Smart Wearable Technologies Inc. v. Huawei Technologies USA Inc.

Since the US Supreme Court issued its decision in TC Heartland v. Kraft Foods Group Brands, RPX has seen an upswing in venue-related filings by both plaintiffs and defendants—with indications that some NPEs may be throwing in the towel on Texas, while others are seemingly digging in. Defendants have also begun to adapt their defensive strategies, asserting more comprehensive interpretations of the patent venue statute and proactively maintaining their right to bring venue challenges down the road.

TC Heartland returned a key portion of the patent venue statue, one that allows infringement suits to be brought where a defendant corporation “resides”, to its prior interpretation: such a defendant “resides” only in its state of incorporation. Although venue is still proper under the same statute where a defendant has “committed acts of infringement” and has “a regular and established place of business”, the ruling could significantly limit available venues—potentially impacting both new filings and existing lawsuits.

RPX has been tracking activity in each of those categories since TC Heartland issued. To receive RPX’s new daily transfer alert email summarizing all transfer motions and orders, subscribe here.

Evolving NPE Responses

Conceding to Transfer

RPX has seen a variety of cases in which NPEs, including prolific Texas plaintiffs, have simply conceded the issue of venue since TC Heartland issued. On May 30, Texas-based Monument Patent Holdings, LLC subsidiary Visual Effect Innovations, LLC stipulated to the transfer of its case against NVIDIA (a Delaware corporation headquartered in Santa Clara) from the Eastern District of Texas to the Northern District of California. The parties’ joint stipulation explicitly cited TC Heartland. Texas plaintiff Hypermedia Navigation LLC, an affiliate of monetization firm IP Valuation Partners LLC, made a similar concession in its case against Yahoo (a Delaware corporation headquartered in Sunnyvale), with both parties filing a joint motion to transfer that lawsuit to the same California district. Both Monument and IP Valuation Partners have both taken advantage of the Eastern District of Texas through the formation of multiple NPEs in the state, each designed to wage a single campaign in the Eastern District. RPX will continue to monitor whether those patterns continue as the effects of TC Heartland become clearer.

Picking New Venues

Other plaintiffs have fought back by dismissing existing cases and re-filing in districts where they consider venue to be proper under the Court’s decision. For example, prolific litigant IP Edge LLC (the top filer in 2017 thus far) has begun to shift its assertion efforts outside Texas. Just three days after TC Heartland issued, the NPE’s affiliate Venadium LLC filed five new cases in the Northern District of Illinois: three against Paylocity, State Farm Mutual Automobile Insurance, and W.W. Grainger—each alleged to reside in that district—as well as two cases against Delaware entities Allstate Insurance and Hyatt Hotels that are alleged to have a principal office in Illinois.

Additionally, Iron Oak Technologies LLC voluntarily dismissed two of its Northern District of Texas cases on June 1, conceding that it is “unaware” of defendants Acer (incorporated in California) or Lenovo (incorporated in Delaware) “having a regular and established place of business” in that district. (See here for the stipulation of dismissal as to Acer, and here for the one pertaining to Lenovo.) That same day, the NPE then filed new actions against both defendants in the Western District of Texas, attaching to its complaints evidence that each has a remote office in the district. Similarly, Express Mobile, Inc.—faced with an existing motion to dismiss due to improper venue brought by defendant Alpine Consulting—notified the district court on the day that TC Heartland was published that it would not oppose that motion. Also that day, the NPE then filed a new case against Alpine in the Northern District of Illinois.

INVT SPE LLC, an NPE controlled by Fortress Investment Group LLC (which took over a campaign started by Inventergy, Inc.) followed that same strategy. On May 25, it both dismissed two suits filed against Apple and HTC in February (one each in the Eastern District of Texas) and filed two new suits against the two defendants in the District of New Jersey. While the previous complaints merely contained short, boilerplate language to establish venue, the new filings make specific allegations supporting its contention that venue is proper in New Jersey, including that the companies have retail locations in New Jersey, have employees in that state that interact with wireless carriers there, and actively list job openings in that district. (See here for the complaint against Apple, and here for the one against HTC.)

