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Mantissa Corp. v. Ondot Systems, Inc.

United States District Court, S.D. Texas, Houston Division

July 26, 2017

MANTISSA CORPORATION, Plaintiff,
v.
ONDOT SYSTEMS, INC.; LONE STAR NATIONAL BANK; and LONE STAR NATIONAL BANCSHARES-TEXAS, INC., Defendants.

          MEMORANDUM AND ORDER

          Dena Hanovice Palermo United States Magistrate Judge

         Pending before the Court in this patent infringement suit is Defendant Ondot Systems, Inc.'s "Rule 12(c) Motion for Judgment on the Pleadings for Improper Venue, and, in the alternative, Motion for Severance and Transfer of Venue." ECF No. 101. As explained below, the Court DENIES that motion.[1]

         BACKGROUND

         Plaintiff Mantissa Corporation ("Mantissa") is the exclusive licensee of, and holds all substantial rights and interests in, U.S. Patent No. 7, 779, 456 (the '456 Patent) and U.S. Patent No. 8, 353, 027 (the '027 Patent) (collectively, the "patents-in-suit"). Mantissa brings this suit under 35 U.S.C. § 271, alleging that Defendants Ondot Systems, Inc. ("Ondot"), Lone Star National Bank, and Lone Star National Bancshares-Texas, Inc. (collectively, "Defendants")"have committed, and continue to commit, direct acts of infringement of the '456 Patent and the '027 Patent by making, using, offering to sell and selling products, systems and services embodying the patented invention." ECF No. 38 at ¶ 15.

         DISCUSSION

         Citing Rule 12(c) of the Federal Rules of Civil Procedure, Ondot moves to be dismissed from this suit on grounds that the Southern District of Texas is an improper venue as to it. ECF No. 101 at 1. In the alternative, Ondot requests, pursuant to 28 U.S.C. § 1406(a), [2] that the case as to it be severed from the case against the other Defendants and transferred to the Northern District of California. ECF No. 101 at 1, 4.

         A. Applicable Law

         The patent venue statute, codified at 28 U.S.C. § 1400(b), provides that an action for patent infringement may be brought in a judicial district where either: (1) "the defendant resides" or (2) "the defendant has committed acts of infringement and has a regular and established place of business.

         " In Fourco Glass Co. v. Transmirra Products Corp., 353 U.S. 222 (1957), the Supreme Court held that, for purposes of § 1400(b), a domestic corporation "resides" only in its state of incorporation. Id. at 226. In so holding, the Supreme Court rejected the argument that a provision of the general venue statute, 28 U.S.C. § 1391(c), modified the patent venue statute. Fourco, 353 U.S. at 228. On the contrary, § 1400(b) "is the sole and exclusive provision controlling venue in patent infringement actions, and ... it is not to be supplemented by the provisions of 28 U.S.C. § 1391(c)." Fourco, 353 U.S. at 229.

         In the sixty years since Fourco was decided, the text of § 1400(b) has remained the same. In 1988, however, Congress amended § 1391(c) to state:

(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....

         Judicial Improvements and Access to Justice Act, Pub. L. No. 100-702, § 1013(a), 102 Stat. 4642(1988). Soon after the 1988 amendment took effect, the Federal Circuit, in VE Holding Corp. v.Johnson Gas Appliance Co., 917 F.2d 1574 (Fed. Cir. 1990), interpreted the phrase "[f]or purposes of venue under this chapter" to mean that, "[o]n its face, § 1391(c) clearly applies to § 1400(b), and thus redefines the meaning of the term 'resides' in that section." VE Holding at 1578. Concluding that "[§] 1391(c) as it was in Fourco is no longer, " id. at 1579, the Federal Circuit held that, under § 1400(b), "venue in a patent infringement case includes any district where there would be personal jurisdiction over the corporate defendant at the time the action is commenced." Id. at 1583.

         The Supreme Court did not grant review of the Federal Circuit's decision in VE Holding. See 499 U.S. 922 (1991) (denying petition for writ of certiorari). But neither did it affirm VE Holding's conclusion that Congress, in enacting the 1988 amendment to the general venue statute, effectively overruled Fourco's interpretation of § 1400(b). See Missouri v. Jenkins, 515 U.S. 70, 85 (1995) ("[T]he denial of a writ of certiorari imports no expression of opinion upon the merits of the case . . . ." (quoting United States v. Carver, 260 U.S. 482, 490 (1923))); Maryland v. Baltimore Radio Show, 338 U.S. 912, 919 (1950) ("[A]ll that a denial of a petition for a writ of certiorari means is that fewer than four members of the Court thought it should be granted, . . . such a denial carries with it no implication whatever regarding the Court's views on the merits of a case which it has declined to review.").

         On May 22, 2017, the Supreme Court issued a decision in TC Heartland LLC v. Kraft Foods Grp. Brands LLC, 137 S.Ct. 1514. In TC Heartland, the Supreme Court abrogated VEHolding and reaffirmed Fourco's holding that "the word 'residence' in § 1400(b) has a particular meaning as applied to domestic corporations: It refers only to the State of incorporation." TC Heartland, 137 S.Ct. at 1520 (brackets and footnote omitted). In its decision, the Supreme Court rejected the argument that "Congress changed the meaning of § 1400(b) when it amended § 1391, " explaining that "[t]he current ...


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