The opinion
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF TEXAS
TYLER DIVISION
WIRELESS PROTOCOL INNOVATIONS, §
INC., §
§
Plaintiff, §
§
v. § CASE NO. 6:15-CV-00918-KNM
§
TCT MOBILE (US) INC. AND TCT §
MOBILE INC., §
§
Defendants. §
MEMORANDUM OPINION AND ORDER
Before the Court is Defendant TCT Mobile (US) Inc. and Defendant TCT Mobile Inc.’s
(collectively, “TCT” or “Defendants”) Motion to Transfer for Improper Venue, or Alternatively,
to Dismiss (Doc. No. 168). For the reasons stated herein, TCT’s Motion to Transfer for Improper
Venue, or Alternatively, to Dismiss (Doc. No. 168) is GRANTED-IN-PART. It is ORDERED
that the above-styled case be TRANSFERRED to the Central District of California.
Background
On October 23, 2015, WPI originally filed suit against Defendants in the Eastern District
of Texas alleging infringement of several patents.1,2 On March 29, 2017, the Court granted TCT’s
Motion to stay the case pending Inter Partes Review (“IPR”).3 On May 22, 2017, less than two
months after the stay was issued, the Supreme Court decided TC Heartland LLC v. Kraft Foods
Grp. Brands LLC, 137 S.Ct. 1514, 197 L.Ed.2d 816 (2017) (“TC Heartland”). Following
proceedings at the Patent Trial and Appeal Board, WPI filed a motion to lift the stay (Doc. No.
1 U.S. Patent Nos. 6,381,211; 8,274,991; 8,565,256; and 9,125,051.
2 Pl.’s Compl., Doc. No. 1.
3 Order Granting Mot. to Stay, Doc. No. 147.
165), which the Court granted (Doc. No. 167). TCT then filed the instant Motion.4 Prior to ruling
on the instant Motion, the Court allowed WPI to conduct limited venue-related discovery,5 and the
parties filed supplemental briefings.6 The only remaining patent at issue is now expired (U.S.
Patent No. 8,274,991).7
Legal Standard
Title 28 U.S.C. § 1400(b) constitutes “the exclusive provision controlling venue in patent
infringement proceedings.” TC Heartland, 137 S. Ct. at 1517. Section 1400(b) provides that an
action for patent infringement may be brought in the judicial district where the defendant either
“resides” or “where the defendant has committed acts of infringement and has a regular and
established place of business.” Under § 1400(b), domestic corporations “reside” only in their state
of incorporation. TC Heartland at 1521. There are three requirements that courts use to determine
if a defendant has a “regular and established place of business” in a particular district: “(1) there
must be a physical place in the district; (2) it must be a regular and established place of business;
and (3) it must be the place of the defendant.” In re Cray Inc., 871 F.3d 1355, 1360 (Fed. Cir.
2017) (“In re Cray”).
Which party bears the “burden of persuasion on the propriety of venue” and whether venue
is proper are issues unique to patent law and are thus governed by Federal Circuit law. In re ZTE
(USA) Inc., 890 F.3d 1008, 1012-13 (Fed. Cir. 2018). The Federal Circuit has held that “upon
motion by the Defendant challenging venue in a patent case, the Plaintiff bears the burden of
establishing proper venue.” Id. at 1013.
4 Defs.’ Mot. to Transfer, Doc. No. 168.
5 (See Order Granting Limited Venue-Related Disc., Doc. No. 179)
6 (Pl.’s Suppl. Br., Doc. No. 189 and Defs.’ Suppl. Br., Doc. No. 191)
7 Pl.’s Mot. to Lift Stay and Reopen Disc., Doc. No. 165, p. 4.
A failure to satisfy any statutory requirement of § 1400(b) requires a court to conclude that
venue is improper. Upon a finding of improper venue, a court must “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.” 28 U.S.C. § 1406(a).
Analysis
In response to TCT’s Motion to Transfer (Doc. No. 168), WPI argues that Defendants
waived their right to challenge venue.8 TCT maintains that they have not waived their right to
challenge venue, by rule or by conduct.9
I. Rule-Based Waiver
For rule-based waiver under Federal Rule of Civil Procedure 12(h)(1), a defendant may
waive an improper venue defense under three circumstances: “(1) by failing to move under Rule
12; (2) by failing to object in a responsive pleading or in an amendment allowed by Rule 15(a)(1)
as a matter of course; or (3) by moving under Rule 12 for reasons other than venue without also
objecting to venue.” Uniloc USA, Inc. v. Ubisoft, Inc., No. 2:16-CV-00781-RWS, 2018 U.S. Dist.
LEXIS 165665, at *3 (E.D. Tex. 2018) (“Uniloc USA”).
According to WPI, TCT has waived its right to challenge venue by admitting proper venue
in its answers and affirmatively consenting to proceed before a magistrate judge in the Eastern
District of Texas.10 WPI emphasizes that TCT has yet to identify a case suggesting that a party’s
express consent to proceed in a particular venue before a magistrate judge can be disregarded
because it was given prior to TC Heartland.11
8 Pl.’s Resp., Doc. No. 171 at 4-10; Pl.’s Suppl. Br., Doc. No. 189 at 7-9.
9 Defs.’ Mot. to Transfer, Doc. No. 168 at 1; Defs.’ Suppl. Br., Doc. No. 191 at 12.
10 Pl.’s Resp., Doc. No. 171, pp. 1, 10; Pl.’s Sur-Reply, Doc. No. 177, pp. 1, 3-4; see Defs.’ Answer to Compl., Doc.
No. 15, ¶ 11; see also Defs.’ Answer to Am. Compl., Doc. No. 86, ¶ 7.
