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Blackbird Tech LLC v. Cloudflare, Inc.

United States District Court, D. Delaware

October 11, 2017

BLACKBIRD TECH LLC d/b/a BLACKBIRD TECHNOLOGIES, Plaintiff,
v.
CLOUDFLARE, INC., Defendant. BLACKBIRD TECH LLC d/b/a BLACKBIRD TECHNOLOGIES, Plaintiff,
v.
FASTLY, INC., Defendant.

          MEMORANDUM OPINION

          Goldberg, J.

         Plaintiff Blackbird Technologies (“Blackbird”) has brought the present actions against Defendants Cloudflare Inc. (“Cloudflare”) and Fastly, Inc. (“Fastly”) alleging patent infringement in connection with Blackbird's U.S. Patent No. 6, 453, 335 (the “‘335 patent”), entitled “Providing an Internet Third Party Data Channel.” Defendants have jointly moved to transfer venue to the United States District Court for the North District of California. As I find the balance of conveniences weighs in favor of transfer to the Northern District, I will grant the Motions.

         I. FACTS AS SET FORTH IN THE AMENDED COMPLAINTS

         A. The Underlying Patent Claim

         According to the Amended Complaints filed in both actions, the ‘335 patent represents an improvement to the technologies that make the internet work. The invention is more fully described as follows:

         Prior to the ‘335 patent, internet communication protocols, such as the hypertext transfer protocol (HTTP), allowed for the exchange of data, such as documents encoded in the hypertext markup language (HTML), over the internet. These protocols generally permitted only two parties to the communication, the client and the server. As a result, third-party participation in the existing client-server communications was problematic. (Am. Compl., No. 17-283, ¶ 10; Am. Compl., No. 17-284, ¶ 10.)

         The inventions claimed in the ‘335 patent constitute novel ways of providing an internet third-party data channel, address shortcomings of existing internet communications protocols, and extend those protocols to communications involving three parties. These results are achieved by introducing a distinct processing device, located physically and logically between the client and server, which monitors client-server data communications having predetermined properties, such as HTTP status codes. Upon detection of such communications, the device accesses a distinct data source to obtain third-party data, modifies or replaces the original data communication in response to the third-party data, and then provides the resulting data communication to the intended recipient. (Am. Compl., No. 17-283, ¶ 11; Am. Compl., No. 17-284, ¶ 11.)

         In March 2017, Blackbird sued both Cloudflare and Fastly for infringing the ‘335 patent. The Amended Complaints in both cases allege that Defendants infringe one or more claims of the ‘335 patent by importing, making, using, selling, and/or offering to sell certain web content systems and services as part of their content delivery networks. (Am. Compl., No. 17-283, ¶ 12; Am. Compl., No. 17-284, ¶ 12.)

         B. The Parties

         Plaintiff Blackbird is a Delaware LLC formed on July 1, 2014, with its principal place of business in Concord, Massachusetts. Blackbird obtains rights to patents and uses its in-house expertise to litigate patent claims at reduced costs. According to the company's web page, Blackbird's “team” includes twelve individuals, none of whom reside in Delaware. (Am. Compl., No. 17-283, ¶ 1; Decl. of Grayson Cassada (“Cassada Decl.”), Exs. 1, 3-22.)

         Defendant Cloudflare is a Delaware corporation with its principal place of business in San Francisco, California. Cloudflare provides content-delivery, proxy, and DNS services to customers in the United States and around the world. (Decl. of Chris Merritt (“Merritt Decl.”) ¶ 4.) The Amended Complaint accuses Cloudflare of maintaining a network of data centers- many of which are in the United States-that contain processing devices for monitoring data communications between user systems and origin services. (Am. Compl., No. 17-283, ¶¶ 15, 18.) In general, when a customer signs up and activates Cloudflare's services, internet users cease connecting with customer servers and are instead directed to an IP address that establishes a connection to a Cloudflare server. These servers are responsible for much of the accused functionality at the center of the patent infringement claim. (Merritt Decl. ¶¶ 4, 6.)

