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Luminati Networks Ltd. v. BIScience Inc.

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

May 13, 2019

LUMINATI NETWORKS LTD., Plaintiff,
v.
BISCIENCE INC., Defendant.

          MEMORANDUM OPINION AND ORDER

          RODNEY GILSCRAP, UNITED STATES DISTRICT JUDGE.

         Before the Court is Defendant BIScience Inc.'s (“BIScience”) Motion to Dismiss, and in the Alternative, Motion to Transfer Venue (the “First Motion to Dismiss”). (Dkt. No. 15.) Additionally, before the Court is BIScience's Second Motion to Dismiss, and in the Alternative, Motion to Transfer Venue (the “Second Motion to Dismiss”) (Dkt. No. 36), as well as Plaintiff Luminati Networks Ltd.'s (“Luminati”) Motion to Strike Portions of Defendant's Second Motion to Dismiss (the “Motion to Strike”) (Dkt. No. 40). Finally, before the Court is Luminati's Motion for Early Venue Discovery. (Dkt. No. 22.)

         Having considered these motions and for the reasons set forth herein, the Court finds that Luminati's Motion to Strike should be and hereby is DENIED. The Court further finds that BIScience's First Motion to Dismiss should be and hereby is DENIED AS MOOT. BIScience's Second Motion to Dismiss should be and hereby is GRANTED-IN-PART and DENIED-IN-PART. BIScience's Second Motion to Dismiss is GRANTED as to Luminati's claim for tortious interference with employment agreements, but is otherwise DENIED. Also, Luminati's Motion for Early Venue Discovery is DENIED AS MOOT.

         Background

         Luminati filed its first Complaint (the “Original Complaint”) against BIScience alleging direct and indirect infringement of U.S. Patent Nos. 9, 241, 044 (the “'044 Patent”) and 9, 742, 866 (the “'866 Patent”) (collectively, the “Asserted Patents”), as well as tortious interference with Luminati's employment agreements and misappropriation of trade secrets under the Defend Trade Secrets Act (“DTSA”). (Dkt. No. 1.) BIScience then filed its First Motion to Dismiss directed at the Original Complaint arguing that this Court lacked personal jurisdiction over BIScience; that, if the Court did have jurisdiction, the case should nonetheless be transferred; and that the Original Complaint failed to state claims for violation of the DTSA or indirect infringement of the Asserted Patents. (Dkt. No. 15.) Luminati opposed the First Motion to Dismiss and moved for early venue discovery. (Dkt. No. 22.)

         While briefing on the First Motion to Dismiss was ongoing, Luminati filed its First Amended Complaint.[1] (Dkt. No. 28.) The First Amended Complaint adds additional claims for false advertising under the Lanham Act and tortious interference with current and prospective business relationships. (Id. ¶¶ 69-78.) The First Amended Complaint also alleges new facts relevant to this Court's personal jurisdiction over BIScience. (E.g. Id. ¶ 5.) These facts also bear on whether a transfer of venue is appropriate. BIScience took the position that the First Amended Complaint mooted the First Motion to Dismiss and filed its Second Motion to Dismiss. (Dkt. No. 36.) Luminati took the position that the First Motion to Dismiss was not moot in its entirety and moved to strike the portions of the Second Motion to Dismiss that Luminati argued were duplicative of the First Motion to Dismiss. (Dkt. No. 40.) The Second Motion to Dismiss asserts the same bases for dismissal or transfer as the First Motion to Dismiss, except BIScience drops its Rule 12(b)(6) defense as to Luminati's claim for indirect infringement and adds a Rule 12(b)(6) defense as to Luminati's Lanham Act claim. (Compare Dkt. No. 15, with Dkt. No. 36.)

         Luminati's Motion to Strike

         The Court finds that the First Amended Complaint mooted the First Motion to Dismiss directed at the Original Complaint. BIScience properly directed its Second Motion to Dismiss at the First Amended Complaint. Accordingly, BIScience's First Motion to Dismiss is DENIED AS MOOT and Luminati's Motion to Strike is DENIED.

