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Lites Out, LLC v. Outdoorlink, Inc.

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

November 2, 2017

LITES OUT, LLC
v.
OUTDOORLINK, INC. ET AL.

          MEMORANDUM OPINION AND ORDER

          AMOS L. MAZZANT, UNITED STATES DISTRICT JUDGE.

         Before the Court is Defendants OutdoorLink, Inc. and OutdoorLink Services, Inc.'s ("Outdoor") Motion to Dismiss Pursuant to Federal Rule of Civil Procedure 12(c) (Dkt. #17).[1] After reviewing the relevant pleadings and motion, the Court finds the motion should be granted.

         BACKGROUND

         On March 21, 2017, Lites Out, LLC ("Lites Out") sued Outdoor for infringement of U.S. Patent No. 7, 501, 941 ("the '941 Patent"), infringement of U.S. Patent No. 8, 497, 773 ("the '773 Patent"), and infringement of U.S. Patent No. 8, 912, 898 ("the '898 Patent") (Dkt. #1). Outdoor answered on May 1, 2017 (Dkt. #10). The Court issued its Order Governing Proceedings and its Scheduling Order (Dkt. #14); Lites Out, LLC v. OutdoorLink Services, Inc., 4:16-cv-00565 at Dkt. #14.[2] The parties served their initial disclosures (Dkt. #9; Dkt. #13). Then, on May 24, 2017, after the Supreme Court issued its opinion in TC Heartland LLC v. Kraft Food Group Brands LLC, Outdoor filed the present motion to dismiss, arguing that venue is improper in the Eastern District of Texas (Dkt. #17); See TC Heartland LLC v. Kraft Food Group Brands LLC', 137 S.Ct. 1514 (2017). Lites Out filed its response to Outdoor's Motion to Dismiss on August 11, 2017 (Dkt. #34). Outdoor filed its reply on September 1, 2017 (Dkt. #46). Lites Out filed its sur-reply to Outdoor's Motion to Dismiss on September 7, 2017 (Dkt. #50). Outdoor filed supplemental authority in support of its motion to dismiss on September 25, 2017 (Dkt. #56). Lites Out filed a response to the notice of supplemental authority in support of Outdoor's Motion to Dismiss on September 27, 2017 (Dkt. #59). The Court held a Markman hearing on October 4, 2017 (Dkt. #64).

         Outdoor provides digital monitoring services for billboards. The company sells surveillance computers-SmartLink units-to billboard owners who hold legal title to the units. SmartLink units track billboard structural integrity and detect defects-e.g. a broken floodlight or power outage-as they arise. The SmartLink units wirelessly report such wear-and-tear to Outdoor, enabling it to oversee and control myriad billboards across large areas. Outdoor's employees physically install SmartLink units. Upon installation, SmartLink usually earns several years of revenue per unit. Thereafter, Outdoor services, maintains, and repairs SmartLink units through independent contractors. All told, Outdoor monitors about two thousand billboards through nearly one thousand SmartLink units in The Eastern District of Texas ("District"). Outdoor does not have a retail store, warehouse, or other physical facility in the District. Outdoor keeps neither inventory nor property in the District. Rather, Outdoor ships SmartLink units to its customers within the District and supplies to its employees and independent contractors for installation and repair work. One independent contractor, Todd Grace ("Mr. Grace"), resides in Texas outside of this District.

         LEGAL STANDARD

         If venue is not proper in the district or division where the case is filed, the case may be dismissed under Federal Rule of Civil Procedure 12(b)(3). Alternatively, under § 1406(a), "[t]he district court of a district in which is filed a case laying venue in the wrong division or district shall dismiss, or if it be in the interest of justice, transfer such case to any district or division in which it could have been brought." 28U.S.C. § 1406(a).

         However, Federal Rule of Civil Procedure 12(h)(1) "advises a litigant to exercise great diligence in challenging personal jurisdiction, venue, or service of process. If he wishes to raise any of these defenses he must do so at the time he makes his first defensive move." Golden v. Cox Furniture Mfg. Co. Inc., 683 F.2d 115, 118 (5th Cir. 1982). Under Federal Rule of Civil Procedure 12(h)(1), "[a] party waives any defense listed in rule 12(b)(2)-(5) by . . . omitting it from a motion in the circumstances described in Rule 12(g)(2)." FED. R. Civ. P. 12(h)(1)(A). Federal Rule of Civil Procedure 12(g) provides that "a party that makes a motion under this rule must not make another motion under this rule raising a defense or objection that was available to the party but omitted from its earlier motion." FED. R. Civ. P. 12(g)(2). Accordingly, a party must assert any Rule 12(b)(3) motion that is available at the time it files any Rule 12 motion. See Elbit Sys. Land & C41 Ltd. v. Hughes Network Sys., LLC, No. 2:15-cv-37, 2017 WL 2651618, at *20 (E.D. Tex. June 20, 2017) (citing e.g., Peacock v. Ins. & Bonds Agency of Tex., PLLC, No. 3:12-cv-1710-D, 2012 WL 3702920, at *1 (N.D. Tex. Aug. 28, 2012)).s

         ANALYSIS

         Outdoor moves for dismissal based on improper venue. Lites Out contends that venue is proper as Outdoor waived this objection and the facts permit venue in this District. The Court must determine whether Outdoor waived its venue defense. Lites Out contends that Outdoor waived its improper venue defense in several ways: (1) by filing an answer before its motion to dismiss; (2) by failing to timely file its venue challenge per the Court's Order Governing Proceedings; (3) by not making a specific venue objection in its answer; and (4) by waiving its venue objection through conduct. The Court will address each argument in turn.