         Defendant Fastly is also a Delaware corporation with its principal place of business in San Francisco, California. (Decl. of Charles Neerdaels (“Neerdaels Decl.”), ¶ 3.) The infringement allegations against Fastly are largely identical to those against Cloudflare. (Am. Compl., No. 17-284, ¶¶ 15, 18.)

         C. Procedural History

         Plaintiff initiated suit against Defendants on March 16, 2017. On May 26, 2017, this case was reassigned to the undersigned's docket.[1] On June 20, 2017, Cloudflare filed a Motion to Transfer Venue to the United States District Court for the Northern District of California. Fastly thereafter filed a Motion to Transfer and Joinder in Cloudflare's Motion to Transfer Venue. Plaintiff responded to both Motions on August 3, 2017, and Cloudflare filed a reply brief on August 10, 2017. I held oral argument on the Motion on September 21, 2017.

         II. STANDARD FOR TRANSFER OF VENUE

         Under 28 U.S.C. § 1404(a), a district court may transfer an action to any other district “where it might have been brought” if this transfer is “for the convenience of parties and witnesses” and “in the interest of justice.” 28 U.S.C. § 1404(a); see also In re Genentech, Inc., 566 F.3d 1338, 1341-42 (Fed. Cir. 2009). The determination of whether to transfer venue pursuant to § 1404(a) is governed by federal law. See Jumara v. State Farm Ins. Co., 55 F.3d 873, 877-878 (3d Cir. 1995).

         Analysis of a request for a § 1404(a) transfer has two components. First, both the original venue and the requested venue must be proper. Jumara, 55 F.3d at 879. Venue in a patent infringement action is governed solely and exclusively by the patent venue statute, 28 U.S.C. § 1400(b). See TC Heartland LLC v. Kraft Foods Grp. Brands LLC, 137 S.Ct. 1514, 1519 (2017). In such a case, venue is proper both where a corporate defendant “resides” and “where the defendant has committed acts of infringement, and has a regular and established place of business.” Bristol-Myers Squibb Co. v. Mylan Pharms., Inc., No. 13-379, 2017 WL 3980155, at *1 (D. Del. Sept. 11, 2017) (summarizing 28 U.S.C. § 1400(b)).

         Second, the purpose of allowing § 1404(a) transfers is “‘to prevent the waste of time, energy and money and to protect litigants, witnesses and the public against unnecessary inconvenience and expense.'” Mosaid Techs., Inc. v. Sony Ericsson Mobile Commc'ns (USA), Inc., 885 F.Supp.2d 720, 723 (D. Del. 2012) (quoting Van Dusen v. Barrack, 376 U.S. 612, 616 (1964)). Accordingly, the court must undertake a balancing test comprised of various public and private interest factors. Jumara, 55 F.3d at 879. The burden falls on the moving defendant to show the desirability of transferring venue. Boston Sci. Corp. and Boston Sci. SciMed, Inc. v. Cook Grp. Inc. and Cook Med. LLC, No. 15-980, 2017 WL 3996110, at *4 (D. Del. Sept. 11, 2017).[2]

         Analyses of transfers under § 1404(a) are “flexible and must be made on the unique facts of each case.” Job Haines Home for the Aged v. Young, 936 F.Supp. 223, 227 (D.N.J. 1996) (internal quotations omitted). In weighing the various factors, the court should not grant a motion to transfer unless the moving party can demonstrate that the transferee venue is “clearly more convenient” than the venue chosen by the plaintiff. In re Nintendo Co., Ltd., 589 F.3d 1194, 1197 (Fed. Cir. 2009) (quotations omitted). Such motions are “not to be liberally granted.” Intellectual Ventures I LLC v. Altera Corp., 842 F.Supp.2d 744, 750 (D. Del. 2012) (quoting Shutte v. Armco Steel Corp., 431 F.2d 22, 25 (3d Cir. 1970) (internal quotation marks omitted)). Nonetheless, the court's discretion is broad in deciding whether to transfer. See Plum Tree, Inc. v. Stockment, 488 F.2d 754, 756 (3d Cir. 1973).

