in this district and has sold allegedly
infringing products in this district. SalesLoft is a Delaware corporation with its principal place of
business in Atlanta, Georgia. On December 1, 2016, SalesLoft filed two motions to dismiss
based on unpatentability under 35 U.S.C. § 101 and failure to state a claim upon which relief can
be granted.

On December 14, 2016, the United States Supreme Court granted certiorari in TC
Heartland LLC v. Kraft Foods Group Brands LLC, 821 F.3d 1338 (Fed. Cir.), cert. granted 137
S. Ct. 614 (2016), which raised the issue of proper venue in patent cases. On May 22, 2017, the
Supreme Court issued its decision in TC Heartland, 137 S. Ct. 1514 (2017), reversing the
Federal Circuit and explaining that venue in a patent case is proper only where a defendant is
incorporated or where its regular and established place of business is located.
At the time the Supreme Court decided TC Heartland, this court had SalesLoft’s motions
to dismiss under advisement. Three days after the TC Heartland decision, SalesLoft filed a
notice of supplemental authority regarding a new case relating to unpatentability under 35 U.S.C.
§ 101. SalesLoft did not notify this court of the TC Heartland decision or seek to supplement its
motions to dismiss to add a venue challenge. On June 13, 2017, this court denied SalesLoft’s
motions to dismiss.
On June 27, 2017, SalesLoft filed the present motion to dismiss based on improper venue
under TC Heartland. SalesLoft has not yet answered the Complaint.
DISCUSSION
SalesLoft’s Motion to Dismiss
SalesLoft moves to dismiss or transfer this action for improper venue based on the
Supreme Court’s recent decision in TC Heartland, 137 S. Ct. 1514 (2017). The patent venue
statute, 28 U.S.C. § 1400(b), provides 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.” In TC Heartland, the
Supreme Court concluded that “for purposes of § 1400(b) a domestic corporation ‘resides’ only
in its State of incorporation.” 137 S. Ct. at 1517.
2

Under TC Heartland, the only proper venues in this case are the District of Delaware,
where SalesLoft is incorporated, or the Northern District of Georgia, where SalesLoft has its
principal place of business. InsideSales makes no allegations that SalesLoft has any facilities in
the District of Utah, only that SalesLoft has allegedly sold infringing products in Utah.
Accordingly, SalesLoft brought this motion to dismiss for improper venue under Rule 12(b)(3) of
the Federal Rules of Civil Procedure.
However, a Rule 12(b)(3) motion for improper venue is subject to waiver, and SalesLoft
has already brought two prior motions to dismiss in this case. Under Rule 12(h) of the Federal
Rules of Civil Procedure, “[a] party waives any defense listed in Rule 12(b)(2) -(5) by: (A)
omitting it from a motion in the circumstances described in Rule 12(g)(2).” Fed. R. Civ. P.
12(h)(1). Rule 12(g)(2) 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.” Id. 12(g)(2) (emphasis added).
SalesLoft argues that it its Rule 12(b)(3) motion is timely because it was not available to
it prior to the TC Heartland decision. SalesLoft filed its prior motions to dismiss on December
1, 2016. At that time, the Supreme Court had not granted certiorari in TC Heartland.
InsideSales, however, argues that SalesLoft waived its venue challenge because SalesLoft could
have advanced the same argument as was advanced in TC Heartland and SalesLoft should have
notified this court of the TC Heartland decision prior to this court’s ruling on SalesLoft’s
original motions to dismiss.
Courts are divided as to whether the improper venue basis for SalesLoft’s motion was
available prior to the TC Heartland decision. “[A]n exception to the general rule of waiver . . .
exists . . . when there has been an intervening change in the law recognizing an issue that was not
3

previously available.” Holland v. Big River Minerals Corp., 181 F.3d 597, 605 (4th Cir. 1999).
The parties, as well as courts around the country, dispute whether TC Heartland changed the law.
The TC Heartland Court stated that it was not announcing a new standard but simply reaffirming
the venue rule it had established sixty years prior. 137 S. Ct. at 1520. In reversing the Federal
Circuit, the Supreme Court relied on its interpretation of the term “resides” in its decision in
Fourco Glass Co. v. Transmirra Prods. Corp., 353 U.S. 222 (1957). The issue in TC Heartland
was whether Congress had legislatively overruled Fourco through subsequent amendments to the
general venue provisions. 137 S. Ct. At 1520.
Although the Federal Circuit ruled twenty-seven years ago that Congress had legislatively
overruled Fourco, VE Holding Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574 (Fed. Cir.
1990), the TC Heartland Court overruled VE Holding and determined that Fourco remained
good law. InsideSales contends that, at most, TC Heartland, merely strengthened SalesLoft’s
available venue defense. Decisions that merely “provide[] a stronger basis” for a claim cannot
save a venue challenge omitted from an earlier-filed motion. See In re Vivendi, S.A. Sec. Litig.,
838 F.3d 223, 244 (2d Cir. 2016). Several district courts across the country have rejected the
exact arguments SalesLoft advances in its motion. “Based on the Supreme Court’s holding in TC
Heartland, Fourco has continued to be binding law since it was decided in 1957, and thus, it has
been available to every defendant since 1957. Accordingly, the court finds that TC
Heartland does not qualify for the intervening law exception to waiver because it merely affirms
the viability of Fourco,” Cobalt Boats, LLC v. Sea Ray Boats, Inc., 2017 WL 2556679, at *3
(E.D. Va. June 7, 2017).
InsideSales claims that there was nothing stopping SalesLoft from making a venue
challenge similar to the venue challenge made in TC Heartland that worked its way up to the
4

