Court Reconsiders and Grants Motion to Transfer for Improper Venue in Light of TC Heartland

Stuebing Automatic Machine Company v. Allan Gavronsky d/b/a Matamoros Machine Shop, et al., S.D. Ohio (June 12, 2017) (Judge Karen L. Litkovitz) 

Under 28 U.S.C. § 1400(b), venue is only proper in a patent infringement suit in a jurisdiction (1) where the defendant resides, or (2) where the defendant has committed acts of infringement and has a regular and established place of business. The Supreme Court’s decision in TC Heartland focused on the first test, holding that a defendant “resides” only in its state of incorporation, not that personal jurisdiction over the defendant exists, as the Federal Circuit previously held. That narrowing of the first test put renewed focus on the second test, in particular whether a defendant maintained a “regular and established place of business.” In the wake of TC Heartland, Judge Karen L. Litkovitz granted the defendants’ motion to transfer six months after she initially denied it.

In this patent infringement suit, plaintiff Stuebing Automatic Machine Company (“Stuebing”) sued individual defendants Gavronsky and Lerma—d/b/a Matamoros Machine Shop (“Matamoros”)—in the Southern District of Ohio, alleging that their purchase, manufacture, and sales of “calendar slides” (metal strips for binding calendars, posters, and documents) infringed its patent. Stuebing’s Complaint alleged that personal jurisdiction and venue were proper as to both defendants because they sold infringing products to customers located in the Southern District of Ohio. Stuebing also alleged that venue was proper as to defendant Gavronsky because he maintained a residence in Ohio. Defendants brought a motion under 28 U.S.C. § 1404(a) to transfer the case to the Southern District of Texas, arguing that it was a more convenient forum, for multiple reasons—including that both defendants resided in the Southern District of Texas, Lerma operated Matamoros in that district, and any alleged patent infringement occurred in that district. The court denied this motion in December 2016. The defendants never moved under 28 U.S.C. § 1400(b). After TC Heartland, however, the court ordered the parties, sua sponte, to show cause why the case should not be transferred to the Southern District of Texas.

Stuebing argued that defendant Gavronsky maintained a residence in the Southern District of Ohio. However, the court held that Gavronsky’s ownership of vacant land in the district did not establish residence under 28 U.S.C. § 1400(b), and even if it did, venue would still have been improper as to defendant Lerma.

The court further explained that because Stuebing’s allegations were unsupported by affidavits or other evidence, they were insufficient to establish that the defendants committed acts of infringement in the Southern District of Ohio. Additionally, Stuebing failed to show that either defendant had a regular and established place of business in the district. The court noted that in the Federal Circuit’s decision in Cordis, the defendant had a “permanent and continuous presence” in a district where it employed local sales agents conducting company business out of home offices who also stored company product and records in the district. Here, by contrast, Stuebing failed to provide any evidence establishing that defendants employed local agents or stored company product in the Southern District of Ohio. The court explained that even though defendants may have communicated by email or telephone with customers in the district, shipped product from Texas to customers in the district, and personally visited the district for business, this did not establish that defendants had a permanent and continuous presence in the district. Accordingly, the court held venue to be improper under § 1400(b).

Stuebing further argued that, notwithstanding, because it had already ruled on venue at the outset of the litigation, the court should not disturb that established venue now, a full year after the complaint had been filed. But the court was not persuaded. The court explained that its prior order was issued in response to a motion to transfer based on inconvenient forum under 28 U.S.C. § 1404(a) and, thus, the court never actually analyzed the question of whether venue was proper. The court also dismissed Stuebing’s argument that a change in venue would be inconvenient and costly, further explaining that the venue requirements exist for the benefit of defendants not for the convenience of plaintiffs. Accordingly, the court transferred the suit to the Southern District of Texas.

Judge Litkovitz’s order should serve as a lesson to patent plaintiffs who are choosing a jurisdiction in which to file. Unless patent plaintiffs are confident that a defendant actually resides in a particular jurisdiction, they must determine the extent of a defendant’s business operations in that jurisdiction. And, according to Judge Litkovitz, mere shipping of product to customers in a particular district, without the employment of sales agents and/or maintenance of products and records in that district, would not create a regular and established place of business there. Moreover, plaintiffs must be prepared to submit affidavits (or other evidence) to support their allegations, as courts are unlikely to find the venue proper based on unsupported allegations alone.