11 Pl.’s Sur-Reply, Doc. No. 177 at 3-4.
However, TCT argues that because TC Heartland was decided after the case was stayed,
the improper venue defense was unavailable when TCT answered WPI’s initial and amended
complaints affirming proper venue.12 TCT asserts that there is no waiver of an improper venue
defense even though proper venue was admitted in prior pleadings if the defense was not available
at the time it was admitted.13
A defendant cannot waive an improper venue defense if the defense is not available to it at
the time they file a responsive pleading. Uniloc USA at *6. The venue objection was not “available”
to TCT until the Supreme Court decided TC Heartland because, prior to TC Heartland, it would
have been improper, given controlling precedent, for the district court to dismiss or transfer the
case for lack of venue. See In re Micron Tech., Inc., 875 F.3d 1091, 1096 (Fed. Cir. 2017) (“In re
Micron”). Thus, TCT’s failure to object to venue in a responsive pleading filed before TC
Heartland does not waive TCT’s post-TC Heartland objection for improper venue. See Keranos,
LLC v. Silicon Storage Tech., Inc., No. 2:13-cv-00017-RWS-RSP, 2018 WL 7283284, at *1 (E.D.
Tex. Mar. 1, 2018). Further, there is no support for the idea that TCT’s consent to proceed before
a magistrate judge would waive an improper venue defense.14
TCT did not waive its right to challenge venue under a rule-based theory because the
defense was unavailable at the time TCT admitted proper venue in its responsive pleadings.15
Accordingly, rule-based waiver does not apply to TCT, and TCT is free to raise the improper venue
defense absent any waiver by conduct.
12 Defs.’ Mot. to Transfer, Doc. No. 168 at 1.
13 Id. at 6.
14 See Pl.’s Resp., Doc. No. 171 at 7.
15 See In re Micron; Realtime Data LLC v. Hewlett Packard Enterprise Co., No. 6:18-CV-00384-RWS, 2018 WL
4599582, at *3 (E.D. Tex. Sep. 24, 2018); see also Defs.’ Answer to Compl., Doc. No. 15 at ¶ 11; Defs.’ Answer
to Amend. Compl., Doc. No. 86 at ¶ 7.
II. Waiver By Conduct
In addition to rule-based waiver, a court may determine a venue defense to be waived
because it was not timely presented. In re Micron at 1094. Courts are required to consider non-
Rule 12 bases for waiver. In re Cutsforth, Inc., No. 2017-135, 2017 WL 5907556, at *2 (Fed. Cir.
Nov. 15, 2017); see Uniloc USA at *3 (“A court may also find that a defendant waived its improper
venue defense by actively litigating a case without contesting venue.”). Non-rule-based waiver is
also referred to as waiver by conduct. The Federal Circuit has suggested that waiver by conduct
grounds may include other factors in addition to the sheer time from when the defense becomes
available to when it is asserted, including closeness of the trial date and judicial efficiency. In re
Micron at 1102. Furthermore, “[a] court’s forfeiture inquiry should begin and focus on a
defendant’s post-TC Heartland conduct.” Realtime Data LLC v. Hewlett Packard Enterprise Co.,
No. 6:18-CV-00384-RWS, 2018 WL 4599582, at *3 (E.D. Tex. Sep. 24, 2018) (quoting
Intellectual Ventures II LLC v. FedEx Corp., No. 2:16-cv-00989-JRG, 2017 WL 5630023, at *3
(E.D. Tex. Nov. 22, 2017) (“[T]he forfeiture inquiry should at least start with an examination of
the time from when the defense becomes available to when it is asserted.”).
TCT asserts that it has not engaged in any substantive litigation that would constitute
waiver by conduct upon the Court’s lifting of the stay.16,17 TCT highlights that the case was stayed
when TC Heartland was issued and TCT immediately filed its Motion to Transfer18 asserting
improper venue under TC Heartland upon the lifting of the stay.19 TCT argues that where a case
was stayed before TC Heartland issued, as here, “the relevant time period for considering whether
16 The Court granted WPI’s Motion to Lift Stay (Doc. No. 165) on September 21, 2022. Order, Doc. No. 167.
17 Doc. No. 168 at 1.
18 TCT’s Motion to Transfer for Improper Venue, or Alternatively, to Dismiss (Doc. No. 168) was filed on September
22, 2022.
19 Id. at 3.
a defendant’s conduct waived its right to assert the venue defense available after TC Heartland is
from the time after the stay is lifted.”20
WPI argues that TCT has waived its right to challenge venue through its conduct because
its venue objection was untimely.21 WPI states that there is no reason that TCT could not have
brought its venue challenge after TC Heartland was decided despite the case being stayed.22 WPI
heavily relies on Tinnus Enterprises, LLC v. Telebrands Corp. et al.23 as support for the proposition
that the fact that this action was stayed when TC Heartland was announced is “of little
significance.” Pl.’s Resp., Doc. No. 171 at 5, 9-10; Pl.’s Sur-Reply, Doc. No. 177 at 1; see Tinnus
Enterprises, 2018 U.S. Dist. LEXIS 172381, at *5-7 (holding that that defendants had waived their
right to object to venue when defendants waited nearly eight months until the stay was lifted to re-
urge their motion to dismiss following In re Micron because defendants had previously urged a
motion to dismiss for improper venue after TC Heartland during the pendency of a stay); see
Tinnus Enterprises, 2017 U.S. Dist. LEXIS 116078, at *8 (“and the case has remained stayed to
date… While the Court declines to lift the stay, the Court addresses the merits of Defendants’
motion herein.”).
In Tinnus Enterprises, the court determined that defendants had waived their right to
challenge venue through their post-TC Heartland conduct by waiting seven months after In re
Micron to raise their objection. Tinnus Enterprises, 2018 U.S. Dist. LEXIS 172381, at *4-5. In so
determining, the court “noted” that “the fact the case was stayed was of little significance” because
20 Doc. No. 168 at 4 (citing Siltek Corp. v. Entech Instruments, Inc., No. 15-1531, 2018 WL 1818192, at *1, *3-5
(W.D. Pa. Apr. 17, 2018); Xodus Med. Inc. v. Prime Med. LLC, No. 13-cv-01372, 2018 WL 4385243, at *4 (W.D.
Pa. Sept. 14, 2018)).
