United States District Court, E.D. Texas, Marshall Division
KRANOS IP CORPORATION, KRANOS IP II CORPORATION, KRANOS CORPORATION d/b/a SCHUTT SPORTS, Plaintiffs,
RIDDELL, INC., Defendant.
MEMORANDUM OPINION AND ORDER DENYING MOTION TO
DISMISS OR TRANSFER BASED ON IMPROPER VENUE BUT
GRANTING TRANSFER UNDER SECTION 1404
GILRAPUNITED STATES DISTRICT JUDGE
the Court is Defendant Riddell, Inc.'s
(“Riddell”) Motion to Dismiss or Transfer to the
Northern District of Illinois Pursuant to 28 U.S.C. §
1406(a) or 28 U.S.C. § 1404(a). (Dkt. No.7.) Having
considered the Motion, the corresponding briefing, and the
relevant authorities, the Court finds that venue is proper in
this District. Thus, the portion of Riddell's Motion
based on improper venue is DENIED. However,
the Court is of the opinion that the Northern District of
Illinois is a clearly more convenient forum for this
particular case. As such, Riddell's Motion based on
§ 1404(a) is GRANTED. As a result, this
case is hereby TRANSFERRED to the Northern
District of Illinois.
a competitor case between two companies that specialize in
the design and manufacture of football helmets used by
athletes throughout the United States. Plaintiffs Kranos IP
Corporation, Kranos IP II Corporation, and Kranos Corporation
d/b/a Schutt Sports (collectively, “Schutt”)
brought this patent infringement suit against Defendant
Riddell, alleging infringement of three patents related to
football helmets. The products accused of infringement in
this case are various football helmets made by Riddell.
Specifically, the accused products include: SpeedFlex,
Revolution Speed, Revolution Speed Classic, 360, Revolution
IQ, Foundation, Revolution Edge, Revolution Attack,
Revolution Attack-I, Attack, Victor-I, and Victor. (Am.
Compl. ¶ 73.) These products are marketed, sold, and
used throughout the United States. (Decl. of Thad M. Ide,
Dkt. No. 7-1, ¶ 4 (“Ide Decl.”).)
is an Illinois corporation, with its principal place of
business located in Des Plaines, Illinois. (Suppl. Decl. of
Thad M. Ide, Dkt. No. 20-1 ¶ 3 (“Suppl. Ide
Decl.”).) Although Riddell recently moved its
headquarters from Rosemont, Illinois, to Des Plaines,
Illinois, both cities are within the Northern District of
Illinois. (Suppl. Ide Decl. ¶ 3.) According to
Plaintiffs' Amended Complaint, Riddell is the leading
supplier of football helmets in the United States. (Am.
Compl. ¶¶ 20, 23.)
Schutt Plaintiff is a Delaware corporation with its principal
place of business in Litchfield, Illinois. (Am. Compl.
¶¶ 3-5.) Schutt is a leading supplier of protective
and sports equipment, including football helmets. (Am. Compl.
Motion seeks dismissal or transfer based on improper venue
under § 1406 and, in the alternative, transfer based on
convenience under § 1404(a). The Court is aware some
courts have held that § 1404(a) applies only upon a
finding that venue is proper in the transferor district.
See, e.g., Nizami v. Woods, 263 F.Supp.
124, 125 (S.D.N.Y. 1967) (“Since venue in this District
is improper, § 1404(a) quite clearly does not
apply.”); Wright & Miller, 15 Fed. Prac. &
Proc. Juris. § 3845 (4th ed.) (“Section 1404(a)
applies when the transferor is a proper venue. Section
1406(a) applies when the transferor is an improper
venue.”). Without necessarily agreeing with this
position, the Court will nonetheless address the portion of
Riddell's Motion based on improper venue before
addressing Riddell's arguments regarding
Rule 12(b)(3) Standard
evidentiary framework surrounding a Rule 12(b)(3) motion
combines aspects of a Rule 12(b)(6) analysis with elements of
a summary judgment analysis. At the outset, it is clear that
a district court may look beyond the complaint when deciding
a motion to dismiss based on improper venue. Ambraco,
Inc. v. Bossclip B.V., 570 F.3d 233, 238 (5th Cir. 2009)
(stating that under Rule 12(b)(3) a court may look at
evidence beyond the facts alleged in the complaint and its
attachments). With this in mind, two potential
sources of factual information come into play in the improper
venue analysis: (1) the well-pleaded facts in a
plaintiff's complaint; and (2) affidavits or evidence
submitted by a defendant in support of its motion to dismiss
(or by a plaintiff in response thereto).
respect to the well-pleaded facts in a plaintiff's
complaint, in the 12(b)(3) context, the majority of circuit
courts, including the Fifth Circuit, accept these facts as
true, at least initially. Braspetro Oil Servs. Co. v.
Modec (USA), Inc., 240 F. App'x 612, 615 (5th Cir.
