Script Sec. Solutions L.L.C. v. Amazon.com, Inc.

170 F.Supp.3d 928

Script Security Solutions L.L.C., Plaintiff,

v.Amazon.com, Inc. and Amazon.com, LLC, Defendants.

Case No. 2:15-CV-1030-WCB

United States District Court, E.D. Texas, Marshall Division.

Signed March 16, 2016

Filed March 17, 2016

Califf Teal Cooper, Osha Liang LLP, Matthew J. Antonelli, Larry Dean Thompson, Jr., Zachariah Harrington, Antonelli, Harrington & Thompson LLP, Houston, TX, for Plaintiff.

Callie J. Sand, Lauren Keller Katzenellenbogen, Michael K. Friedland, Knobbe Martens Olson & Bear LLP, Irvine, CA, Aamir A. Kazi, Fish & Richardson PC, Atlanta, GA, Charles Ainsworth, Parker Bunt & Ainsworth, Tyler, TX, Robert T. Cruzen, Klarquist Sparkman LLP, Portland, OR, Califf Teal Cooper, Osha Liang LLP, Matthew J. Antonelli, Larry Dean Thompson, Jr., Zachariah Harrington, Antonelli, Harrington & Thompson LLP, Houston, TX, for Defendants.

MEMORANDUM OPINION AND ORDER

WILLIAM C. BRYSON, UNITED STATES CIRCUIT JUDGE

Before the Court is the Motion to Dismiss for Improper Venue filed by defendants Amazon.com, Inc. and Amazon.com, LLC (collectively “Amazon”). Dkt. No. 73. Also before the Court are motions to dismiss the plaintiff's claims of indirect and willful infringement filed by defendants Amazon; Best Buy Stores, L.P. (“Best Buy”); and Time Warner Cable Enterprises LLC (“Time Warner”). Dkt. Nos. 73 and 74; Case No. 2:15–cv–1033, Dkt. No. 11. Each of the motions is DENIED.

I. BACKGROUND

Plaintiff Script Security Solutions, L.L.C. (“Script”) is a Texas corporation with its principal place of business in Austin, Texas. Script owns United States Patent Numbers 6,542,078 (“the '078 patent”) and 6,828,909 (“the '909 patent”). On June 12, 2015, Script filed these consolidated actions alleging that the defendants directly, indirectly, and willfully infringed the '078 and '909 patents. Amazon subsequently filed a motion to dismiss for improper venue, as well as arguing that Script failed to adequately plead indirect and willful infringement. Dkt. No. 11. Amazon and Best Buy filed motions arguing that Script failed to adequately plead indirect and willful infringement. Case No. 2:15–cv–1031, Dkt. No. 11. Time Warner filed a motion arguing that Script failed to adequately plead contributory and willful infringement. Case No. 2:15–cv–1033, Dkt. No. 11. Script subsequently amended its complaints against Amazon and Best Buy on two occasions. See Dkt. Nos. 42, 43, 57 & 58. Amazon and Best Buy responded to each amendment by re-filing their motions to dismiss. See Dkt. Nos. 49, 50, 73 & 74. Script has replied to those motions by incorporating the arguments it made in opposition to Amazon's and Best Buy's motions to dismiss Script's original and first amended complaints. See Dkt. Nos. 18, 61 & 95.

II. ANALYSIS

A. Motion to Dismiss for Improper Venue

Amazon has moved under Federal Rule of Civil Procedure 12(b)(3) and 28 U.S.C. § 1406(a) to dismiss this action for improper venue. The special venue provision that applies to patent cases reads as follows: “Any 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). The general federal venue statute provides that a corporate defendant resides “in any judicial district in which such defendant is subject to the court's personal jurisdiction with respect to the civil action in question.” Id.§ 1391(c)(2); VE Holding Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574, 1584 (Fed.Cir.1990).

Amazon argues that the definition of “resides” in section 1391 should not be used to determine venue under section 1400(b) for patent cases. Although Amazon acknowledges that the VE Holding Corp. case held that the section 1391 definition applies to patent cases, it argues that the holding of the VE Holding Corp. case was repudiated by Congress in a subsequent amendment to section 1391. Based on that amendment, Amazon argues that a corporate defendant in a patent case should be deemed to “reside” only in the State where the defendant is incorporated.¹

In Fourco Glass Co. v. Transmirra Products Co., 353 U.S. 222, 226, 77 S.Ct. 787, 1 L.Ed.2d 786 (1957), the Supreme Court addressed the interaction between sections 1391 and 1400. At the time, section 1391 was entitled “venue generally.” It read:

(b) A civil action wherein jurisdiction is not founded solely on diversity of citizenship may be brought only in the judicial district where all defendants reside, except as otherwise provided by law.