Supreme Court. However, the TC Heartland decision reversed Federal Circuit precedent that
had been in place for 27 years. InsideSales’ entire argument for waiver relies on treating the TC
Heartland decision as a mere restatement of an older case. However, it was a dramatic departure
from twenty seven years of Federal Circuit authority. Before TC Heartland, the law on patent
litigation venue was controlled by the Federal Circuit’s decision in VE Holding Corp. v. Johnson
Gas Appliance Co., 917 F.2d 1574 (Fed. Cir. 1990), cert. denied 499 U.S. 922 (1991). The
Supreme Court denied certiorari in VE Holding at the time and it was considered the controlling
law. Over those twenty-seven years, many parties challenged VE Holding, but none were
successful at the district court level, circuit court level, or in getting certiorari granted by the
Supreme Court until the Supreme Court granted certiorari in TC Heartland. See e.g., Vulcan
Equip. Co. v. Century Wrecker Corp., No. 90-1339, 1991 WL 11176416 (U.S. Feb. 6, 1991);
Script Sec. Sols. LLC v. Amazon.com, Inc., 170 F. Supp. 3d 928, 935 (E. D. Tex. 2016).

In

addition, in MyMail, Ltd. v. IAC Search & Media, Inc., No. 2:16cv1434-JRF-RSP, Dkt. 32 (E. D.
Tex. March 17, 2107), a district court denied a motion to dismiss for improper venue while TC
Heartland was pending before the Supreme Court on the grounds that VE Holding was still
controlling law. Id. at 1-2. This pattern shows that VE Holding was settled and established law
until the Supreme Court issued the TC Heartland decision.
This court finds that it is not accurate to state that the Supreme Court’s 1957 Fourco was
good law since that time when it was not being applied by any court and the Supreme Court
failed to grant certiorari to ensure that it was followed. Moreover, if Fourco was controlling law
at the time InsideSales filed its Complaint in the present case, InsideSales misrepresented to the
court that venue was proper in this court. The court does not believe that InsideSales should be
allowed to rely on VE Holding to claim that its venue assertions in its Complaint were made in
5

good faith and then contend that VE Holding was never controlling law. The court, therefore,
concludes that TC Heartland was a change in the controlling law and a venue challenge was not
available to SalesLoft until the Supreme Court issued its decision. See Curtis Publishing Co. v.
Butts, 388 U.S. 130, 143 (1967) (“[T]he mere failure to interpose [] a defense prior to the
announcement of a decision which might support it cannot prevent a litigant from later invoking
such a ground.”).
Nonetheless, even if TC Heartland is a change in the law, that does not resolve the issue
before this court. InsideSales argues that SalesLoft still waived its venue challenge because it
failed to notify this court of the decision while its original motions to dismiss were pending. It is
well established that “a party cannot be deemed to have waived objections or defenses which
were not known to be available at the time they could first have been made, especially when it
does raise the objection as soon as their cognizability is made apparent.” Curtis Publishing Co.
v. Butts, 388 U.S. 130, 143 (1967) (emphasis added).
The rules specifically provide a system in which venue challenges are not available for
tactical deployment. A party cannot wait to see how a motion to dismiss on the merits turns out
before challenging venue. In this case, SalesLoft had several weeks in which to notify the court
that it wanted to supplement its pending motions to dismiss. During that time period, SalesLoft
notified the court of other recent decisions impacting the §101 motion. SalesLoft similarly could
have, and should have, notified the court of the TC Heartland decision if it did not want to waive
the venue challenge. By waiting to see how the court would come out on its unpatentability
motion, SalesLoft waived its venue challenge. Accordingly, the court denies SalesLoft’s motion
to dismiss.

6

CONCLUSION
Based on the above reasoning, Defendant SalesLoft’s Rule 12(b)(3) Motion to Dismiss or
Transfer for Improper Venue [Docket No. 70] is DENIED.
DATED this 26th day of September, 2017.
BY THE COURT:

____________________________________
DALE A. KIMBALL,
United States District Judge

7