2007); Deb v. SIRVA, Inc., 832 F.3d 800, 809 (7th
Cir. 2016); Estate of Myhra v. Royal Caribbean Cruises,
Ltd., 695 F.3d 1233, 1239 (11th Cir. 2012); Bockman
v. First Am. Mktg. Corp., 459 F. App'x 157, 158 n.1
(3d Cir. 2012); Pierce v. Shorty Small's of Branson
Inc., 137 F.3d 1190, 1192 (10th Cir.
1998). However, the well-pleaded facts are
accepted as true “only to the extent that such facts
are uncontroverted by [a] defendant's affidavit.”
Pierce, 137 F.3d at 1192 (citing Home Ins. Co.
v. Thomas Indus., Inc., 896 F.2d 1352, 1355 (11th Cir.
1990)). See also Deb, 832 F.3d at 809 (“Under
Rule 12(b)(3), which allows for dismissal for improper venue,
the district court assumes the truth of the allegations in
the plaintiff's complaint, unless contradicted by the
defendant's affidavits.”); Myhra, 695 F.3d
at 1239; Bockman, 459 F. App'x at 158 n.1.
Pierce, for example, the plaintiff did not submit
affidavits or evidence in response to the defendant's
improper venue motion, but instead doubled-down on its
complaint, arguing that it was entitled to rely on the
well-pleaded facts in its complaint even after the defendant
had submitted affidavits controverting those alleged facts.
Pierce, 137 F.3d. at 1192. The Tenth
Circuit agreed that, generally, a plaintiff could rely on the
allegations in its complaint, but explained that this was
true only to the extent that those allegations remained
uncontroverted. Id. The Circuit then found that, in
that particular case, the defendant's affidavit defeated
the plaintiff's venue allegations. Id.
Accordingly, when a defendant submits affidavits or evidence
controverting specific facts alleged in a plaintiff's
complaint, a court is no longer required to accept those
controverted facts as true. See Deb, 832 F.3d at
809; Bockman, 459 F. App'x at 158 n.1;
Pierce, 137 F.3d at 1192.
Improper Venue Standard
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). As to domestic corporations, this
statute is “the sole and exclusive provision
controlling venue in patent infringement actions.”
TC Heartland, 137 S.Ct. at 1519 (quoting Fourco
Glass Co. v. Transmirra Prods. 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).
§ 1400(b) does not define the word “resides,
” the Supreme Court in Fourco 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 that
defendant has committed acts of infringement in the district
and has a regular and established place of business within
the district. 28 U.S.C. § 1400(b).
Riddell is incorporated in Illinois. (Am. Compl. ¶ 7.)
Under TC Heartland, Riddell's residency cannot
serve as the basis for proper venue. As such, Schutt relies
on the second prong of the patent venue statute to establish
venue: where the defendant has committed acts of infringement
and has a regular and established place of business. 28
U.S.C. § 1400(b).
Parties in this case spend much of their briefing addressing
which party bears the burden of establishing proper venue,
with both sides citing case law in support of their
respective positions. As this Court has previously noted, a
deep divide exists with respect to which party bears the
burden in improper venue disputes. Raytheon Co. v. Cray,
Inc., --- F.Supp.3d ---, No. 2:15-cv-1554, 2017 WL
2813896, at *2 (E.D. Tex. June 29, 2017). Recent case law
from this District, however, has found that the burden lies
with the defendant who seeks to protect the privilege of
having its case heard in a convenient forum. See,
e.g., Soverain IP, LLC v. Apple, Inc.,
2:17-cv-207-RWS-RSP (E.D. Tex. July 25, 2017) (“Because
an objection to venue is a personal privilege that offers
protection from inconvenience, the burden of establishing
improper venue lies with the defendant.”). See also
Neirbo Co. v. Bethlehem Shipbuilding Corp., 308 U.S.
165, 168 (1939) (referring to venue as a “personal
privilege” that may be waived). While this Court sees
no apparent error in the Soverain decision, in this
case, the Court declines to address this question, as the
result would be the same regardless.
respect to acts of infringement in this District, Plaintiffs
allege that Riddell sells the infringing football helmets in
this District. For example, Schutt alleges that Riddell's
local representative sells directly to schools, counties,
municipalities, and school districts in this District,
including to the Marshall Independent School District and
specifically to the Marshall Mavericks High School football
team. (Am. Compl. ¶¶ 31, 36-38, 52-53.) Riddell
does not appear to dispute these allegations for purposes of
the venue analysis. (See Dkt. No. 7.) As such, the
Court will not address this aspect of the venue inquiry
further. Based on the uncontroverted facts, for venue
purposes, Riddell has committed acts of infringement in this
District within the meaning of § 1400(b). See
Raytheon, No. 2:15-cv-1554, 2017 WL 2813896, at *4
(noting that courts have consistently held that an allegation
of infringement is sufficient to establish this aspect of the
Regular and Established Place of Business
crux of the Parties' dispute as to improper venue turns
on whether Riddell has a regular and established place of
business in this District. Riddell contends that it does not
have a regular and established place of business in this
District because it has no “place of business, ”
facilities, property, or offices located in the District.
