United States District Court, E.D. Texas, Tyler Division
TINNUS ENTERPRISES, LLC, ZURU LTD., ZURU INC., ZURU UK LTD., ZURU LLC, ZURU PTY LTD., Plaintiffs,
TELEBRANDS CORPORATION, BULBHEAD.COM, LLC, BED BATH & BEYOND INC., Defendants.
REDACTED ORDER ADOPTING REPORT AND RECOMMENDATION OF
W. SCHROEDER III UNITED STATES DISTRICT JUDGE
above entitled and numbered civil action was referred to
United States Magistrate Judge John D. Love pursuant to 28
U.S.C. § 636. On March 9, 2018, the Magistrate Judge
issued a Report and Recommendation (“R&R”),
recommending that Defendants Telebrands Corp.
(“Telebrands”) and Bulbhead.com LLC's
“Defendants”) Motion to dismiss this case
pursuant to Federal Rules of Civil Procedure 12(b)(3) and
12(b)(6) be denied. Docket No. 255. Defendants filed
objections to the Magistrate Judge's R&R. Docket No.
263. Plaintiffs Tinnus Enterprises, LLC, ZURU Inc., ZURU LLC,
ZURU Ltd., ZURU Pty Ltd. and ZURU UK Ltd.
(“Plaintiffs”) have filed a response. Docket No.
267. Having conducted a de novo review of
Defendants' written objections, the Court concludes that
the findings and conclusions of the Magistrate Judge are
correct and the objections are without merit. 28 U.S.C.
§ 636 (b)(1).
first object to the Magistrate Judge's finding that
Defendants did not dispute that they have a physical place of
business in this District. Docket No. 263 at 4. In his
R&R, the Magistrate Judge noted that Defendants did not
dispute this factor in their motion to dismiss. Docket No.
255 at 9. While Defendants did not dispute this factor upon
filing their initial motion, Defendants' argument now is
primarily directed to their previous arguments that they do
not have a regular and established place of business in this
District. Docket No. 263 at 4. Specifically, Defendants argue
that they only sell wholesale to retailers in this District
and that it is the retailers, not Defendants, who carry out
business in this District. Id. However, as the
Magistrate Judge described in great detail, Defendants hold
out special retail sections within this District as their own
and have relationships with several third parties, thereby
establishing control of product sales and placement in this
District. Docket No. 255 at 13-15.
example, the Magistrate Judge found that Defendants contract
with third-party XXXXX to identify
“zero sales” stores and facilitate movement of
products in those stores in this District. Docket No. 255 at
13, citing Docket No. 222-19. The Magistrate Judge also
identified third-party, XXXXX with
whom Defendants also contract, and who has moved products
from the back room to the store shelves within this District
on behalf of Telebrands. Id. citing Docket No.
222-10, 30(b)(6) Deposition of, XXXXX
at 59:18- 60: 21; 87:13-23. The evidence cited by the
Magistrate Judge further showed that Defendants employ
third-party XXXXX to manage these
merchandisers, report on the status of retail stores and help
procure the best available space in the retail stores.
Id. at 14, citing Docket No. 222-7, XXXXX 30(b)(6) Deposition at 30:22-31:1; Docket
No. 222-5, Bianco Dep. at 72:5-19. The Magistrate Judge found
that Telebrands monitors retail sales on a weekly basis and
works with “service providers to investigate the
situation for product placement so that it can increase
profits from sales of those products.” Id.