(c) A corporation may be sued in any judicial district in which it is incorporated or licensed to do business or is doing business, and such judicial district shall be regarded as the residence of such corporation for venue purposes.

28 U.S.C. § 1391 (1958). Section 1400 read, as it still does:

(b) Any 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 (1958).

The Court in Fourco Glass reasoned that “it is clear that § 1391(c) is a general corporation venue statute, whereas § 1400(b) is a special venue statute applicable, specifically, to all defendants in a particular type of actions, i.e., patent infringement actions.” Fourco Glass, 353 U.S. at 228, 77 S.Ct. 787. The Court therefore held “that 28 U.S.C. § 1400(b) is the sole and exclusive provision controlling venue in patent infringement actions, and that it is not to be supplemented by the provisions of 28 U.S.C. § 1391(c).” Id. For that reason, the Court ruled that a corporate defendant in a patent case could not be sued in any judicial district in which it is doing business, as provided in section 1391(c), but only in a district where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business,” as provided in section 1400(b). Id. at 228–29, 77 S.Ct. 787. The Court further stated that the term “resides” in section 1400(b), like the term “inhabitant” in the predecessor to section 1400(b), “mean[s] domicile, and, in respect of corporations, means[s] the state of incorporation only.” Id. at 226, 77 S.Ct. 787.

In 1988, Congress amended the venue statutes; in particular, it amended section 1391(c) to read as follows:

(c) For purposes of venue under this chapter, a defendant that is a corporation shall be deemed to reside in any judicial district in which it is subject to personal jurisdiction at the time the action is commenced. In a State which has more than one judicial district and in which a defendant that is a corporation is subject to personal jurisdiction at the time an action is commenced, such corporation shall be deemed to reside in any district in that State within which its contacts would be sufficient to subject it to personal jurisdiction if that district were a separate State, and, if there is no such district, the corporation shall be deemed to reside in the district within which it has the most significant contacts.

28 U.S.C. § 1391(c) (1988). At that time, section 1391(b) read as follow: “A civil action wherein jurisdiction is not founded solely on diversity of citizenship may be brought only in the judicial district where all defendants reside, or in which the claim arose, except as otherwise provided by law.”

In VE Holding, the Federal Circuit addressed whether the 1988 amendment to section 1391 had altered the Supreme Court's analysis in Fourco regarding the proper venue for corporate defendants in patent cases. After examining the 1988 statute, the court concluded that as a result of the change in section 1391(c), the reasoning of Fourco Glass was no longer applicable. The VE Holding court explained that the new version of section 1391(c) applied “to all of chapter 87 of title 28, and thus to § 1400(b).” VE Holding, 917 F.2d at 1580. Because the newly amended section 1391(c) operated to define the term “reside” for purposes of all the provisions of the venue chapter, including section 1400(b), that definition governed the meaning of the term “resides” in section 1400(b). The Court explained that the rationale of Fourco—that the more specific section 1400(b) took precedence over the more general section 1391—was inapplicable to the new section 1391(c), which was definitional in nature and “expressly reads itself into the specific statute, § 1400(b).” VE Holding, 917 F.2d at 1580. Applying the language of section 1391(c), the court held that the statutory definition of “resides” applied to the use of that term in section 1400(b), with the result being that a corporate patent defendant could be sued “in any district in which it is subject to personal jurisdiction at the time the action is commenced.” 28 U.S.C. § 1391(c) (1988).

Section 1391 was amended once again in 2011. The new, and current, version of the statute states:

(a) APPLICABILITY OF SECTION.—Except as otherwise provided by law—

(1) this section shall govern the venue of all civil actions brought in district courts of the United States; and

(2) the proper venue for a civil action shall be determined without regard to whether the action is local or transitory in nature.

(b) VENUE IN GENERAL.—A civil action may be brought in—

(1) a judicial district in which any defendant resides, if all defendants are residents of the State in which the district is located;(2) a judicial district in which a substantial part of the events or omissions giving rise to the claim occurred, or a substantial part of property that is the subject of the action is situated; or

(3) if there is no district in which an action may otherwise be brought as provided in this section, any judicial district in which any defendant is subject to the court's personal jurisdiction with respect to such action.

(c) RESIDENCY.—For all venue purposes—

...

(2) an entity with the capacity to sue and be sued in

...