(Dkt. No. 7 at 16; Ide Decl. ¶ 10.) Schutt's
Response provides a lengthy statement of facts to the
contrary. (Dkt. No. 15 at 9-11.) For example, as Riddell
admits in its declarations, Riddell employs two sales
representatives in this District-one in Plano, Texas, and one
in White Oak, Texas. (Ide Decl. ¶ 11.) These two sales
representatives work out of their personal residences and
submit purchase orders to Riddell's manufacturing and
distribution facility in Ohio. (Ide Decl. ¶ 11.)
Raytheon, this Court highlighted the four factors
which this Court views as the most significant guideposts for
analyzing whether a defendant has a regular and established
place of business in a particular judicial district.
Raytheon, No. 2:15-cv-1554, 2017 WL 2813896, at *1.
In this Court's view, these four factors are useful in
discerning the type of place that should be
considered a “regular and established place of
business” under the statute.
four factors identified in Raytheon include: (1) the
extent to which a defendant has a physical presence in the
district, including but not limited to property, inventory,
infrastructure, or people; (2) the extent to which a
defendant represents, internally or externally, that it has a
presence in the district; (3) the extent to which a defendant
derives benefits from its presence in the district, including
but not limited to sales revenue; and (4) the extent to which
a defendant interacts in a targeted way with existing or
potential customers, consumers, users, or entities within a
district, including but not limited to through localized
customer support, ongoing contractual relationships, or
targeted marketing efforts. Raytheon, 2017 WL
2813896, at *11-13.
these factors in mind, the Court addresses the facts of this
case. The Court also considers facts presented that fall
outside of these four factors because, as this Court has
previously emphasized, the purpose of the four factors is
merely to provide a “tailored ‘totality of the
circumstances' approach to venue, guided by the important
goal of administrative simplicity.” Raytheon,
No. 2:15-cv-1554, 2017 WL 2813896, at *11. These four
factors, of course, are not exhaustive and do not circumvent
other relevant considerations.
Physical Presence in the District
the first Raytheon factor, the Court considers
“the extent to which a defendant has a physical
presence in the district, including but not limited to
property, inventory, infrastructure, or people.”
Raytheon, No. 2:15-cv-1554, 2017 WL 2813896, at *11.
Riddell employs at least twofull-time direct sales
representatives who are based in this District and who work
exclusively for Riddell. (Am. Compl. ¶¶ 24-28,
31-33; Ide Decl. ¶ 11.) These two representatives work
from their personal residences. (Ide Decl. ¶ 11.) One of
these direct sales representatives is Mr. Rokky Mullikin.
(Am. Compl. ¶ 31.) Mr. Mullikin's LinkedIn page
states that he is a “NorthEast Texas Sales Rep at
Riddell” and lists his location as Longview, Texas.
(Am. Compl. ¶ 31.) His contact information includes a
phone number with a local (903) area code. (Am. Compl. ¶
direct sales representatives receive the infringing helmets
in this District, keep samples in this District, and display
and show these samples in this District. (Am. Compl. ¶
29.) They also give sales presentations for Riddell in this
District and provide promotional materials about the
infringing products. (Am. Compl. ¶ 29.) Schutt further
alleges that Riddell has sales showrooms in this District for
the purpose of displaying samples of the infringing helmets.
(Am. Compl. ¶ 30.)
facts tend to show that Riddell has a substantial physical
presence in this district. This factor therefore weighs in
favor of finding that Defendant's place of business in
this District is a regular and established place of
Defendant's Representations Regarding its Presence in the
second Raytheon factor focuses on “the extent
to which a defendant represents, internally or externally,
that it has a presence in the district.”
Raytheon, No. 2:15-cv-1554, 2017 WL 2813896, at *12.
This inquiry stems from an equitable concern that a defendant
should not be permitted to portray itself as a local provider
or local business, then deny such representations when they
become inconvenient. See Chadeloid Chem. Co. v. Chicago
Wood Finishing Co., 180 F. 770, 771 (C.C.S.D.N.Y. 1910)
(Hand, J.) (placing emphasis on a defendant's
representations in the regular and established place of
business inquiry and stating that the defendant could not
“with a good grace” deny its presence in a region
where the local agent's office was advertised as a place
of business for defendant and where the defendant expected
inquiries to be directed to the local agent).
well-pleaded facts presented by Schutt show that Riddell
holds out its direct sales representatives in this District
as local contact persons for Riddell. Schutt's Complaint
indicates that Riddell's preferred method of accepting
orders is through its direct sales force representatives.
(See Am. Compl. ¶ 26 (explaining that customers
other than individuals should fill out a form to be contacted
by a direct sales representative).) In fact, Riddell takes
pride in its vast direct sales force. Specifically, Riddell
has advertised that “Riddell/All American manufactures
and distributes all of their products through its own direct
sales force and a select number of dealers. Riddell/All
American has ten company centers and over 230 full-time
salesmen / saleswomen.” (Am. Compl. ¶ 24.) Riddell
has also proclaimed that it has the “only national
sporting goods direct sales force calling on junior high
schools, high schools, and colleges.” (Am. Compl.
¶ 25.) ...