21 Pl.’s Resp., Doc. No. 171 at 1; Pl.’s Sur-Reply, Doc. No. 177 at 1-3.
22 Id. at 4.
23 No. 6:15-cv-551, 2018 U.S. Dist. LEXIS 172688 (E.D. Tex. July 5, 2018), R. & R. adopted by Tinnus Enterprises,
LLC v. Telebrands Corp. et al., No. 6:15-cv-551, 2018 U.S. Dist. LEXIS 172381 (E.D. Tex. Oct. 5, 2018) and
Tinnus Enterprises, LLC et al. v. Telebrands Corp. et al., No. 6:15-cv-551, 2017 U.S. Dist. LEXIS 116078 (E.D.
Tex. July 5, 2017) (collectively, “Tinnus Enterprises”).
the defendants had raised the same challenge for improper venue during a stay that the court had
ruled upon following TC Heartland but prior to In re Micron. Id. at *5.
Notwithstanding the unique circumstances of Tinnus Enterprises, a party’s filing of
substantive motions during an action’s stay of all proceedings24 is generally inappropriate without
requesting administrative leave to file a motion or requesting a partial lift of the stay. See Dolby
Laboratories, Inc. v. Intertrust Techs. Corp., No. 19-cv-03371-EMC, 2021 WL 5322695, at *2-5
(N.D. Cal. Nov. 16, 2021) (denying motion to partially lift a stay pending completion of IPR
proceedings to permit defendant to file a summary judgment motion as to one patent that was not
subject to the IPR proceeding because defendant had not showed any prejudice if the stay was not
lifted and the reasons the stay was imposed had not changed significantly); Fusilamp, LLC v.
Littelfuse, Inc., No. 10-20528-CIV, 2017 WL 2671997, at *1 (S.D. Fla. June 13, 2017) (stating
that the purpose of a stay is to conserve resources); IOENGINE, LLC v. PayPal Holdings, Inc.,
No. 18-452-WCB, 2020 WL 419448, at *6 n.6 (D. Del. Jan. 27, 2020) (“[I]f the stay were vacated,
the parties and the court would be subject to the substantial expense and effort entailed
by…dispositive motions, all decisions on these motions[.]”); see also Personal Audio LLC v.
Google, Inc., 230 F. Supp. 3d 623, 626 (E.D. Tex. 2017) (providing that when determining whether
to either impose a stay or lift an already-imposed stay pending IPR, the court considers the same
three factors as the standard for determining whether a court should impose a stay in the first
place).
Moreover, although not binding on this Court, other courts have concluded that when a
case was stayed at the time TC Heartland issued, a party’s motion to transfer within a reasonable
time after the stay being lifted is timely. Blackbird Tech., LLC v. TADD, LLC, No. 16-970-RGA,
24 (including cases stayed pending parallel proceedings by the USPTO)
2019 WL 3340700, at *3 (D. Del. May 10, 2019), report and recommendation adopted by
Blackbird Tech., LLC v. TADD, LLC, 2019 WL 3337011 (D. Del. May 29, 2019) (finding no venue
defense waiver when case was stayed and administratively closed pending resolution of a Federal
Circuit appeal and defendant timely moved to transfer venue within one month of the stay being
lifted). However, partial stays or deadline-specific stays do not necessarily preclude a defendant
from timely raising a post-TC Heartland challenge to venue. Id.; see Princeton Digital Image
Corp. v. Ubisoft Entertainment SA, No. 13-335-LPS-CJB, 2018 WL 3105062, at *5-6 (D. Del.
June 25, 2018), report and recommendation adopted by Princeton Digital Image Corp. v. Ubisoft
Entertainment SA, 2018 WL 6790309 (D. Del. Oct. 23, 2018) (defendant waived right to assert
post-TC Heartland venue defense despite case being stayed when TC Heartland issued because
the stay was not a blanket stay and only extended the date for the close of fact discovery).
Here, the case in whole was stayed pending IPR.25 All deadlines were terminated, and the
case was subsequently administratively closed in October 2017.26 The case was not placed back
on the Court’s active docket until September 21, 2022, and TCT filed its motion to transfer the
next day.27 Accordingly, the Court concludes that TCT’s venue challenge was timely raised.
WPI also suggests that TCT should have brought its venue challenge at the time the
Supreme Court granted certiorari to TC Heartland and prior to the issuance of the decision.28 WPI
identifies no precedent, nor is the Court aware of such, requiring a defendant to move for improper
venue by virtue of a Supreme Court decision that has not yet issued but which may be issued in
25 Order, Doc. No. 147.
26 See Order, Doc. No. 148.
27 Order, Doc. No. 167.
28 Pl.’s Resp., Doc. No. 171 at 2.
the future.29 As such, TCT was not required to move for improper venue due to the Supreme Court
merely granting certiorari to TC Heartland.
WPI further argues that courts regularly deny venue objections in cases where significant
litigation has been undertaken such as in this case.30 As an initial matter, it is arguable whether
extensive litigation has taken place in this case given that the Court has issued no claim
construction opinion nor dispositive motion rulings. Moreover, courts generally deny venue
objections where the objection is raised shortly before trial, not simply after extensive litigation
has occurred. See, e.g., In re Nintendo of Am., Inc., No. 2017-127, 2017 U.S. Dist. LEXIS 14835,
2017 WL 4581670, at *2 (Fed. Cir. July 26, 2017) (Federal Circuit denying review of venue
objection where motion to dismiss or transfer filed less than three months before trial date); In re
Techtronic Industries North Am., Inc., No. 2017-125, 2017 WL 4685333, at *1 (Fed. Cir. July 25,
2017) (Federal Circuit denying review of venue challenge where challenge filed two months before
trial date); In re Hughes Network Systems, LLC, No. 2017-130, 2017 WL 3167522, at *1 (Fed.
Cir. July 24, 2017) (Federal Circuit denying review of venue challenge when motion to transfer
filed less than two months before trial date); In re Sea Boats, Inc., No. 2017-124, 695 Fed. Appx.
543, 543-544 (Fed. Cir. 2017) (Federal Circuit denying review of venue challenge where challenge
raised two weeks before trial date).
WPI cites several cases in support of the proposition that TCT has waived its venue
objection by undertaking significant litigation in this case. Pl.’s Resp., Doc. No. 171 at 6; see, e.g.,
Realtime Data LLC v. NetApp, Inc., No. 6:16-CV-00961-RWS, 2017 WL 3588047, 2017 U.S.