Doubling Down on Texas

While some NPEs have attempted to get ahead of TC Heartland, some have doubled down on their venues of choice—particularly the notoriously plaintiff-friendly Eastern District of Texas. A notable example occurred toward the end of last week, when Australian NPE Uniloc Corporation Pty. Limited filed a new set of complaints, some amended and others original, in the Eastern District against Google. While its previous pleadings had dedicated scarcely a paragraph or two to venue, Uniloc’s newest filings provide expansive venue-related allegations spanning over thirty pages. (See here for one of the new complaints against Google.) The NPE now prefaces its venue pleadings with a lengthy accounting of the defendant’s supposed connections to the Eastern District, listing a wide variety of Google products made available and supposedly used by customers there along with other alleged connections to the forum, including Google business locations, data collection efforts, and even its provision of services measuring traffic conditions. Uniloc has not felt the need for such extensive venue-related pleading in all of its new cases in the Eastern District—a new round of cases against Apple, also brought last week, contain the NPE’s more standard, minimal venue language.

Roping in Foreign Defendants

RPX has also begun to see early examples of cases addressing the issue of venue for foreign defendants, which the Supreme Court explicitly declined to discuss in TC Heartland. On May 31, CyWee Group Ltd., a British Virgin Islands entity affiliated with Industrial Technology Research Institute (ITRI), sued LG Electronics (LGE) in the Southern District of California along with two of its US subsidiaries, LG Electronics Mobilecomm USA (LGEMU) and LG Electronics USA (LGEUSA). The NPE’s complaint asserts that venue is proper in that district for LGEMU based on its incorporation in California. CyWee then pleads that LGEMU is an agent of LGEUSA, noting several ways that those entities have allegedly been equated with LGE in public communications. Venue is alleged to be proper against the South Korean corporate parent both because “it is not a resident of the United States and may, therefore, be sued in any judicial district” and because it has a “regular and established place of business” in the district through its purported agents (and has allegedly committed acts of infringement in the district).

Evolving Defensive Strategies

Moving Beyond Residence

While venue motions filed in the immediate wake of TC Heartland focused on corporate residence, RPX has more recently seen an increasing number of defendants asserting improper venue due to the lack of a “regular and established place of business” in the original district. One such example occurred this past week in the sprawling campaign waged by Realtime Data LLC. Less than two weeks after a jury in the Eastern District of Texas awarded the NPE $4.32M in a trial against Riverbed Technologies, that same defendant filed a declaratory judgment action against Realtime Data in the Northern District of California. In the new complaint, Riverbed pleads that because it is not incorporated in Texas and does not have a “regular and established place of business” in the Eastern District of Texas, venue is not proper there. Meanwhile, Realtime Data faces reinvigorated venue challenges in other cases in its Texas campaign, including a motion to dismiss for improper venue or transfer to the District of Colorado brought by Spectra Logic (under a TC Heartland theory, prior to the decision’s issuance), a motion to dismiss for improper venue filed by Barracuda Networks, and a motion to dismiss for improper venue filed by Carbonite. In addition, on May 30, Huawei challenged the choice of venue in a case brought by Smart Wearable Technologies Inc., a subsidiary of Wi-LAN Inc. (which changed its name to Quarterhill Inc. on June 1 as part of a business re-organization and shift away from patent assertion). That motion alleges that venue is not proper in the Western District of Virginia, asserting that as a Texas corporation, defendant Huawei Technologies does not reside in the Western District of Virginia. Huawei also argues that it lacks a “regular and established place of business” in that district.

Additionally, some defendants have tacked venue challenges onto motions to dismiss for pleading inadequacies, arguing that the plaintiff had not sufficiently pled acts of infringement anywhere, much less in the suit’s venue. On May 25, Apple filed a Rule 12 motion to dismiss in a case brought against it by Prowire LLC in the District of Delaware. The company asserts that the NPE has not plausibly alleged infringement of the asserted claims, making that venue improper as a result because venue is only proper in a district where the defendant has “committed acts of infringement and has a regular and established place of business”. A similar argument was asserted by Lowes in a June 1 motion to dismiss filed against Monument Patent Holdings, LLC subsidiary Clean Energy Management Solutions, LLC.