         I. Legal Standard

         “Generally, an amended pleading supersedes the original for all purposes.” Nolen v. Lufkin Indus., Inc., 466 Fed.Appx. 895, 898 (Fed. Cir. 2012); see also King v. Dogan, 31 F.3d 344, 346 (5th Cir. 1994) (“An amended complaint supersedes the original complaint and renders it of no legal effect . . . .”). “A motion to dismiss that attacks the superseded complaint may be denied as moot.” New World Int'l, Inc. v. Ford Global Techs., LLC, No. 3:16-CV-1112-M, 2017 WL 1078525, at *5 (N.D. Tex. Mar. 22, 2017); see also WorldVentures Holdings, LLC v. Mavie, No. 4:18-CV-393, 2018 WL 6523306, at *16 (E.D. Tex. Dec. 12, 2018). However, where a motion to dismiss attacks the original complaint for deficiencies that persist in the amended complaint, the court has discretion to apply the original motion to dismiss to the amended complaint rather than deny the motion as moot. New World, 2017 WL 1078525, at *5; see also 6 Charles A. Wright & Arthur R. Miller, Federal Practice and Procedure § 1476 (3d ed. 2019) (“[D]efendants should not be required to file a new motion to dismiss simply because an amended pleading was introduced while their motion was pending. If some of the defects raised in the original motion remain in the new pleading, the court simply may consider the motion as being addressed to the amended pleading.”).

         II. Discussion

         The Court finds that the proper course is to deny the First Motion to Dismiss as mooted by the First Amended Complaint.

         Luminati argues that its First Amended Complaint did not necessarily moot the First Motion to Dismiss and, as a result, the Second Motion to Dismiss is a duplicative motion that represents an abusive litigation tactic. (Dkt. No. 40, at 5-6.) While Luminati is correct that other courts have found motions to dismiss and motions to transfer not mooted by amended complaints, these courts recognized that it was an act of their “discretion” to consider such motions to the extent “such a motion remains applicable.” WowWee Grp. Ltd. v. Wallace, CV-12-2298-MWF(VBKx), 2012 WL 13013022, at *2 (C.D. Cal. June 27, 2012). Indeed, it is within the Court's discretion to consider a motion directed to a superseded pleading where the motion remains applicable to the amended pleading-that is, where the amended pleading has not addressed the defects raised in the motion. However, it is equally within the discretion of the Court to deny such motion where it is not applicable. The Court finds that the latter situation is present here. This decision is largely facilitated by BIScience's filing of its Second Motion to Dismiss.

         The purpose of interpreting a motion directed at a superseded complaint as one directed at the amended complaint is to save time and resources in situations where the motion is fairly applicable to amended complaint, not to unfairly tie the hands of the movant in situations where it is not. The plaintiff should not be allowed to amend its complaint in response to a motion and then require the movant to rest on its outdated briefing.

         Luminati argues that Rule 12(b)(2) motions are distinguishable from Rule 12(b)(6) motions or other motions on the pleadings and thus cases finding such motions moot are inapposite. (Dkt. No. 57, at 2-3.) Luminati provides no basis for this supposed distinction. See, e.g., New World, 2017 WL 1078525, at *5 (denying as moot a motion to dismiss for lack of personal jurisdiction and improper venue directed towards a superseded complaint). Though discovery is available in determining a Rule 12(b)(2) motion, the Court also relies on the facts pled in the complaint, just as it does in a Rule 12(b)(6) motion. See Bullion v. Gillespie, 895 F.2d 213, 217 (5th Cir. 1990) (“[O]n a motion to dismiss for lack of jurisdiction, uncontroverted allegations in the plaintiff's complaint must be taken as true . . . .”). The First Amended Complaint, in addition to adding new causes of action, alleges new facts, including new facts alleged in support of this Court's jurisdiction. (See Dkt. No. 28 ¶ 5.) The plaintiff cannot shift the playing field during the course of briefing on a motion and reasonably expect that the defendant will not be given an opportunity to respond with a new and properly directed motion.

