Timing the Venue Inquiry in W.D. Texas

by Dennis Crouch

I wrote earlier about the Federal Circuit’s TracFone decision, calling-out W.D. Texas Judge Albright for his months long delay in deciding defendant’s motions to transfer/dismiss for improper/inconvenient venue. In its decision, the appellate court repeated a prior conclusion that Judge Albright’s approach represented “egregious delay and blatant disregard for precedent.”

Egregious Delay and Blatant Disregard for Precedent

The following day (March 11), Judge Albright complied with the order and issued a 17 page opinion denying TracFone’s motion to dismiss or transfer.

Proper Venue: Congress created a particular venue statute for patent infringement lawsuits (28 USC 1400(b)) that is substantially narrower than the general venue statute used in Federal Courts. (28 USC 1391).  For an out-of-state-defendant (such as TracFone), venue in W.D. Texas will be proper if the defendant “has a regular and established place of business” within the district and has also “committed acts of infringement” within the district.

Precis Group, LLC v. TracFone Wireless, Inc., Docket No. 6:20-cv-00303 (W.D. Tex. Filed Apr 21, 2020)

Regularly established place of business: In this case, the plaintiff Precis alleged that TracFone operates a store in San Antonio using its d/b/a name Total Wireless.  The address is 1825 SW Military Dr., San Antonio, TX 78221.  The photo below comes from a Google search and is dated May 2019. Google tells me that the store is now closed, but we don’t know the date when it closed.  [COULD someone drive by and snap a photo for me?].

Total Wireless Store Photo from 2019

In its briefing, TracFone (1) denied that this was its store — but rather was “an independently owned retailer of TracFone products” and (2) alleged that the store was already out of business “well before this action was filed” in April 2020.  To support its motion to dismiss, TracFone submitted an affidavit from a TracFone employee who stated that the referenced store above is a Click Mobile store and that “TracFone has no ownership or other interest in Click Mobile and no relationship with it other than its rights to sell TracFone products and services.”  In a later filing, the defendant did admit that the “store exclusively sold Total Wireless products and accordingly used that mark.”  From the pictures and the admission of exclusive dealing, it sure looks like the relationship must have gone a bit deeper than simply “rights to sell TracFone products.”

In its responsive briefing, Precis provided images from TracFone’s TotalWireless website showing that this was an exclusive Total Wireless store. Those have since been removed from the website.

Note here that Precis did not provide its own affidavits.  And, the normal rule of a venue motion to dismiss/transfer is that uncontroverted plausible allegations in plaintiff’s complaint must be taken as true. However, the court should take into account evidence presented by the defense (including affidavits).  Still, any conflicts between affidavits should be resolved in the plaintiff’s favor.

In my mind, there are two big issues (1) is the store attributable to TracFone? and (2) what about the timing issue — what result if it closed before the complaint was filed?

In his order, Judge Albright sided with the patentee — holding that allegations and evidence suggests enough link to conclude that the store a TracFone “place of business.” The court writes:

While TracFone disputes its ownership of the property, Precis alleges that the store belongs to TracFone’s corporation, doing business under the assumed business name “Total Wireless.” Additionally, Total Wireless’s terms and conditions agreement states that: “Total Wireless is a brand of TracFone Wireless, Inc. d/b/a Total Wireless.” Total Wireless holds itself out as a being owned by and essentially one and the same as TracFone. Furthermore, TracFone is the owner of the Total Wireless trademark.

[Precis_Group_LLC_v._Tracfone__53].  Judge Albright did not address the TracFone affidavit indicating only a distant relationship with the actual store owner. Although I believe that it could be distinguished based the seeming exclusive dealing and trademark linkage, the court should have walked through the process.

The Store Closing: The bigger failing of Judge Albright’s opinion is that he did not address the issue of the store closing prior to the complaint being filed.  Venue needs to be proper as of the filing of the complaint, and the defendant submitted uncontroverted evidence that the store had already closed.  Note here that there is some disagreement among the lower courts about whether timing for the place-of-business should focus on infringement or filing of the lawsuit.  In Raytheon Co. v. Cray, Inc., 258 F. Supp. 3d 781 (E.D. Tex. 2017), the court held that the appropriate timing was at the time of infringement. That decision was later vacated by the Federal Circuit, although the court did not address the timing issue. In Pers. Audio, LLC v. Google, Inc., 280 F. Supp. 3d 922 (E.D. Tex. 2017), the court held that the place of business must be in existence as of the filing of the complaint.  In any event, the Judge Albright did not even address the issue in his opinion.  I would recommend to Judge Albright that he draft up a new opinion tonight that also addresses the store-closing issue. Otherwise we’ll likely see a quick reversal from the Federal Circuit.