Dist. LEXIS 133446, at *2-3 (E.D. Tex. Aug. 21, 2017) (determining waiver by conduct due to
defendant’s participation in discovery, claim construction challenges, and filing a § 1404 motion
29 See Pl.’s Resp., Doc. No. 171 at 2.
30 Id. at 6-7.
to transfer, all taking place prior to TC-Heartland); Koninklijke Philips N.V. v. ASUSTeK Comput.
Inc., No. 15-1125-GMS, 2017 U.S. Dist. LEXIS 111889, at *7 (D. Del. July 19, 2017)
(determining defendant waived venue challenge by actively litigating the case since December
2015, emphasizing pre-TC Heartland conduct); InfoGation Corp. v. HTC Corp., No. 16-cv-01902-
H-JLB, 2017 WL 2869717, 2017 U.S. Dist. LEXIS 103645, at *6-7 (S.D. Cal. July 5, 2017)
(determining defendant waived venue challenge by participating in litigation for over one year,
emphasizing pre-TC Heartland conduct).
However, the majority of cases WPI referenced, supra, occurred pre-In re Micron, wherein
the respective courts had determined that TC Heartland did not constitute an intervening change
in the law.31,32 Pre-In re Micron courts often placed equal emphasis on the pre- and post-TC
Heartland conduct of the defendant in the determination of whether defendant had forfeited its
venue objection. See Intellectual Venutures II LLC v. FedEx Corp., No. 2:16-CV-00980-JRG,
2017 WL 5630023, 2017 U.S. Dist. LEXIS 193581, at *9 (E.D. Tex. Nov. 22, 2017) (In light of
In re Micron, “the Court begins by examining Defendants’ conduct after TC Heartland was
decided.”). While In re Micron did not prohibit a court from considering a defendant’s pre-TC
Heartland conduct, the Federal Circuit suggested that the forfeiture inquiry should at least start
with the timeliness determination of when the defense became available and may include other
factors such as closeness to trial and judicial efficiency. In re Micron at 1101-02.
Accordingly, courts begin with a defendant’s post-TC Heartland conduct in the
determination of whether a defendant has waived its right to object to venue through conduct. Id.
The litigation in this case exclusively occurred prior to the stay which occurred prior to TC
31 See Pl.’s Resp., Doc. No. 171 at 6-7.
32 See Realtime Data LLC, 2017 WL 3588047 at *2 (collecting cases).
Heartland.33 Immediately upon lift of the stay, TCT raised its improper venue challenge.34
Therefore, there is no basis for waiver based on TCT’s post-TC Heartland conduct.
WPI emphasizes that TCT’s venue challenge has resulted in severe prejudice to WPI’s
ability to develop a factual record regarding proper venue.35 WPI states that TCT could have raised
its venue challenge years ago, but instead “waited more than five years to file the present
Motion.”36 Although a court might find forfeiture of venue defense where a defendant raises the
venue challenge where dismissal or transfer would unduly prejudice a plaintiff, this is not the case
here. See Uniloc USA at *3 (determining defendant did not raise its improper venue defense as a
“tactical wait-and-see approach,” nor did defendant raise its venue defense close to trial or months
after the defense became available). Given the stay and subsequent administrative closure of the
case, it is understandable that TCT waited to move to transfer the case until the Court lifted the
stay. See Fusilamp, LLC v. Littelfuse, Inc., No. 10-20528-CIV, 2017 WL 2671997, at *1 (S.D. Fla.
June 13, 2017) (denying motion to dismiss for improper venue post-TC Heartland because
although “TC Heartland applie[d] retroactively to all currently pending patent cases,” the case had
been administratively closed, and was thus, not a currently pending case).
Here, TCT did not engage in any substantive litigation that could form the basis for waiver
by conduct as the case was stayed prior to TC Heartland. Nor is the Court aware of extraneous
factors which would justify forfeiture. See In re Micron at 1101-02. Accordingly, TCT did not
waive its right to challenge venue through its conduct and may so challenge the propriety of venue
in this District.
33 Defs.’ Reply, Doc. No. 175 at 3.
34 Id.; see Defs.’ Mot. to Transfer, Doc. No. 168.
35 Pl.’s Resp., Doc. No. 171 at 1.
36 Id. at 1, 8.
III. Sanction of Forfeiture
WPI asserts that TCT has forfeited its objection to venue.37 WPI argues that TCT failed to
preserve “most of its knowledge and information concerning its presence in the [Eastern District
of Texas] in 2015.”38 WPI states that this failure “has prejudiced WPI’s ability to discover and
identify facts that support its venue allegations” and that the sanction of forfeiture of TCT’s venue
objection is the proper penalty for TCT’s failure to preserve.39 WPI notes that TCT changed its
HR system in 2018 and failed to suspend routine document retention policies, resulting in a loss
of prior employee information and resulting in prejudice to WPI.40
TCT counters that it had no duty to preserve any venue-related information and that there
was no culpable breach of any duty to preserve.41 TCT argues that the duty to preserve only extends
to documents relevant to a party’s claims or defenses.42 According to TCT, under existing law
when the case was filed in 2015, TCT had no duty to preserve venue-related evidence.43
For courts to impose spoliation sanctions, “the party seeking the sanction must show the
following: (1) the existence of a duty to preserve the evidence; (2) a culpable breach of that duty;
and (3) the resulting prejudice to the innocent party.” Accresa Health LLC v. Hint Health, Inc.,
No. 4:18-cv-00536, 2020 U.S. Dist. LEXIS 203428, at *19 (E.D. Tex. Feb. 28, 2020). The duty to
preserve evidence arises “when the party has notice that the evidence is relevant to the litigation
or should have known that the evidence may be relevant.” Guzman v. Jones, 804 F.3d 707, 713
(5th Cir. 2015).
