United States District Court, E.D. Texas, Marshall Division
MEMORANDUM OPINION AND ORDER
GILSTRAP UNITED STATES DISTRICT JUDGE
the Court is the Motion of Defendant Cray, Inc.
(“Cray”) to Transfer Pursuant to 28 U.S.C. §
1406(a). (Dkt. No. 256.) Having considered the Parties'
submissions and the relevant authorities, and for the
following reasons, the Court finds that the motion should be
and is DENIED.
September 25, 2015, Raytheon Company (“Raytheon”)
filed its Complaint against Cray, Inc., alleging infringement
of four patents. (Dkt. No. 1.) Raytheon asserts that Cray has
directly infringed at least two of Raytheon's patents by
using, selling, or offering to sell high performance
computing (“HPC”) products or supercomputer
systems to customers within the State of Texas and the
Eastern District of Texas. (Dkt. No. 1 ¶¶ 7, 8, 22,
38.) In addition, Raytheon asserts that Cray has indirectly
infringed its patents by inducing others in this District to
use the accused supercomputer or HPC products. (Dkt. No. 1
¶¶ 7, 8, 23, 39.)
November 25, 2015, Cray filed a Motion to Dismiss for lack of
personal jurisdiction and improper venue. (Dkt. No. 21.)
Raytheon responded that at the time of Cray's Motion to
Dismiss, one of Cray's sales executives, Mr. Douglas
Harless, had been working for Cray from within this District
for over seven years. (Dkt. No. 22 at 7-8.) Mr. Harless's
responsibilities at Cray included “new sales and new
account development in [the] Central U.S.” as well as
“management of key accounts within the Financial,
BioMedical and Petroleum Industries.” Id.
addition, Cray sold an accused XC40 supercomputer to the
University of Texas System. (Dkt. No. 21 at 4.) While the
accused system was delivered and installed at the University
of Texas's Austin campus, the system was accessed via
remote terminals at various University of Texas facilities,
including two campuses within the Eastern District of Texas.
(Dkt. No. 21 at 4; Dkt. No. 1 ¶ 7.) Based on these
facts, Magistrate Judge Roy S. Payne found that venue was
proper in the Eastern District of Texas, under VE Holding
Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574 (Fed.
Cir. 1990), and that the exercise of personal jurisdiction
was appropriate. (Dkt. No. 65.) The Court adopted this
recommendation. (Dkt. No. 94.)
following the Magistrate Judge's Report and
Recommendation revealed additional, relevant information
regarding Cray's involvement in the Eastern District of
Texas. (Dkt. No. 265 at 8-10.) For example, in a map of
Cray's “Americas Sales Territories, ” Cray
specifically identified Athens, Texas, and listed Mr. Harless
as the “Named Account Manager” located there.
(Dkt. No. 265, Ex. C at 2.) In addition, Mr. Harless's
“office” telephone number, which is listed on
Cray's invoices to customers and emails to clients, has
an area code associated with several counties in this
District. (Dkt. No. 265 at 4; Dkt No. 265, Springfield Decl.
¶¶ 6-7.) Mr. Harless has been identified as the
account manager for at least twenty-one separate sales of the
accused products to nine different customers. (Dkt No. 265,
Springfield Decl. ¶¶ 8-9.) The revenue for the
accused sales attributed to Mr. Harless exceeds $345 million.
Id. In addition to receiving a salary for his sales
activities at Cray, Mr. Harless received reimbursement for
(1) his cell phone used for business purposes; (2) Internet
fees; and (3) mileage or other costs for business travel.
(Dkt. No. 265 at 6; Dkt. No. 256, Hoelzeman Decl.
¶¶ 4-5.) Although Cray did not pay for any
secretarial or support staff, Mr. Harless received direct
“administrative support” from Cray's
Minnesota office such that Mr. Harless could continue to work
from his home office. (Dkt. No. 256, Hoelzeman Decl. ¶
5.) Under this arrangement, Mr. Harless was able to sell
products to customers both within Texas and across the
nation. At the time the Complaint was filed, Mr.