The court also denied the motion to transfer for on grounds of inconvenient forum (or that there is another more convenient forum) under 28 USC 1404.

The Court finds that the ease of access to relevant sources of proof and the court congestion factors weigh slightly in favor of transfer, the cost of attendance of willing witnesses weighs against transfer, and all other factors are neutral. The Court notes that the convenience of witnesses is the single most important factor in the transfer analysis and that the court congestion factor is the most speculative and cannot outweigh the other factors. As such, the Court finds that TracFone has not met its significant burden to demonstrate that the Southern District of Florida is “clearly more convenient.”

Id.

25 thoughts on “Timing the Venue Inquiry in W.D. Texas

  1. 6

    So I could set up an e-store and locate my headquarters in a remote place in Alaska.

    The shipping and handling would be dispersed by Amazon.

    The internet changes and all this and makes these test ridiculous.

    How many of these were purchased per capital compared with other areas? The concept of location is only valid in the sense of convenience for witnesses some facts but not really.

    1. 6.1

      Of course the odds of the CAFC getting this right are zero.

    2. 6.2

      Wrong. But even so your beef is with Congress, which wrote the statute, not with the Courts that must apply the law as written.

      1. 6.2.1

        I am sure I am right. I haven’t looked at this in a long time but I’d bet that the CAFC has done everything possible to make the situation worse.

        Could they hold that a place of business is an online store?

        And if I bother to read all this and get a headache from probably Taranto’s clever judicial activism or some of the other’s brute force nonsense, I’d bet that a judge that wanted to make this work fairly could work around what Congress did.

        1. 6.2.1.1

          The court has previously held that a “regular and established place of business” requires a physical and tangible presence in the district. A web store available in the state is insufficient.

          1. 6.2.1.1.1

            Who held that? The CAFC?

      2. 6.2.2

        I recognize the irony here of noting that to “rule” for the patentee, we have to strictly abide by the words of Congress — even as the Supreme Court (and those that it has be aten down through Simian Fire-hosing) routinely does the opposite.

        But note as well the possible lever here FOR THE COURTS if this be an item rooted in the “laws of equity” — see my post below at 2.1.1.1.

  2. 5

    On a motion to dismiss for improper venue (as opposed for failure to state a claim for relief), the Court isn’t supposed to accept the factual allegations in the Complaint as true. Same for a motion to dismiss for lack of jurisdiction.

    link to americanbar.org

    1. 5.1

      were it otherwise it would be normally virtually impossible to challenge venue or jurisdiction until after a final judgment, which makes no sense.

    2. 5.2

      The court does accept the (plausible) factual allegations as true at the motion-to-dismiss stage. However, the defense can then present evidence (typically in the form of affidavits) to disprove the allegations.

  3. 4

    Dennis, thanks for bringing up the factual dispute here over the statutory venue requirement [and lack of evidence citations in the transfer motion decision]as to whether or not the defendant “HAS a regular and established place of business” in his district. I had also found that troubling. The judge could have ordered cross-examinations of conflicting affiants. But if that business had really closed at that location before the suit was filed it was up to the defendant to provide clear proof of that which was not contradicted by plaintiff’s evidence. [If proven closed before suit why would not be clear clear legal error?] As emphasized above, the statute says “has” not “was”.
    But all of this is unrelated to what seemed to upset the Fed. Cir. the most in the 3 mandamus cases against the same judge, and is finally now properly treated in this motion decision, which was not considering the proper factors for an “inconvenient forum” transfer motion.

    1. 4.1

      Not sure I can jump at that same “what seemed to upset the CAFC,” there Paul.

      To me, the “upset” is NOT the contents of any individual determination, but instead is the TIMING of determinations.

      The post in particular here goes beyond that aspect of timing, and thus tends more towards conjecture and “what next.”

      Not that such is “bad” in and of itself, mind you. These are fair things to think about and discuss.

      There is a certain dichotomy afoot between the Supreme Court’s over-arching enmity towards “Bright Line Rules” (which leads towards judicial discretion), and an opposing “We Want THESE Ends,” No Matter the Means” when those ends run counter to judicial discretion (in cases, such as in Texas, in which the Ends can be described as “off script”).

      1. 4.1.1

        Yes, the last of these three Waco mandamus cases was about ignoring the timely venue transfer motion altogether while otherwise proceeding with the lawsuit. D.C. judges do have a lot of discretion, but there are clearly established exceptions.