37 Pl.’s Suppl. Br., Doc. No. 189 at 1.
38 Id.; see id. at 5-7.
39 Id. at 1; see id. at 7-9.
40 Id. at 8.
41 Defs.’ Suppl. Br., Doc. No. 191 at 9.
42 Id. at 9-10.
43 Id. at 10.
Here, WPI has not shown that TCT had a duty to preserve venue-related evidence after
proper venue was established in 2015 under, then current, pre-TC Heartland venue law. Neither
party had notice that venue-related evidence may be relevant to the litigation after 2015, nor should
either party have known the same. See Guzman, 804 F.3d at 713. As such, there was no duty after
2015 until 2017 when TC Heartland issued for TCT to preserve venue-related evidence. At best,
TCT had knowledge of its venue defense when the law changed in 2017, prior to TCT changing
HR programs in 2018. However, even if TCT had a duty to preserve after TC Heartland issued,
spoliation sanctions require a finding of bad faith. See Guzman, 804 F.3d at 713 (stating that the
Fifth Circuit “permit[s] … sanctions against the spoliator only upon a showing of ‘bad faith’ or
‘bad conduct.’”). “Bad faith, in the context of spoliation, generally means destruction for the
purpose of hiding adverse evidence.” Id. (citation omitted). Mere negligence is not enough to
warrant spoliation sanctions. Rimkus Consulting Grp. V. Cammarata, 688 F. Supp. 2d 598, 614
(S.D. Tex. 2010).
There is simply no evidence of bad faith here. TCT notes that it produced over 20,000
pages of documents in response to WPI’s venue discovery requests, including information
pertaining to multiple employees in Texas at the time of filing.44 Although a duty may have arisen
for TCT to preserve venue-related evidence after the issuance of TC Heartland, WPI is merely
speculating that there may have been more information regarding venue had TCT not changed HR
systems in 2018. Moreover, as discussed in the next section, there is no evidence that the HR
information on particular employees WPI sets forth did more than work from home—which does
not establish venue. See Galderma Laboratories, L.P. v. Teva Pharmaceuticals USA, Inc., 290 F.
Supp. 3d 599, 610 (N.D. Tex. 2017) (stating that the requirement “that the ‘regular and established
44 Defs.’ Suppl. Br., Doc. No. 191 at 11.
place of business’ must be ‘the place of the defendant’—means that it cannot be solely a place of
the defendant’s employee, such as an employee’s home, if that employee works from home”).
WPI’s speculation that it “believes other TCT employees worked from places of business in this
District … but that TCT has lost information and knowledge concerning their presence and
activities”45 cannot demonstrate prejudice sufficient to warrant a spoliation finding. See Accresa
Health LLC v. Hint Health Inc., No. 4:18-cv-00536, 2020 WL 6325733, at *10 (E.D. Tex. Feb.
28, 2020).
Because WPI has not shown a culpable breach of a duty to preserve evidence nor resulting
prejudice to WPI, the imposition of spoliation sanctions is inappropriate. For the reasons stated,
supra, TCT has neither waived nor forfeited its venue objection.
IV. Whether Venue is Proper under 28 U.S.C. § 1400(b)
In patent cases, venue is governed by 28 U.S.C. § 1400(b), which provides that venue is
proper where the defendant either resides or where the defendant has committed acts of
infringement and has a regular and established place of business (quotations omitted). Post-TC
Heartland, under § 1400(b), domestic corporations “reside” only in their state of incorporation.
TC Heartland at 1521. There are three general requirements courts use to determine if a defendant
has a “regular and established place of business” in a particular district: “(1) there must be a
physical place in the district; (2) it must be a regular and established place of business; and (3) it
must be the place of the defendant.” In re Cray at 1360.
Because the venue analysis is particularly fact-specific, courts may allow a plaintiff to
conduct limited venue-related discovery. See Galderma Laboratories, L.P. v. Teva
Pharmaceuticals USA, Inc., 290 F. Supp. 3d 599, 605 (N.D. Tex. 2017). District courts have broad
45 (Pl.’s Suppl. Br., Doc. No. 189 at 15) (emphasis added)
discretion in determining whether to grant limited discovery for the purpose of exploring
jurisdictional facts, including facts related to venue. Johnson v. Emerson Elec. Co., No. 4:13-CV-
1240-JAR, 2013 WL 5442752, at *4 (E.D. Mo. Sep. 30, 2013) (citations omitted). After
determining that TCT did not waive its venue objection, the Court, in its discretion, allowed WPI
to conduct limited venue-related discovery.46
After conducting venue-related discovery, WPI maintains that venue is proper in the
Eastern District of Texas,47 and TCT argues that WPI has failed to meet its burden of establishing
proper venue in the district.48,49
A. First Cray Factor
Under the first Cray factor, “there must be a physical place in the district.” In re Cray, 871
F.3d at 1360. The place need only be a “physical, geographical location in the district from which
the business of the defendant is carried out.” Id.
According to WPI, TCT had physical places of business in the District at the time of
filing.50 WPI asserts that 5201 Alliance Gateway (“5201 Alliance Gateway” or “the ATC facility”)
constitutes a physical place in the District.51 The facility at 5201 Alliance Gateway is operated by
ATC, a third-party distributor of TCT products.52 TCT admits that 5201 Alliance Gateway
46 See Pl.’s Resp., Doc. No. 171 at 10-15; see also Pl.’s Suppl. Br., Doc. No. 189 and Defs.’ Suppl. Br., Doc. No. 191,
generally.
47 (Pl.’s Suppl. Br., Doc. No. 189 at 9)
48 Defs.’ Suppl. Br., Doc. No. 191 at 1.
49 To the extent that WPI argues that its assertions “are sufficient to support an allegation that venue is proper at the
pleading stage” (See Pl.’s Suppl. Br., Doc. No. 189 at 15), the Court disagrees. TCT challenged venue, venue
discovery was undertaken at WPI’s request to resolve factual disputes, and WPI now “bears the burden of
establishing proper venue” under § 1400(b). See Parallel Licensing, 2022 U.S. Dist. LEXIS 90442, at *5 (stating
that to conclude a defendant has a regular and established place of business in a particular district, a plaintiff must
prove all three requirements to establish proper venue); see also In re ZTE (USA) Inc., 890 F.3d 1008, 1013 (Fed.
Cir. 2018).