citing Docket No. 222-6, Telebrands 30(b)(6) Dep. at
29:17-22, 65:15-20; Docket No. 222-5, Bianco Dep. at
addition, the Magistrate Judge found that Defendants had held
out a place of business where they paid money for retail
space to increase profits and set up “As Seen on
TV' retail sections closely affiliated with the marketing
of their products. Id. at 11-13. Specifically, the
Magistrate Judge concluded that “Defendants hold this
space out as their own, pay fees to construct the space in
retail stores, and control product placement for these
spaces.” See Docket No. 255 at 12, citing Case
No. 6:16-cv-33, Doc. No. 553, November 17, 2017 Hearing
Transcript at 8:21- 9:18 (testimony of Telebrands's Vice
President of Procurement, Arline Wall, stating that that the
“As Seen on TV logo” in “our As Seen on TV
section” has a lot to do with how Telebrands brings a
product to market because Telebrands advertises so heavily);
Docket No. 222-25, at 5-29; Docket No. 222-6,
Telebrands's 30(b)(6) Dep. at 306:25-308:12 (showing that
Telebrands paid Sears XXXXX to create
an “As Seen on TV” section in its retail stores,
at least some of which are located within this District).
Indeed, it was these facts, collectively, that caused the
Magistrate Judge to reach the conclusion that Defendants have
a place of business in this District. Docket No. 255 at 15.
Defendants object to the Magistrate Judge's statement
that Defendants did not dispute the “regular and
established” prong of the venue analysis. Docket No.
263 at 5. Specifically, Defendants argue that the Magistrate
Judge incorrectly relied on the transient sale of products
and placement of holiday tables. Id. However, as the
Magistrate Judge explained, these are ongoing, long-term
relationships. Docket No. 255 at 11-13. In fact, Defendants
do not dispute the duration or ongoing nature of these
relationships, or offer facts to the contrary. Instead,
Defendants merely disagree with the Magistrate Judge's
conclusion. These conclusory disagreements are not persuasive
where the Magistrate Judge found, inter alia, that
Defendants had a continuous business relationship with at
least one retailer in this District over the past four years.
See Docket No. 255 at 11 (explaining that holiday
space at Walgreens was leased by Defendants from 2014-17).
Defendants object to the Magistrate Judge's findings as
to Walgreens, arguing that Defendants do not lease space or
have a place of business within Walgreens. Docket No. 263 at
6. Defendants argue that they do not pay for shelf space at
Walgreens, but that Walgreens imposes a fee on all vendors to
cover the expense of creating holiday space. Id. at
7. Regardless of whether the payment is a vendor fee, the
fact remains that Defendants willingly and purposefully make
these payments for shelf space in this District. As the
Magistrate Judge explained, whether or not Defendants call
this a “lease, ” as their 30(b)(6) deponent
referred to the relationship, it “establishes a payment
made for premium shelf placement at Walgreens whereby
Telebrands actively participates by paying money for said
placement to increase its profits.” Docket No. 255 at
next object to the Magistrate Judge's conclusion that
Defendants hold out “As Seen on TV” sections as
their own. Docket No. 263 at 7. Defendants object on the
basis that only some of the “As Seen on TV”
products displayed are Telebrands's products.
Id. As discussed above, the Magistrate Judge cited
testimony from Defendants' Vice President of Procurement
who testified that the “As Seen on TV logo” in
“our As Seen on TV section” has a lot to do with
how Telebrands brings a product to market because Telebrands
advertises so heavily. Id. citing Case No.