         Luminati also argues that the Second Motion to Dismiss is barred by Rule 12(g). (Dkt. No. 40, at 7-8.) It is true that Rule 12(g) would prevent BIScience from raising an argument in its Second Motion to Dismiss that was available to it but not asserted in its First Motion to Dismiss. Fed.R.Civ.P. 12(g)(2). However, Luminati identifies no such arguments. On the contrary, Luminati affirmatively states that “BIScience's Second Motion to Dismiss is based on the same grounds as the First Motion to Dismiss.” (Dkt. No. 40, at 9; see also Id. at 1-2.)

         Finally, Luminati's argument that the Second Motion to Dismiss effectively circumvents this Court's local rules regarding briefing schedules and page limits is unfounded. (Id. at 8-9.) BIScience timely responded to Luminati's First Amended Complaint with a new motion directed at the First Amended Complaint. Fed.R.Civ.P. 12(a)-(b), 15(a). BIScience briefed this motion within the prescribed page limits and without seeking to incorporate by reference arguments made in its First Motion to Dismiss.

         Luminati's First Amended Complaint superseded the Original Complaint and added allegations to address defects asserted by the First Motion to Dismiss. Accordingly, the Court denies the First Motion to Dismiss as moot and considers instead the Second Motion to Dismiss. Luminati's Motion to Strike is denied.

         BIScience's Second Motion to Dismiss

         Turning to the Second Motion to Dismiss, the Court finds that it has specific personal jurisdiction or supplemental personal jurisdiction over all of Luminati's claims. However, the Court declines to exercise supplemental jurisdiction over the claim for tortious interference with employment agreements. Accordingly, the tortious interference with employment agreements claim is DISMISSED WITHOUT PREJUDICE. The Court further finds that transfer of venue is not warranted and that Luminati has stated claims for violations of the DTSA and the Lanham Act. Therefore, the remainder of BIScience's Second Motion to Dismiss is DENIED.

         I. Motion to Dismiss for Lack of Jurisdiction

         The Court finds that it has specific personal jurisdiction over Luminati's claims for patent infringement and false advertising. Additionally, the Court has supplemental jurisdiction over the remainder of Luminati's claims. However, the Court declines to exercise supplemental jurisdiction over Luminati's claim for tortious interference with employment agreements, as determination of that claim is best left to the judicial authority of the State of Israel.

         A. Legal Standard

         Federal Circuit law governs personal jurisdiction where “a patent question exists.” See Celgard, LLC v. SK Innovation Co., 792 F.3d 1373, 1377 (Fed. Cir. 2015). “[W]hether a defendant is subject to specific personal jurisdiction in the forum state involves two inquiries: first, whether the forum state's long-arm statute permits service of process and, second, whether the assertion of jurisdiction is consistent with due process.” Id. “Because the Texas long-arm statute extends to the limits of federal due process, the two-step inquiry collapses into one federal due process analysis.” Johnston v. Multidata Sys. Int'l Corp., 523 F.3d 602, 609 (5th Cir. 2008); accord Grober v. Mako Prod., Inc., 686 F.3d 1335, 1345 (Fed. Cir. 2012) (“California and federal due process limitations are coextensive, and thus the inquiry collapses into whether jurisdiction comports with due process.”) (internal quotation marks omitted).