50 Pl.’s Suppl. Br., Doc. No. 189 at 9.
51 Id. at 9.
52 Master Services Agreement, Doc. No. 189-2 at 2; Pl.’s Suppl. Br., Doc. No. 189 at 2-3; Defs.’ Suppl. Br., Doc.
No. 191 at 2.
“straddles county lines of Denton and Collin counties,” and thus, is partially within both the
Northern and Eastern Districts.53 However, TCT states that even if 5201 Alliance Gateway is a
physical place of business in the District, WPI has not satisfied the second and third Cray factors.54
As such, the Court presumes without deciding that WPI has shown that 5201 Alliance Gateway is
a physical place in the District for the purpose of this analysis.
B. Second and Third Cray Factors
The second and third Cray factors require: (1) a “regular and established place of
business[;]” and (2) that the place of business be the place “of” the Defendants. In re Cray, 871
F.3d at 1362-63. Here, because many of the facts and the parties’ arguments go to both factors, the
Court analyzes the second and third Cray factors together.
Under the second Cray factor, a “regular and established place of business” requires “the
regular, physical presence of an employee or other agent of the defendant conducting the
defendant’s business at the alleged ‘place of business.’” In re Google LLC, 949 F.3d 1338, 1345
(Fed. Cir. 2020). A business may be “regular” if it operates in a “steady[,] uniform[,] orderly[,
and] methodical manner.” In re Cray, 871 F.3d at 1362. An “established” place of business is
settled or fixed permanently, and not transient. Id. at 1363.
An agency relationship is a fiduciary relationship that arises when a principal manifests
assent to an agent that the agent shall act on the principal’s behalf and subject to the principal’s
control, and the agent manifests assent or otherwise consents to act. Restatement (Third) of Agency
§ 1.01 (2006) (quotations omitted). The essential elements of an agency relationship are: “(1) the
principal’s right to direct or control the agent’s actions, (2) the manifestation of consent by the
principal to the agent that the agent shall act on his behalf, and (3) the consent by the agent to act.”
53 Defs.’ Suppl. Br., Doc. No. 191 at 1-2; see Pl.’s Suppl. Br., Doc. No. 189 at 2-3.
54 Id.
In re Volkswagen Grp. Of Am., 28 F.4th 1203, 1209 (Fed. Cir. 2022) (citing Meyer v. Holley, 537
U.S. 280, 286 (2003)). The power to give interim instructions distinguishes principals in agency
relationships from those who contract to receive services by persons who are not agents. In re
Google LLC, 949 F.3d at 1345-46 (quotations omitted); In re Volkswagen Grp. Of Am., 28 F.4th
at 1209. Simply, “setting standards in an agreement for acceptable service quality does not of itself
create a right of control.” In re Volkswagen Grp. Of Am., 28 F.4th at 1209-10; Restatement (Third)
of Agency § 1.01(f)(1).
Under the third Cray factor, the “‘regular and established place of business’ must be ‘the
place of the defendant.’” In re Cray, 871 F.3d at 1363. To be the place “of” the defendant, “the
defendant must establish or ratify the place of business.” Id. A court may consider “whether the
defendant owns or leases the place, or exercises other attributes of possession or control over the
place[;]” any marketing or advertisements by the defendant, “but only to the extent they indicate
that the defendant itself holds out a place for its business[;]” “whether the defendant conditioned
employment on an employee’s continued residence in the district or the storing of materials at a
place in the district so that they can be distributed or sold from that place[;]” and “the nature and
activity of the alleged place of business of the defendant in the district in comparison with that of
other places of business of the defendant in other venues.” Id. at *1363-64. Importantly, “the mere
fact that a defendant has advertised that it has a place of business or has even set up an office is
not sufficient.” Id. at *1364.
According to WPI, the second and third Cray factors are met because TCT conducted
“regular and established business” at the ATC facility through TCT employees and other agents
working from ATC offices and other locations in the district.55 Similarly, WPI asserts that the ATC
55 Pl.’s Suppl. Br., Doc. No. 189 at 10-15.
facility constitutes the place “of” TCT because (1) TCT employees used the facility as their office,
and (2) because TCT “established interim control over ATC and its employees who acted on TCT’s
behalf.”56 WPI states that TCT employees responsible for supply chain issues worked from offices
at the ATC facility under supervisor Keiki Rodriguez.57 WPI’s evidence that TCT employees
regularly worked at the ATC facility in 2015 seems to derive from a handful of statements made
by former TCT employee Joseph Venable.58 When asked whether he recalls TCT “ever doing
business with” ATC, Venable stated that there were “supply chain people” who “worked out of an
office in [the ATC facility], I believe” who reported to Keiki Rodriguez.59 Venable goes on to state
that he had meetings in the conference room at the ATC facility with Keiki Rodriguez.60 Venable
specifically noted that “[i]t was an annual review or quarterly business review” and that TCT
employees were in the room with a handful of ATC employees.61
WPI also states that it “believes” TCT employees worked from other places of business in
the district that could be considered “of” TCT.62 Here, WPI reiterates that TCT has “lost
information concerning their presence and activities in this District[,]” presumably prohibiting
WPI from obtaining more evidence of proper venue.63
In response, TCT states that it is likely any such employees were temporarily working from
ATC offices “given that Keiki Rodrigez, the head of [TCT’s] supply team, was based in Irvine,
California.”64 TCT argues that any statement that it rented a facility in the district is “incomplete
and misleading.” In particular, TCT points to Venable’s testimony that a “temporary office space”
