United States District Court, W.D. Wisconsin
OPINION AND ORDER
WILLIAM M. CONLEY, District Judge.
Plaintiff
Genesis Attachments, LLC (“Genesis”) filed suit
in this district against defendant Detroit Edge Tool Company
(“DETCO”), claiming that demolition sheer tips
manufactured by DETCO infringed Genesis's patent. (Compl.
(dkt. #1) ¶13.) While this case was stayed pending
inter partes review, the United States Supreme Court
decided TC Heartland LLC v. Kraft Foods Group Brands
LLC, 137 S.Ct. 1514 (2017), which held that a domestic
corporation “resides” in its state of
incorporation for purposes of the patent venue statute. 28
U.S.C. § 1400(b). Subsequently, the Federal
Circuit's issued a related opinion in In re Cray,
Inc., 871 F.3d 1355 (Fed. Cir. 2017), narrowing the
alternative basis for venue under § 1400(b), requiring
that the defendant have a “regular and established
place of business.” After the stay was lifted,
defendant DETCO moved to transfer venue to the Eastern
District of Michigan, arguing that venue was improper under
the patent venue statute in light of TC Heartland
and Cray. (Def.'s Mot. to Transfer (dkt. #31)
7.) Because the court agrees that DETCO neither
“resides” nor has a “regular and
established place of business” in the Western District
of Wisconsin within the meaning of these opinions, the court
will grant defendant's motion to transfer.
In
addition to the patent claims, DETCO also asserts
patent-related, breach of contract and promissory
estoppel/reliance counterclaims. While DETCO requests that
the court sever these counterclaims and maintain jurisdiction
over them, the court concludes that the Eastern District of
Michigan is a more convenient forum to hear all of
defendant's counterclaims and the interests of justice
weigh in favor of such a transfer. As such, the court will
also transfer the counterclaims as well.
BACKGROUND[1]
Plaintiff
Genesis Attachments is a Delaware limited liability company
with its headquarters in Wisconsin. (Compl. (dkt. #1) ¶
2.) Genesis is the assignee of United States Patent No. RE45,
341 (the “RE'341 patent”), which is a reissue
of United States Patent No. 7, 895, 755, entitled
“Replaceable Demolition Shear Piercing Tip.”
(Id. ¶ 8.) Defendant DETCO is a Michigan
corporation with its principle place of business in Detroit,
Michigan. (Answ. (dkt. #9) p.1, ¶ 3.) DETCO was a
supplier to Genesis of patented tips for use in various
Genesis products. (Id. at p.5, ¶ 5.) DETCO does
not manufacture or store its products in Wisconsin; it does
not have any employees physically located in Wisconsin; and
it does not maintain a physical location in the Western
District. (See Ebbing Decl. (dkt. #30) ¶¶
4-8.)
In June
2016, Genesis filed suit in the Western District for patent
infringement. In its answer, DETCO denied that venue was
proper in this court for the infringement claim. (Answ. (dkt.
#9) p.2, ¶ 6.) DETCO also filed counterclaims, alleging
non-infringement, invalidity, breach of contract, and
promissory estoppel. (Id. at pp.5-9.) In April 2017,
the case was stayed pending reexamination by the USPTO. In
January 2019, the case was reopened, and two days later DETCO
filed the present motion to transfer venue for the patent
infringement claim based on the intervening decisions by the
Supreme Court in TC Heartland and by the Federal
Circuit in Cray.
OPINION
I.
Venue for Genesis's Patent Infringement Claim
Venue
in patent cases is controlled by 28 U.S.C. § 1400(b),
which states that “[a]ny civil action for patent
infringement may be brought in the judicial district [1]
where the defendant resides, or [2] where the defendant has
committed acts of infringement and has a regular and
established place of business.” 28 U.S.C. §
1400(b). In TC Heartland, the Supreme Court held
that a domestic corporation only “resides” in the
state where it is incorporated. 137 S.Ct. at 1520. Shortly
after the Supreme Court's decision in TC
Heartland, the Federal Circuit considered the scope of
the second prong of the patent venue statute in
Cray. To satisfy this prong, the Federal Circuit set
forth three requirements: “(1) there must be a physical
place in the district; (2) the place must be a regular and
established place of business; and (3) it must be the place
of the defendant.” 871 F.3d at 1360.
In its
recent motion, DETCO contends that Genesis cannot establish
venue under the patent venue statute in the Western District
of Wisconsin because: (1) DETCO does not “reside”
in Wisconsin; and (2) DETCO does not have a “regular
and established place of business” in Wisconsin.
