Case: 1:16-cv Document #: 45 Filed: 08/03/17 Page 1 of 7 PageID #:189

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1 Case: 1:16-cv Document #: 45 Filed: 08/03/17 Page 1 of 7 PageID #:189 UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION SAMUEL LIT, Plaintiff, v. No. 16 C 7054 Judge Thomas M. Durkin ZAZZLE INC., Defendant. ORDER Zazzle Inc. s motion to dismiss for improper venue [38] is granted in part and denied in part, in that the Court finds that venue is improper in this district, but will not dismiss the case on that basis, and instead orders the parties to determine, either by agreement or motion, the proper district to which the case should be transferred pursuant to 28 U.S.C. 1406(a). If agreement can be reached, the parties should file an agreed motion for transfer and submit a proposed order. If the parties are unable to reach agreement, Zazzle should file a motion seeking transfer to its desired venue by 9/1/17; with Lit s response due 9/15/17; and no reply permitted. The status hearing set for 8/4/17 is vacated. Status hearing set for 9/22/17. STATEMENT Zazzle Inc. moves to dismiss Samuel Lit s patent infringement case for improper venue pursuant to Federal Rule of Civil Procedure 12(b)(3). Venue in a patent infringement case is governed by 28 U.S.C. 1400(b), which provides that

2 Case: 1:16-cv Document #: 45 Filed: 08/03/17 Page 2 of 7 PageID #:190 any such action may be brought in the judicial district where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business. I. History of Interpretation of 1400(b) In 1957, the Supreme Court interpreted 1400(b) s use of the word resides to mean a corporation s state of incorporation. See Fourco Glass Co. v. Transmirra Prods. Corp., 353 U.S. 222, 226 (1957). The Court distinguished 1400(b) from the general venue statute, 28 U.S.C. 1391(c), which defined residence more broadly as any judicial district in which [a corporation] is incorporated or licensed to do business or is doing business. See Fourco, 353 U.S. at 223. The Court held that 1391(c) s reference to for venue purposes did not mean that Congress intended 1391(c) s broader definition of residence to be incorporated into 1400(b). Id. at 226. In 1988, Congress amended the general venue statute 1391(c) to provide that [f]or purposes of venue under this chapter, a defendant that is a corporation shall be deemed to reside in any judicial district in which it is subject to personal jurisdiction at the time the action is commenced. See TC Heartland LLC v. Kraft Foods Group Brands LLC, 137 S. Ct (2017) (citing Judicial Improvements and Access to Justice Act, 1013(a), 103 Stat. 4669). Shortly thereafter, the Federal Circuit held that this new definition s inclusion of the phrase under this chapter, meant that Congress intended the definition to also apply to 1400(b), which is in the same chapter as 1391(c), and justified a departure from the Supreme Court s 2

3 Case: 1:16-cv Document #: 45 Filed: 08/03/17 Page 3 of 7 PageID #:191 holding in Fourco. See VE Holding Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574, 1578 (Fed. Cir. 1990). On the basis of the Federal Circuit s decision in VE Holdings, many courts found venue to be proper in patent infringement cases in states that were not the defendant corporation s place of incorporation but in which the defendant corporation was subject to the court s personal jurisdiction. See, e.g., Original Creations, Inc. v. Ready Am., Inc., 836 F. Supp. 2d 711, 719 (N.D. Ill. 2011). Congress again amended 1391 in 2011 such that its language is now closer to what it was in 1957 when the Supreme Court decided Fourco. The Section currently provides that, [e]xcept as otherwise provided by law.... this section shall govern the venue of all civil actions brought in district court of the United States, 1391(a), and that 1391(c) applies [f]or all venue purposes. Despite the similarity of this statutory language to that analyzed by the Supreme Court in Fourco, the Federal Circuit, in reviewing the 2011 amendments, reaffirmed its holding in VE Holdings that 1400(b) s definition of resides incorporates 1391 s definition of residence based on personal jurisdiction. See In re TC Heartland LLC, 821 F.3d 1338, 1343 (Fed. Cir. 2016). This past May, the Supreme Court reversed the Federal Circuit. The Court first noted that Congress has not amended 1400(b) since Fourco. TC Heartland, 137 S. Ct. at The Court reasoned that the current language of 1391 removes the under this chapter language that was key to the Federal Circuit s analysis in VE Holdings, and returns to language substantially similar to the for venue 3