Harless's job responsibilities also extended beyond
sales, including the management of key accounts within the
financial, biomedical, and petroleum industries. (Dkt. No. 22
eventually disclosed, Mr. Harless was not Cray's only
employee within the Eastern District of Texas. From 2010 to
2011, Cray employed Mr. Troy Testa as a “Sr. Territory
Manager.” (Dkt No. 265, Springfield Decl.
¶ 2.) Like Mr. Harless, Mr. Testa resided in
this District and sold Cray's HPC systems. Id.
¶¶ 2-3. Mr. Testa “[s]old [a] $132, 000
system at [a] 41% margin” within three months of
joining Cray; “[c]losed six new customers in [his]
first year[, ] including Areva, Amgen and Weir Oil;”
and “[h]ad a pipeline of over $6, 000, 000 on a $2,
500, 000 quota” for Cray, all while he resided in the
Eastern District of Texas. Id.
1, 2017, three months before trial, Cray filed a motion to
transfer this case under 28 U.S.C. §1406(a) in light of
the Supreme Court's decision in TC Heartland LLC v.
Kraft Foods Grp. Brands LLC, 137 S.Ct. 1514
(2017). (Dkt. No. 256.) Cray asserts that venue is improper
because (1) Cray does not “reside” in this
District; and (2) Cray has not committed acts of infringement
and does not have a regular and established place of business
within this District. (Dkt. No. 256.)
Establishing Venue Under § 1400(b)
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) (2012); TC Heartland, 137 S.Ct. at
1519 (“§ 1400(b) ‘is the sole and exclusive
provision controlling venue in patent infringement
actions.'” (quoting Fourco Glass Co. v.
Transmirra Products Corp., 353 U.S. 222, 229 (1957))).
If venue is not proper, a defendant may move to dismiss the
case or transfer it to a district in which the case could
have been originally brought. Fed.R.Civ.P. 12(b)(3); 28
U.S.C. § 1406(a).
the general venue statute, which defines residency
“[f]or all venue purposes, ” a domestic
corporation resides “in any judicial district in which
such defendant is subject to the court's personal
jurisdiction.” 28 U.S.C. § 1391(c). However, the
Supreme Court has held that this statute is inapplicable in
patent infringement cases. TC Heartland, 137 S.Ct.
1514 at 1519.
§ 1400(b) does not define the word “resides,
” the Supreme Court in Fourco Glass Co. v.
Transmirra Products Corp. concluded that, under §
1400(b), a domestic corporation resides only in its state of
incorporation. 353 U.S. at 226; TC Heartland, 137
S.Ct. at 1521.
a domestic corporation does not reside in the district in
which the case is filed, venue remains proper if the domestic
corporation has committed acts of infringement and has a
regular and established place of business within the
district. 28 U.S.C. § 1400(b).
The Burden of Proof When Defendant Objects to Venue
courts, district courts, and scholars have reached
different answers in allocating the burden of proof in venue
disputes. Even courts in this District have rendered
conflicting opinions. Compare Langton v. Cbeyond
Commc'n, L.L.C., 282 F.Supp.2d 504, 508 (E.D. Tex.
2003) (“[T]he burden of sustaining venue lies with the
plaintiff.”), with Sanders v. Seal Fleet,
Inc., 998 F.Supp. 729, 733 (E.D. Tex. 1998) (“The
burden to demonstrate why venue is improper and why the forum
should be changed lies with the movant.”), and
Texas Marine & Brokerage, Inc. v. Euton, 120
F.Supp.2d 611, 612 (E.D. Tex. 2000) (same). The Fifth Circuit
also has yet to determine which party bears the burden of
proof on a motion regarding improper venue. See Gupta v.
Lynch, 2014 WL 4063831, at *2 (E.D. La. Aug. 15, 2014)
(noting that “district courts in the Fifth Circuit have
been inconsistent in allocating the burden of proof” in
courts have held that the burden to establish proper venue
lies with the plaintiff. Where the burden of sustaining venue
is placed on the plaintiff, courts often rely on older
authority recognizing a plaintiff's burden in
establishing jurisdictional facts. For example,
Langton cited an earlier case from the Southern
District of Texas, see Langton, 282 F.Supp.2d at 508
(citing Laserdynamics Inc. v. Acer Am. Corp., 209
F.R.D. 388, 390 (S.D. Tex. 2002)), that in turn relied on a
line of cases extending back to K. J. Schwartzbaum, Inc.