56 Id. at 10-11, 15.
57 Id. at 10.
58 See id. (citing Venable Dep., Doc. No. 189-5 at 27:19-28:19).
59 Venable Dep., Doc. No. 189-5 at 27:19-28:1.
60 Id. at 28:1-4.
61 Id. at 28:4-10.
62 Pl.’s Suppl. Br., Doc. No. 189 at 15.
63 See id.
64 Defs.’ Suppl. Br., Doc. No. 191 at 6-7; Sutton Dep., Ex. 1, Doc. No. 191-2 at 35:11-16.
was rented in the district so he could provide training to another employee for 2-3 weeks.65
According to Venable, the temporary office space was a weekly rental and was chosen as a location
at least in part because the third week was free.66 After Venable finished training the employee at
the temporary office space, that employee returned to Irvine, California—where the employee
resided—to work out of the Irvine office.67
The venue facts of this case are similar to those of Fractus v. Zte Corp.68 In Fractus, the
defendant established a call center “with” a third-party, wherein at least two full-time employees
of the defendant worked.69 The parties did not dispute that the call center was a regular and
established place of business; however, the issue for the court was whether the call center was the
place “of” the defendant.70 The plaintiff argued that the defendant exercised significant control
over the call center’s customer service representatives by requiring a specified drug test and
background check, “a formal skills assessment,” and “the authority to audit training sessions to
measure the effectiveness of the training program.”71 The defendant countered that it had no
authority to correct or remove call-center customer service representatives, that the call center may
service a competitor of defendant with defendant’s approval and upon the installation of physical
barriers to protect confidential information, and that defendant did not control, review, or provide
feedback on the performance of individual customer service representatives.72 The Court
determined that the presence of two employees of the defendant who worked at the call center on
a part-time basis and in visitor office space was insufficient, without more, to make the third-party
65 Id. at 8. (citing Venable Dep., Ex. 2, Doc. No. 191-3 at 18:21-25, 21:12-20, 32:1-17).
66 Venable Dep., Ex. 2, Doc. No. 191-3 at 32:5-13.
67 Id. at 32:14-17.
68 No. 2:17-CV-00561-JRG, 2018 U.S. Dist. LEXIS 244831 (E.D. Tex. Sept. 28, 2018).
69 Id. at *2.
70 Id. at *3.
71 Id. at *11.
72 Id. at *11-12.
call center a place “of” the defendant.73 In addition, in finding that the defendant and third-party
did not act as a single entity, the Court distinguished parties acting as a single entity from parties
acting under an agreement for the provision of services.74 The Court further concluded that “quality
control stipulations are not sufficient to alone transform [a third-party] into the same entity as [the
defendant]”,75 and that there was insufficient evidence to support a finding that the call center was
a place “of” the defendant.76
Here, there is even less evidence than in Fractus that the ATC facility is the place “of” the
Defendant. The ATC facility was not rented, leased or owned by TCT, nor did TCT ever market
or hold ATC out to the public as TCT. See In re Cray at 1363. There is no suggestion that TCT
marketed or advertised itself as ATC. See id. There is no evidence that TCT’s continued business
with ATC was conditioned upon ATC retaining the 5201 Alliance Gateway location. See id. The
presence of TCT employees at the ATC facility to oversee “inbound and outbound shipments,” or
the temporary use of “an ATC office” by a handful of TCT employees,77 do not, without more,
establish the ATC facility as the place “of” TCT. See Fractus generally. Similarly, a TCT annual
or quarterly review held in an ATC conference room attended by TCT employees—at least some
of whom were stationed in other states—is insufficient to establish the ATC facility as the place
“of” TCT. See Fractus generally; see also Venable Dep., Doc. No. 189-5 at 28:4-10.
Likewise, WPI’s argument that a temporary rental of office space to train employees
constitutes the place “of” TCT where TCT was conducting “regular and established business” is
unpersuasive.78 The single rental of 2-3 weeks to train an out-of-state employee, without more,
73 Id. at *7.
74 Id. at *10-14.
75 (id. at *12)
76 Id. at *13-14.
77 (See Pl.’s Suppl. Br., Doc. No. 189 at 4)
78 See Pl.’s Suppl. Br., Doc. No. 189 at 15; see also Venable Dep., Ex. 2, Doc. No. 191-3 at 18:21-25, 21:12-20, 32:1-
17.
cannot satisfy the second Cray factor of being a “regular and established” place of business. See
In re Cray, 871 F.3d at 1362 (stating that “sporadic activity cannot create venue”) (citing Phillips
v. Baker, 121 F.2d 752, 756 (9th Cir. 1941) (stating that “[a] ‘regular place of business’ is,
obviously, a place where such business is carried on ‘regularly’ and not merely temporarily, or for
some special work or particular transaction.”)).
WPI next argues that the ATC facility was the place “of” the Defendants where Defendants
conducted “regular and established business” because an agency relationship existed between TCT
and ATC or ATC’s employees.79 In support, WPI notes that TCT: shipped millions of products
per year to ATC; provided detailed instructions to ATC employees tasked with inspecting the
products and making them commercial ready; supervised and reviewed issues with the supply
chain; and worked with ATC to improve processes.80 WPI further states that TCT was able to
“access [ATC’s] facilities to review ATC’s processes and work.”81
TCT argues that there was no agency relationship between TCT and ATC.82 Though TCT
had the right to inspect its product held by a third-party, it argues this is standard and “merely
reflective of the ordinary desire of manufacturers to set sufficient minimum performance and
quality standards.”83 TCT emphasizes that this practice is “reasonable and customary” in the
industry and is insufficient to show day-to-day control of the ATC’s operation.84 TCT argues that
the conduct WPI focuses on (e.g. providing “kitting” instructions and visiting ATC to review
79 Pl.’s Suppl. Br., Doc. No. 189 at 11-15.
80 Id. at 11-14.
81 Id. at 13.
82 Defs.’ Suppl. Br., Doc. No. 191 at 3-6.
83 Defs.’ Suppl. Br., Doc. No. 191 at 6 (citing Westport Fuel Systems Canada Inc. v. Ford Motor Co., No. 2:21-CV-
00453-RWS, 2022 WL 4280490, at *2 (E.D. Tex. Sep. 15, 2022)); See Venable Dep., Ex. 2, Doc. No. 191-3 at
16:12-22.
84 Id.; See Venable Dep., Ex. 2, Doc. No. 191-3 at 16:12-25.
procedural issues) is simply “TCT and ATC’s cooperation in delivering quality products, required
under the Master Services Agreement.”85
As an initial matter, the fact that TCT shipped products into ATC in Texas and had no
locations of their own86 cannot establish venue for TCT in this district under § 1400(b). Case
precedent is consistent in holding that the place of business of a distributor, without more, cannot
establish venue for its supplier under § 1400(b). See, e.g., Emed Techs. Corp. v. Repro-Med Sys.,
No. 2:17-CV-728-WCB-RSP, 2018 U.S. Dist. LEXIS 93658, at *10 (E.D. Tex. June 4, 2018)
(collecting cases); Wet Sounds, Inc. v. PowerBass USA, Inc., No. CV H-17-3258, 2018 U.S. Dist.