6:16-cv-33, Docket No. 553, November 17, 2017 Hearing
Transcript at 8:21-9:18. Contrary to Defendants'
suggestion that this was a casual reference, this testimony
was provided under oath as a description of Telebrands's
business. Moreover, the Magistrate Judge cited evidence that
these “As Seen on TV” sections are uniquely
displayed at Defendants' direction in this District, and
that Telebrands has paid to set up these displays in retail
stores in this District. Docket No. 255 at 12-13, citing
Docket No. 222-25, at 5-29; Docket No. 222-6,
Telebrands's 30(b)(6) Dep. at 306:25-308:12. Similarly,
the Magistrate Judge detailed the relationships Defendants
maintain with hired third party agents who “monitor,
clean, restock, and affix price signage to the As Seen on TV
sections within these retail stores.” Docket No. 255 at
Defendants object to the Magistrate Judge's conclusion
that Defendants use third-party agents to help execute
product placement in stores. Docket No. 263 at 9. In their
objections, Defendants rely only on a single
retailer-Wal-Mart-to argue that the retailer controls all
product placement. Id. However, as discussed above,
the evidence relied on by the Magistrate Judge shows that
Defendants work with these third parties to monitor sales,
have identified “zero sales” stores, and have
worked to move products from the backroom to the storefront
in these retail locations. Docket No. 255 at 13, citing
Docket No. 222-19; Docket No. 222-10, 30(b)(6) Deposition of,
at 28:1-29:16; 67:17-22 (discussing movement of
Telebrands's Star Shower products by XXXXX over Telebrands's express concerns that
sales had dipped at Wal-Mart stores). Further, the Magistrate
Judge also found that, with respect to Wal-Mart, Telebrands
is responsible for reimbursing Wal-Mart for at least a
portion of any product price markdowns and paying credits for
unsold goods. Docket No. 255 at 14, citing Docket No. 222-6,
Telebrands 30(b)(6) Dep. at 87:14-89:19. Moreover, the
Magistrate Judge found that Defendants' control over the
placement of products in this District was further shown
through Defendants' actions in this litigation where they
were able to immediately remove accused products from shelves
within this District when Plaintiffs moved for a temporary
restraining order. Docket No. 255 at 14-15.
also object to the Magistrate Judge's conclusion that
Defendants forfeited their venue defense. Docket No. 263 at
10-11. Defendants first contend that the Magistrate Judge
misstated the record in stating that Defendants did not
oppose venue during the injunctive proceedings in this case.
Id. at 10. However, the Magistrate Judge accurately
stated that “Defendants did not affirmatively raise a
venue defense and instead only stated in a footnote that
their participation did not concede venue.” Docket No.
22. Indeed, the motion at issue was not filed until a week
after the Court had granted an injunction in this matter.
Docket No. 90. Defendants primarily object to the Court's
reliance on the relatedness of other pending cases regarding
forfeiture. Docket No. 263 at 10-11. However, as the
Magistrate Judge explained, this case presents a unique set
of circumstances whereby this Court has been involved with
four injunction proceedings, two trials, and numerous other
disputes related to the family of patents and accused
products in this case. Docket No. 255 at 17-18. Contrary to
Defendants' contentions, this case presents more than the
mere pendency of related cases. As stated in the R&R,
“the continuation of cases in this Court arose not only
from Defendants' conduct in litigation, but
Defendants' business choices made in reaction to orders
of this Court.” Id. at 18. The Magistrate
Judge further noted that the Court completed a jury trial on
two of the patents-in-suit on a prior injunction and related
products without a meritorious venue objection prior to
trial. Id. The Court agrees with the Magistrate
Judge that, based on the conduct cited in the R&R,
Defendants have forfeited their venue defense in this case.
reasons discussed herein, the Court ADOPTS
the findings and conclusions of the Magistrate Judge as the
findings and conclusions of this Court with respect to
Defendants' Motion to Dismiss pursuant to Rule 12(b)(3).
do not raise any objections to the Magistrate Judge's
findings and conclusions as to Plaintiffs' Lanham Act
claims, which Defendants sought to dismiss pursuant to
Federal Rule of Civil Procedure 12(b)(6). The Court has
reviewed these findings and conclusions (Docket No. 255 at
19-23) and finds no plain error. See Douglass v. United
States Auto. Ass'n, 79 F.3d 1415, 1430 (5th Cir.
1996). The Court therefore ADOPTS the
Magistrate Judge's findings and conclusions as to
Defendants' motion to dismiss pursuant to Rule 12(b)(6).
raise no other objections to the findings and conclusions of
the Magistrate Judge. Any objections to those findings and
conclusions are therefore waived and not considered herein on
de novo review. The Court ADOPTS
the Report and Recommendation of the United States Magistrate
Judge as the findings and conclusions of this Court. All
objections are OVERRULED, and
Defendants' Motion (Docket No. 156) is
seven (7) days of the issuance of this Order, the parties
shall file a notice with the Court as to whether this Order