4 Case: 1:16-cv Document #: 45 Filed: 08/03/17 Page 4 of 7 PageID #:192 purposes at issue in Fourco in TC Heartland, 137 S. Ct. at Additionally, the current 1391(a) includes a savings clause providing that its provisions apply except as otherwise provided by law. For these reasons, the Court held that Congress did not change[] the meaning of 1400(b) when it amended 1391, TC Heartland, 137 S. Ct. at 1520, and residence in 1400(b) refers only to the State of incorporation. Id. at II. Waiver Zazzle argues that this Court should dismiss the case for improper venue based on TC Heartland because Zazzle is not incorporated in Illinois. (Lit does not contend that venue is proper under the other clause of 1400(b) regarding place of infringement and established place of business.) Lit argues that Zazzle waived the improper venue argument by not raising it in the motion to dismiss for failure to state a claim pursuant to Rule 12(b) that Zazzle filed on September 6, 2016, R. 13. That motion was fully briefed on October 31, 2016, R. 29, and the parties presented an off the record tutorial regarding the technology at issue on February 7, The motion is still pending. A party waives the defense of improper venue by omitting it from a motion under Rule 12(b) if it was available to the party at the time the motion was made. Fed. Rs. Civ. P. 12(h)(1)(A), (g)(2) (emphasis added). Zazzle argues that TC Heartland constitutes an intervening change in law that was not available to it at the time it made its first Rule 12 motion. R. 39 at 8. 4

5 Case: 1:16-cv Document #: 45 Filed: 08/03/17 Page 5 of 7 PageID #:193 There is authority supporting both sides of the waiver issue. See, e.g., The Chamberlain Group, Inc. v. Techtronic Indust. Co. Ltd., 2017 WL , at *1 (N.D. Ill. June 28, 2017) (finding waiver because [t]he conflict between Fourco and VE Holding was a defense that was available to Moving Defendants just as easily as it was to the plaintiff in TC Heartland ); Westech Aerosol Corp. v. 3M Co., 2017 WL , at *2 (W.D. Wash. June 21, 2017) (finding no waiver because TC Heartland abrogated approximately 27 years of patent law precedent ). But the Court need not choose a side, because Zazzle s original motion to dismiss is still pending. According to the Seventh Circuit, a party that files a Rule 12(b) motion and fails to raise the issue of improper venue can avoid waiving that issue if the party supplements its motion before the... court [takes] up the matter. Fed. Deposit Ins. Corp. v. Hartford Ins. Co. of Ill., 877 F.2d 590, 591 (7th Cir. 1989) (citing Bechtel v. Liberty Nat. Bank, 534 F.2d 1335, 1341 n.8 (9th Cir. 1976) ( Rule 12(h)(1)... does not in any way prevent a judge in his discretion from permitting a party to expand the grounds of motion well in advance of a hearing. )); see also Myers v. Am. Dental Ass n, 695 F.2d 716, 721 (3d Cir. 1982) (distinguishing cases that involved situations where a pre-answer motion was amended or supplemented prior to argument before the district court from cases in which the defense of personal jurisdiction was not raised before the district court until after argument and after the court rendered its decision on the motion ) (emphasis in original). District courts have also followed this rule. See Cross v. Simons, 729 F. Supp. 588, 590 n.1 (N.D. Ill. 1989) ( Such an amendment was properly allowed given that the 5

6 Case: 1:16-cv Document #: 45 Filed: 08/03/17 Page 6 of 7 PageID #:194 court had not yet ruled on the defendants motion to dismiss and that the plaintiff was given an opportunity to respond to the newly asserted defense. ); Friedman v. World Transp., Inc., 636 F. Supp. 685, 688 (N.D. Ill. 1986) ( That the venue defense was presented in the amended motion to dismiss rather than in the original one filed three days sooner presents no problem. A party can amend a motion to dismiss to raise an omitted ground if he or she acts promptly and before the court rules on the original motion. ); Styles v. Triple Crown Pubs., LLC, 2012 WL , at *3 (D. Md. May 30, 2012) ( The Court will permit the Defendants to amend the motion to dismiss. The Court has not ruled on the first motion to dismiss, and Styles will have the opportunity to respond to the amended motion. Thus, Styles will not suffer any prejudice. ); Remley v. Lockheed Martin Corp., 2001 WL , at *3 (N.D. Cal. June 4, 2001) ( [S]everal cases hold that a defendant can amend a pending Rule 12 motion to include a waivable defense provided the amendment is made before the hearing before the district court and as soon as possible. ). To the extent that prompt amendment is a requirement to avoid waiver, the Court finds that Zazzle s filing of a motion raising improper venue within a month of the Supreme Court s decision in TC Heartland is sufficiently prompt as this case has not progressed past the pleading stage. III. Transfer Zazzle asks the Court to dismiss the case because venue is not proper in this district. But under 28 U.S.C. 1406(a) the Court shall... if it be in the interest of justice, transfer [the] case to any district or division in which it could have been 6

7 Case: 1:16-cv Document #: 45 Filed: 08/03/17 Page 7 of 7 PageID #:195 brought. This statute is designed to ensure that the claims [will] be deemed timely in the proper venue. Granger v. Rauch, 388 Fed. App x 537, 541 (7th Cir. 2010). Not being apprised as to whether a refiling of this action would be timely, the Court will transfer the case. ENTERED: Dated: August 3, 2017 Honorable Thomas M. Durkin United States District Judge 7