(Def.'s Mot. (dkt. #31) 9.) Absent a finding of waiver,
DETCO does not argue that venue is proper in this district in
light of TC Heartland and Cray, nor could
it. First, DETCO does not “reside” in Wisconsin
within the meaning of TC Heartland as it is
incorporated only in Michigan. Second, DETCO cannot meet the
Federal Circuit's definition of “a regular and
established place of business” in Cray, as
plaintiff concedes, because the corporation does not even
have a physical presence in the state of Wisconsin.
(See Ebbing Decl. (dkt. #30) ¶¶ 4-8;
Pl.'s Opp'n (dkt. #33) 2 (“Genesis does not
take issue with DETCO's presentation of the basic
facts.”).)
Instead,
Genesis argues that DETCO waived any objections to venue by
(1) not moving to transfer in the eight months
before the case was stayed, and (2) consenting to
venue by asserting counterclaims. (Pl.'s Opp'n (dkt.
#33) 2.) Genesis maintains that DETCO waived any objection
because it “chose to do nothing about the venue
defense” raised in its answer for eight months leading
up to the stay and the intervening Supreme Court and Federal
Circuit decisions. (Pl.'s Opp'n (dkt. #33) 4.) In
contrast, DETCO argues that by pleading that venue was
improper at the outset of this case, it actually
reserved this defense. In any event, DETCO argues an
exception to the general rule of waiver applies because the
combination of the TC Heartland and Cray
decisions constitutes an intervening change in the law
governing venue in patent cases. (Def.'s Mot. (dkt. #31)
10-11.)
Normally,
Genesis's waiver might well have merit, since defendant
had done nothing to challenge venue after its initial
pleading. See 28 U.S.C. § 1406(b)
(“Nothing in this chapter shall impair the jurisdiction
of a district court of any matter involving a party who does
not interpose timely and sufficient objection to the
venue.”). However, an intervening change in the law
provides an exception to the general rule of waiver,
particularly where there is no arguable prejudice to
plaintiff by the delay in light of the long stay of
proceedings awaiting action by the Patent Trial and Appeal
Board. See In re Micron Tech., Inc., 875 F.3d 1091,
1097-98 (Fed. Cir. 2017) (“[A] sufficiently sharp
change of law sometimes is a ground for permitting a party to
advance a position that it did not advance earlier in the
proceeding when the law at the time was strongly enough
against that position.”); Holland v. Big River
Minerals Corp., 181 F.3d 597, 605-06 (4th Cir. 1999)
(citing Curtis Publ'g Co., 388 U.S. 130, 143
(1975) (plurality opinion)) (“The intervening law
exception to the general rule that the failure to raise an
issue timely in the district court waives review of the issue
. . . applies when ‘there was strong precedent'
prior to the change . . . such that failure to raise the
issue was not unreasonable and the opposing party was not
prejudiced by the failure to raise the issue sooner.”).
The
Supreme Court's decision in TC Heartland
unquestionably changed the law of venue in patent cases.
Micron, 875 F.3d at 1099. In particular, controlling
precedent precluded this court from sustaining an objection
to venue based on § 1400(b) prior to the TC
Heartland decision. See Id. at 1098; see
also Columbia Sportswear N. Am., Inc. v. Seirus Innovative
Accessories, Inc., 265 F.Supp.3d 1196, 1206 (D. Or.
2017) (explaining that a venue objection based on
§1400(b) was unavailable to the defendant prior to
TC Heartland). Although DETCO denied venue was
proper in its answer, it would have been a futile exercise
for DETCO to file a motion to transfer venue, as Genesis
argues it should have, in the face of contrary, controlling
precedent in effect at that time. See Columbia
Sportswear, 265 F.Supp.3d at 1206 (“Defendant
could not have reasonably been expected to make an argument
contrary to twenty-seven years of binding precedent.”);
see also Holzsager v. Valley Hosp., 646 F.2d 792,
796 (2d Cir. 1981) (“The clairvoyance demanded by
plaintiff here of the [defendant] is inconsistent with the
doctrine of waiver.”).
Since
the venue defense was not “available” at the time
DETCO filed its answer in 2016, nor during the short time
before the stay was granted in April 2017, defendant cannot
be faulted for not pressing the venue issue until the stay
was lifted in January 2019, at which point it promptly moved
to transfer venue.[2]See Micron, 875 F.3d at 1096
(“The venue objection was not available until the
Supreme Court decided TC Heartland because, before
then, it would have been improper, given controlling
precedent, for the district court to dismiss or to transfer
for lack of venue.”). The defense only became available
in January 2019 when the case was reopened. Because DETCO
acted reasonably and timely in response to this ...