At least one defendant has withdrawn a prior motion to change venues for convenience in light of TC Heartland. For example, on June 5, District Judge Robert W. Schroeder, III granted Dell’s motion to withdraw such a motion in a case filed against it by Cypress Lake Software, Inc., in favor of a future motion to dismiss for improper venue, which need not address the relative convenience of the two districts or public interest factors.

Prevention of Waiver

One potential consequence of TC Heartland is that defendants relying on the previous definition of corporate residence may have waived their ability to challenge venue in existing suits. RPX has seen parties proactively preserve their ability to challenge waiver in pleadings and motions, both since TC Heartland and in the months leading up to the decision, with defendants sometimes explicitly stating that they have reserved those rights in anticipation of TC Heartland. Two days after TC Heartland was decided, STMicro filed a motion to dismiss an Eastern District of Texas case that Semcon IP Inc. (a subsidiary of Quest Patent Research Corporation) brought against it roughly one year ago. Heading off any waiver argument, STMicro notes that it pled improper venue as an affirmative defense in its answer to Semcon IP’s complaint, that the TC Heartland theory was not available before May 22, and that, once the decision came down, it filed its motion within two days. A similar argument was raised by NVIDIA in the transfer motion that it filed in the Texas Visual Effect Innovations case, with a footnote expressly stating it had not conceded proper venue by seeking a transfer for convenience and reserving the right to object after TC Heartland was decided.

Wi-LAN Inc. (WiLAN) subs North Star Innovations Inc. and Smart Wearable Technologies Inc. continue to add new defendants to their respective campaigns. On November 14, North Star filed suit against Integrated Device Technology (IDT) (8:16-cv-02055 ), accusing the company of infringing a group of patents acquired from Freescale. The accused products include various semiconductor memory devices. Also on November 14, Smart Wearable Technologies sued Fitbit (3:16-cv-00077) over a former Barron Associates patent. These latest suits follow WiLAN’s recent announcement of disappointing Q3 earnings.

North Star’s complaint against IDT asserts three patents, all of which the NPE has previously litigated: 5,781,480 (asserted against Cypress Semiconductor in May); 6,093,972 (asserted against Advanced Semiconductor Engineering and Texas Instruments in October); and 6,465,743 (asserted against Texas Instruments last month). The patents issued to Motorola between 1998 and 2002, with estimated priority ranging between 1994 and 1998, and were transferred to North Star in an October 2015 deal with Freescale that reportedly involved over 3,300 patents.

To date, North Star has sued more than 25 companies over patents acquired from Freescale. Defendants include makers of mobile devices and e-readers (Amazon, HTC, Sony), cameras (Canon, GoPro, Nikon), and televisions (Sharp); videoconferencing companies (Polycom and Vidyo); and manufacturers of semiconductors and memory chips (Cypress Semiconductor, UMC, Xilinx). For an assessment of the NPE’s largest litigation campaign, see RPX Insight.

Smart Wearable’s suit against Fitbit, its first new case since launching its campaign in July, asserts a patent (6,997,882) generally related to monitoring a subject based on physiological and six degree-of-freedom (“6-DOF”) data. The ‘882 patent issued in February 2006 to Barron Associates, comprises a single-member family, and has an estimated priority date in December 2001. RPX has published a prior art search report concerning the patent, a copy of which can be accessed here.

As in Smart Wearable’s suits against ASUS, Microsoft, TCL, and Tom Tom, all filed in July 2016, the NPE accuses Fitbit of infringement through provision of fitness trackers. While Smart Wearable’s case against TCL appears to be winding down—the parties recently moved for a stay to allow time to finalize a settlement agreement—ASUS and Microsoft have each filed Rule 12 (b)(6) motions to dismiss (neither of which have yet been heard), and the case against TomTom is open in initial pleadings.

On November 3, WiLAN announced its Q3 2016 earnings, reporting lower revenue and net income compared to the same quarter last year. For details, see “Acacia’s Revenue Soars, and WiLAN’s Slumps, in Q3 2016” (November 2016). RPX periodically reports on the performance and activities of publicly traded NPEs, including WiLAN. The company’s most recent Public PAE Report, covering Q2 2016, can be accessed here.