         For due process to be satisfied, the defendant must have “certain minimum contacts with [the forum] such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice.” Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945) (internal quotations omitted). “A court must inquire whether the defendant has ‘purposefully directed his activities' at the forum state and, if so, whether ‘the litigation results from alleged injuries that arise out of or relate to those activities.'” Breckenridge Pharm., Inc. v. Metabolite Labs., Inc., 444 F.3d 1356, 1361-62 (Fed. Cir. 2006) (quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 (1985)). Upon a showing of purposeful minimum contacts, the defendant bears the burden to prove unreasonableness. Elecs. for Imaging, Inc. v. Coyle, 340 F.3d 1344, 1350 (Fed. Cir. 2003). In rare circumstances, a defendant may defeat the exercise of personal jurisdiction by “present[ing] a compelling case that the presence of some other considerations would render jurisdiction unreasonable.” Burger King, 471 U.S. at 477.

         Where a court has personal jurisdiction over the patent claims asserted, the court also has supplemental personal jurisdiction over “non-patent claims to the extent they form part of the ‘same case or controversy' as the patent claims.” Avocent Huntsville Corp. v. Aten Int'l Co., 552 F.3d 1324, 1339 (Fed. Cir. 2008). 28 U.S.C. § 1367 “confers supplemental jurisdiction with respect to both subject matter and personal jurisdiction where the ‘same case or controversy' requirement is satisfied.” Silent Drive, Inc. v. Strong Indus., Inc., 326 F.3d 1194, 1206 (Fed. Cir. 2003).

         B. Discussion

         The Court finds that it has personal jurisdiction over BIScience as to Luminati's claims of patent infringement. BIScience has sold its allegedly infringing GeoSurf service to at least 52 customers in Texas. (Dkt. No. 36-1 ¶ 11.) Additionally, BIScience's service allows customers all over the world to utilize residential proxy devices in ten Texas cities-Arlington, Austin, Crowley, Dallas, El Paso, Fort Worth, Houston, Katy, San Antonio, and Spring-and BIScience advertises as such. (Dkt. No. 28-5, at 2-3.) Those proxy service activities are “purposefully directed” at Texas, and Luminati's claims for patent infringement allege “injuries that arise out of or relate to those activities.” Burger King Corp., 471 U.S. at 472. Accordingly, specific personal jurisdiction is proper over these claims.

         Blue Spike, LLC v. Texas Instruments, Inc., upon which BIScience relies (Dkt. No. 53, at 3-4), is distinguishable. No. 6:12-cv-499, 2014 WL 11829323 (E.D. Tex. Mar. 31, 2014). In Blue Spike, the plaintiff attempted to establish jurisdiction by arguing that “[defendant's] partners-and therefore [defendant] itself operates pervasively throughout Texas.” Id. at *3. The plaintiff also argued that the defendant's website included a “partner locator” that directed customers to partners in Texas. Id. at *2. The court found these arguments unpersuasive, noting that “[t]he Court's focus is on [defendant's] actions, not third-party customers.” The court held that the plaintiff had not established that the defendant's partner's contacts with Texas related to the claims in that case. Id. at *3.

         By contrast, in the instant case, BIScience itself, not a third-party, has purposefully directed activities toward Texas. These contacts relate directly to the claims at issue. BIScience is accused, inter alia, of directly and indirectly infringing method claims in the Asserted Patents. (Dkt. No. 28 ¶¶ 39-40, 53-54.) BIScience allegedly does this by allowing its customers to request content via selected residential proxy devices, including many located in Texas. (See Id. ¶ 49.) BIScience is also accused of implementing these residential proxies. (Id. ¶ 24, 39, 53.) The ability to direct internet traffic through proxies situated in various locations, including Texas, is a key advertised feature of BIScience's service:

A proxy will also give you access to a set of proxy servers located worldwide, which will help you solve the location obstacle easily: Just select your preferred location, whether it's the United States or Madagascar, and surf in total anonymity and freedom.

(Dkt. No. 28-4, at 5; see also Dkt. No. 28-3, at 2 (“Location is key. One of the reasons to use a proxy, is to appear as if you were surfing from a different place.”).) Far from being unrelated, BIScience's encouragement of customers to use proxies, including those located in Texas, is foundational to Luminati's claims of patent ...


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