LEXIS 64600, 2018 WL 1811354, at *2 (S.D. Tex. Apr. 17, 2018).
Next, ATC’s adherence to quality control standards set out by TCT is insufficient to
establish that TCT had the requisite interim control over ATC or ATC employees necessary to
create an agency relationship. See In re Google LLC, 949 F.3d at 1345 (stating that “[t]he power
to give interim instructions distinguishes principals in agency relationships from those who
contract to receive services by persons who are not agents.”); Restatement (Third) of Agency §
1.01(f)(1); see In re Volkswagen Grp. of Am., 28 F.4th at 1209. There is no evidence that TCT
could direct the ATC employees to perform their work in another part of the building nor was ATC
required to inform TCT of where in the building the “kitting” was being performed. See Fractus,
2018 U.S. Dist. LEXIS 244831, at *13. TCT also had no control over ATC’s employees outside
of providing “kitting” and inspection requirements. See Coffey v. Fort Wayne Pools, 24 F. Supp.
2d 671, 677 (N.D. Tex. 1998) (stating that to prove an agency relationship exists, there must be
evidence from which the court could conclude that “the alleged principal had the right to control
both the means and the details of the process by which the alleged agent was to accomplish the
85 Id. at 4.
86 (Pl.’s Suppl. Br., Doc. No. 189 at 11-12, 14)
task.”) (emphasis added) (quoting In re Carolin Paxson Advertising, Inc., 938 F.2d 595, 598 (5th
Cir. 1991)). TCT had no hiring or firing authority over ATC or its employees. See Fractus, 2018
U.S. Dist. LEXIS 244831, at *12-13. There is no evidence that TCT had control over breaks or
any other task to be completed by ATC employees, including whether and how to inspect devices
for other clients of ATC. See In re Volkswagen Grp. of Am., 28 F.4th at 1209. Although ATC
employees performed “kitting” and device inspections according to requirements provided by
TCT,87 such activities are in accordance with the Master Services Agreement “to ensure inventory,
quality, process and business controls are maintained” in the services performed by ATC.88 TCT’s
inspection requirements (e.g. viewing distance, position, and time) and requests for updates as to
“how many were inspected and what the findings were” does not constitute the kind of interim
control over ATC’s employees necessary to establish the existence of an agency relationship.89
Moreover, although a contractual statement as to the existence of an agency relationship is
not definitive, it is some evidence a court may consider in determining the nature of the
relationship. W. Michael Garner, 2 Franch. & Distr. Law & Prac. § 9:42 (2021) (stating “[w]here
a contract establishes an independent contractor relationship rather than an agency relationship and
does not grant the principal control over the details of the contractor’s work, then evidence must
be produced to show that despite the contract terms, a true relationship between the parties gave
the principal a right of control.”). Here, the Master Services Agreement between TCT and ATC
labels the relationship as one of independent contractor and not one of agency.90 WPI has not
shown that despite the contract terms, an agency relationship existed giving TCT the right of
control. See Garner, 2 Franch. & Distr. Law & Prac. § 9:42.
87 (See Pl.’s Suppl. Br., Doc. No. 189 at 3-4)
88 See Master Services Agreement, Doc. No. 189-2 at 9.
89 See Pl.’s Suppl. Br., Doc. No. 189 at 3.
90 Master Services Agreement, Doc. No. 189-2 at 5.
In sum, WPI failed to show that TCT had the requisite “interim control” over ATC that an
agency relationship requires. See In re Volkswagen Grp. Of Am., 28 F.4th at 1209. Accordingly,
WPI failed to show that the ATC facility was the place “of” the Defendants or that TCT conducted
“regular and established business” at the facility through ATC or its employees as agents acting
for a principal. See In re Cray, 871 F.3d at 1362-63.
V. Transfer or Dismissal
Because venue is not proper in the Eastern District of Texas, the Court must either dismiss
the case or transfer it to any district or division in which it could have been brought. 28 U.S.C. §
1406(a). “The decision whether a transfer or dismissal is in the interest of justice rests within the
sound discretion of the district court.” Personal Audio LLC v. Google, Inc., 280 F. Supp. 3d at 936
(internal quotations omitted). However, transfer is usually preferred over dismissal as transfer is
considered more in the interest of justice. Id.; see Parallel Network Licensing LLC v. Arrow
Electronics, Inc., No. 4:21-CV-00714, 2022 WL 1597364, at *6 (E.D. Tex. May 19, 2022); see
also Realtime Data LLC, 2018 WL 4599582, at *4 (transferring case in the interest of justice rather
than dismissing it because plaintiff would have been penalized by losing years of damages if forced
to refile).
Here, it is in the interest of justice to transfer the case under § 1406(a). As the case was
initiated in 2015, much time has elapsed, and dismissal risks barring parties from refiling valid
claims. See Evs Codec Techs., LLC v. Zte Corp. et al., No. 2:18-CV-00344-JRG, Doc. No. 38
(E.D. Tex. Jan. 10, 2019) (finding transfer over dismissal was in the interest of justice because
“[p]laintiff could not have had knowledge that its venue facts would not support proper venue at
the time it filed the complaint”). TCT defendants are Delaware corporations with regular and
established places of business in Irvine, California.?' Thus, venue is proper in the Central District
of California.
Conclusion
Based on the foregoing, the Court GRANTS-IN-PART Defendant TCT’s Motion to
Transfer for Improper Venue, or Alternatively, to Dismiss (Doc. No. 168). It is ORDERED that
the above-styled case be TRANSFERRED to the Central District of California.
So ORDERED and SIGNED this 19th day of July, 2023.
K. food ur
UNITED STATES MAGISTRATE JUDGE
°! Defs.’ Mot. to Transfer, Doc. No. 168 at 1, 9; Defs.’ Reply, Doc. No. 175 at 5.
25