        1. 4.1.1.1

          On that I agree – the speed of the post-reprimand “following” indicates to me that Judge Albright was perhaps being passive-aggressive (in a situation in which that just needed not to be so).

  4. 3

    Regardless of whether or not the store was closed prior to the suit filing, didn’t TracFone’s “it’s not our store” assertion — backed by at least one affidavit and quickly-removed photos — constitute a fraud on the court?

    If so, seems like TracFone’s best move would be to not appeal the venue decision.

    And while we’re talking TracFone . . . I’m reminded of a good friend of mine telling me a couple years back that he’d anonymously purchased (no name, paid cash for both it and their “minutes” cards as needed) one of their phones for his teenage daughter.

    The alleged privacy that TracFone trumpets was a driving factor in his decision.

    After a few months of using it, they began receiving mailed pitches from them for more minutes . . . at their personal residence. “TracFone Customer” (or some such) was in the name field.

    Understandably upset given TracFone’s obvious tracking of his daughter’s use (one can assume one’s home address from where the phone spends the most (stationary) time), he called their customer service line to see what was up.

    After first asking for his name and TracFone phone number (which he refused to supply — he was calling from his non-TracFone phone), the phone rep insisted that they did not track their users.

    Yet — once he took the SIM card out and threw the phone away — the mailings “mysteriously” stopped.

    Gee; what a surprise.

    1. 3.1

      Fraud? As in a legal sham of an argument (gee, no connection, they just are doing OUR business..)

      Is that what you are asking?

      1. 3.1.1

        Yes my friend, that is what I’m asking.

  5. 2

    Would venue be proper for acts of infringement committed while the store was open even though filed after store closed?

    1. 2.1

      Brandon – This is a good question.

      I have traditionally thought of venue as being judged at the time that the complaint is filed. However, there has been some disagreement by the courts on this timing issue.

      In Raytheon Co. v. Cray, Inc., 258 F. Supp. 3d 781 (E.D. Tex. 2017), the court held that the appropriate timing was at the time of infringement. That decision was later vacated by the Federal Circuit, although the court did not address the timing issue. In Pers. Audio, LLC v. Google, Inc., 280 F. Supp. 3d 922 (E.D. Tex. 2017), the court held that the place of business must be in existence as of the filing of the complaint.

      1. 2.1.1

        More cases from other district courts and a 1969 Seventh Circuit opinion are collected in the Annotated Patent Digest at § 36:153.140 — Temporal Considerations for Evaluating § 1400(b) Venue.

        From this collection of cases, it appears that the courts that are receptive to finding 1400(b) venue proper where the accused infringer closed its regular and established place of business in the forum by the time the complaint was filed, do so only when the closure was done within a “reasonable” time of the filing of the complaint. The outer bounds of this time frame are not established, but it appears to be a matter of only a few weeks. To the extent it appears that the accused infringer closed the store to avoid venue for the infringement suit, courts may be more receptive to looking to see if the place of business was in the forum at the time the infringement cause of action accrued.

        1. 2.1.1.1

          Thanks Bob, your comments appears to indicate that this is not a binary question as to a yes/no open-at-exact-time-of-filing.

          Is this a “grey zone” of Rule of Equity?

          If so, would the ‘concern’ raised above (sham arrangement that appears to side step liability, while still obtaining the benefits of doing business within the jurisdiction) be “fair game” for equitable consideration?

          I recognize that the letter of the law is NOT where I personally would set it – for example, I would draw a mush sharper line that if you are choosing to obtain benefit in a jurisdiction than that choice is not separable from the liability. I recognize that this does not completely jibe with some of the earlier “business by mail” cases, but perhaps it is time to revisit and correct those earlier cases AND use the equitable question (a simpler question) of whether or not an entity IS obtaining benefits in the locale.

      2. 2.1.2

        It is an interesting question.

        What if the place of business was closed five years and 11 months prior to filing, just one month short of the possible term for past damages of six years? If so, does it then matter then if closing was one month prior to filing?

        Is there some kind of balancing test implicated, or is this more like a matter of service, where the elements are either met or not met?

  6. 1

    other than its rights to sell TracFone products and services

    Sounds like doing business to me…

    (Of course, this is merely my own colloquial take on it…)

    1. 1.1

      The test is not doing business, but rather whether the defendant “has a
      regular and established place of business.” 1400(b). This language has remained identical in the patent venue statute since it was first passed in 1897.

      1. 1.1.1

        As per my note to Bob, maybe it is time to reevaluate the meaning of that language -/ from the equitable balance of “are you choosing to obtain benefits from that locale?”

        Does it really seem fair to be able to extract business benefit while skirting business liability?

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