v. Evans, Inc., 44 F.R.D. 589 (S.D.N.Y. 1968), which
recognized that “the burden is on plaintiff to
establish the jurisdiction of the court over . . .
defendants.” 44 F.R.D. at 591. See also Hoover
Grp., Inc. v. Custom Metalcraft, Inc., 84 F.3d 1408,
1410 (Fed. Cir. 1996) (noting that “venue is based on
the facts alleged in the well-pleaded complaint”).
many other courts have reached the opposite conclusion and
hold that the defendant bears the burden to establish
improper venue. These courts reason that requiring plaintiffs
to establish proper venue confuses the relationship between
jurisdiction and venue. See, e.g., Myers v.
American Dental Association, 695 F.2d 716, 724 (3d Cir.
1982) (“[T]hese cases confuse jurisdiction with venue
or offer no reasons to support their position”),
cert. denied, 462 U.S. 1106 (1983). A motion to
dismiss for improper venue is not an attack on the power of
the court to hear a particular case. Myers, 695 F.2d
at 724 (“[A] motion to dismiss for improper venue is
not an attack on jurisdiction but only an affirmative
dilatory defense.”). Instead, it is purely an
affirmative defense that reflects considerations of
convenience. See Panhandle E. Pipe Line Co. v. Fed. Power
Comm'n, 324 U.S. 635, 639 (1945) (“Venue
relates to the convenience of litigants.”). See
also Neirbo Co. v. Bethlehem Shipbuilding Corp., 308
U.S. 165, 168 (1939) (concluding that the right to object to
venue is a “privilege” afforded to defendants
that must be “asserted . . . seasonably”). Thus,
courts have reasoned that because a plaintiff need not plead
venue facts, the plaintiff should not bear the burden to
establish proper venue. Myers, 695 F.2d 716, 724 (3d
Cir. 1982) (“‘[I]t is not necessary . . . for the
plaintiff to include allegations showing the venue to be
proper.' . . . It logically follows therefore that on a
motion for dismissal for improper venue under Rule 12 the
movant has the burden of proving the affirmative defense
asserted by it.” (quoting Fed.R.Civ.P. Form 2, Advisory
Committee note 3)).
Court declines to hold whether the burden of proof, in
asserting venue, lies with the plaintiff or the defendant. In
the matter before the Court, the Parties have not disputed
who bears this burden. However, even if the burden lies with
the plaintiff, the Court finds that Raytheon has met that
burden based on the facts alleged in the complaint and the
evidence raised by Raytheon during discovery.
When the Regular and Established Place of Business Must be
courts have considered the proper time period for assessing
whether a defendant has a regular and established place of
business in the district, but each one has reached the same
conclusion: “under the patent venue statute, venue is
properly lodged in the district if the defendant had a
regular and established place of business at the time the
cause of action accrued and suit is filed within a reasonable
time thereafter.” Welch Sci. Co. v. Human Eng'g
Inst., Inc., 416 F.2d 32, 35 (7th Cir. 1969), cert.
denied, 396 U.S. 1003 (1970). See also San Shoe
Trading Corp. v. Converse Inc., 649 F.Supp. 341, 345
(S.D.N.Y. 1986); Datascope Corp. v. SMEC, Inc., 561
F.Supp. 787, 789 (D.N.J. 1983), aff'd in relevant
part, 776 F.2d 320 (Fed. Cir. 1985). The Court adopts
Court begins by examining both prongs of § 1400(b): (1)
where the defendant resides; and (2) where the defendant has
committed acts of infringement and has a regular and
established place of business.
patent infringement cases, a domestic corporation
“resides” only in its state of incorporation.
Fourco, 353 U.S. at 226. As a domestic corporation,
Cray is incorporated in the State of Washington. (Dkt. No. 1
¶ 2; Dkt. No. 256 at 4.) Accordingly, Cray does not
reside in this District within the meaning of § 1400(b).
The Judicial District Where the Defendant Has Committed Acts
of Infringement and Has a Regular and Established Place of
found that Cray does not reside within the Eastern District
of Texas, the Court now considers whether “the
defendant has committed acts of infringement and has a
regular and established place of business” in the
Eastern District of Texas. 28 U.S.C. § 1400(b).