         First, Lites Out argues Outdoor's motion was late under the plain terms of Rule 12 because Outdoor filed its motion after its answer. The Court disagrees. Even though Federal Rule of Civil Procedure 12 requires defendants to file motions contained in that rule before filing an answer, courts often consider a motion to dismiss under Rule 12(b) timely as long as the defense is properly preserved in the party's answer. Brokerwood Intern. (U.S.), Inc. v. Cuisine Crotone, Inc., 104 Fed.Appx. 376, 379-81 (5th Cir. 2004); Isbell v. DM Records, Inc., No. 4:07-cv-00146, 2011 WL 1299611, at *2 n.2 (E.D. Tex. Mar. 31, 2011) ("courts often 'consider a post-answer motion to dismiss as properly before the court as long as the movant also raised the defense ... in his or her answer.'" (quoting Delhomme v. Caremark RX Inc., 232 F.R.D. 573, 575-76 (N.D. Tex. 2005))); Cloeren Inc. v. Extrusion Dies Indus., LLC, No. 1:12-CV-90, 2012 WL 12897045, at *2 (E.D. Tex. Aug. 14, 2012) ("Although a post-answer Rule 12(b)(6) motion is technically untimely under the Rules, if a defense has previously been included in the answer, a court will generally allow a Rule 12(b)(6) motion." (citing Jones v. Lopez, 262 F.Supp.2d 701, 706 (W.D. Tex. 2001); Puckett v. U.S., 82 F.Supp.2d 660, 663 (S.D. Tex. 1999))). Accordingly, as long as Outdoor otherwise preserved its improper venue defense, its failure to file a motion before it filed its answer did not constitute waiver.

         Second, Lites Out argues that Outdoor did not preserve its improper venue defense because Outdoor's response in its answer was not specific and did not object to venue as improper under § 1400(b) (Dkt. #10) (citing Elbit Sys. Land & C41 Ltd., No. 2:15-cv-37, 2017 WL 2651618, at *20-21). This argument is unpersuasive. In its Complaint, Lites Out asserted that "[v]enue is proper in this District under 28 U.S.C. §§ 1391 and 1400." (Dkt. #1 at p. 3). Outdoor answered Lites Out's Complaint on May 1, 2017 (Dkt. #10). In its answer, Outdoor stated, "OutdoorLink denies that venue is proper in the Eastern District of Texas. OutdoorLink denies that it has performed any infringing activities." (Dkt. #10 at p. 3). Outdoor elaborated that it "is not incorporated in the Eastern District of Texas, nor does it have a principal place of business in the district as required by 28 U.S.C. § 1400(b)." (Dkt. #10 at p. 8). In other words, Outdoor generally denied the allegations set forth by Lites Out in its venue section.

         "While it is true that [Outdoor] could have set forth a more specific objection to venue as improper under § 1400(b) in its Answer, [Outdoor] preserved a general objection to venue." Blue Spike, LLC v. Contixo lnc., No. 6:16-cv-1220-JDL, 2017 WL 3172425, at *3 (E.D. Tex. July 26, 2017) (citing JPW Indus., Inc. v. Olympia Tools Int'l, Inc., No. 16-cv-3153-JPM-bdh, slip, op., Dkt. #56, at *3-4 (M.D. Tenn. July 19, 2017) (finding that the defendant sufficiently preserved its improper venue defense even though it did not list improper venue as an affirmative defense in its first responsive pleading); ISA Chicago Wholesale, Inc. v. Swisher Int'l, Inc., No. 08 C 3461, 2009 WL 971432, at *2-3 (N.D. 111. Apr. 7, 2009) (determining that a general denial that venue was proper in combination with the defendant's timely filing of a Rule 12(b)(3) motion was sufficient to preserve its improper venue defense); Phat Fashions, L.L.C v. Phat Game Athletic Apparel, Inc., No. 00CIV0201, 2001 WL 1041990, at *3 (S.D.N.Y. Sept. 7, 2001) (concluding that the denial of a plaintiffs allegation of personal jurisdiction in a defendant's answer is sufficient to preserve a personal jurisdiction defense)). But cf. Elbit Sys., 2017 WL 2651618, at *20-21 (holding that a defendant waived its objection to improper venue under § 1400(b) because it admitted the applicability of § 1391(c) to patent infringement actions and omitted a specific objection to venue under § 1400(b) from its first three motions to dismiss for improper venue). Because Outdoor preserved its objection to improper venue, the defense is not waived provided Outdoor timely brought its Rule 12(b) motion to dismiss for improper venue.

         Third, Lites Out argues that Outdoor's motion was filed late according to the Order Governing Proceedings. Lites Out maintains that the deadline to file a motion to transfer was no later than January 19, 2017-i.e. twenty-one days before the Case Management Conference on February 9, 2017 (Dkt. #34 at p. 6). But Outdoor did not file its motion until May 24, 2017-over four months after the January 19, 2017 deadline (Dkt. #34 at p. 6). However, because Outdoor properly preserved its objection to improper venue and filed a motion to dismiss based on improper venue, the appropriate inquiry to determine timeliness is whether the parties engaged in extensive litigation prior to the motion being filed. See Blue Spike, No. 6:16-cv-1220-JDL, 2017 WL 3172425, at *3. Here, the parties filed a Joint Report of Rule 26(f) Conference (Dkt #6), filed a Joint Motion to Amend the Scheduling Order, engaged in ongoing discovery, and Lites Out served its infringement contentions on Outdoor. Beyond these preliminary matters, "the Court and the parties have not engaged in extensive litigation conduct." Id. "Thus, because [Outdoor] denied venue in its answer and timely filed its first Rule 12(b) motion for improper venue before ...


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