         III. DISCUSSION

         Defendants move to transfer this case, pursuant to 28 U.S.C. § 1404(a), to the United States District Court for the Northern District of California. Plaintiff challenges any venue transfer, alleging that: (1) the case could not have been brought in the Northern District of California; and (2) the Jumara factors weigh against transfer. Considering each argument individually, I find that transfer is both possible and proper.

         A. Whether the Case Could Have Been Brought in the Northern District California

          Section 1404(a) permits the court to transfer an action to “any other district or division where it might have been brought.” 28 U.S.C. § 1404(a). “Accordingly, the court may only transfer to . . . [another district] if venue would have been proper there and if that district court could have exercised personal and subject matter jurisdiction over this action.” Smart Audio Techs., LLC v. Apple, Inc., 910 F.Supp.2d 718, 728 (D. Del. 2012) (citing 17 James Wm. Moore et al., Moore's Federal Practice § 111.12[b] (3d ed. 2012)).

         Venue in patent infringement suits is governed solely and exclusively by 28 U.S.C. § 1400(b). TC Heartland, 137 S.Ct. at 1519. This statute provides that “[a]ny civil action for patent infringement 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.” 28 U.S.C. § 1400(b).

         The first prong of § 1400(b)-where defendant resides-was recently interpreted by the United States Supreme Court in TC Heartland LLC v. Kraft Foods Grp. Brands LLC, 137 S.Ct. 1514 (2017). Rejecting the notion that a party “resides” where it has its principal place of business, the Court found that for purposes of § 1400(b), a domestic corporation “resides” only in its state of incorporation. Id. at 1521. In the present case, both Cloudflare and Fastly are incorporated in Delaware. As such, venue in the Northern District of California would not be proper under the first prong of § 1400(b).

         The second prong of § 1400(b), not addressed in TC Heartland, contains two prerequisites to establishing proper venue: (1) the defendant must have committed acts of infringement in the proposed district and (2) the defendant must have a regular and established place of business in the proposed district. Magee v. Essex-Tec Corp., 704 F.Supp. 543, 545 (D. Del. 1988). What constitutes an act of infringement is determined by reference to the definition of patent infringement in 35 U.S.C. § 271(a), which states that patent infringement occurs whenever one “without authority makes, uses or sells any patented invention within the United States during the term of the patent therefor.” 35 U.S.C. § 271(a). It is well established that performance of only one of the three statutorily enumerated activities of manufacture, use or sale constitutes patent infringement. Magee, 704 F.Supp. at 545 (citing Roche Products v. Bolar Pharm. Co., 733 F.2d 858, 861 (Fed. Cir. 1984)). In other words, an “act of infringement” may consist of the manufacture, use, or sale of the patented invention. Id. (citing 1 Moore's Federal Practice 0.144[9] at 1509-10 n.39).

         Here, it is undisputed that both Defendants' headquarters are in San Francisco, California, which is where they maintain their regular and established places of business. Thus, the only remaining question, under the second prong of § 1400(b), is whether Defendants committed “acts of infringement” in California. Plaintiff argues that Defendants fail to show that infringement “occurs entirely within the Northern District of California.” (Pl.'s Resp. Opp'n Mot. to Transfer 8.) Plaintiff notes that, under section 1400(b), a method claim is infringed within a district only if the whole system is put into service there. Id. (citing NTP, Inc. v. Research in Motion, Ltd., 418 F.3d 1282, 1318 (Fed. Cir. 2005) (“A method or process consists of one or more operative steps, and, accordingly, ‘[i]t is well established that a patent for a method or process is not infringed unless all steps or stages of the claimed process are utilized.'”)). Plaintiff goes on to contend that claim 8 of the ‘335 Patent is directed to “[a] method for providing an internet third party data channel, ” while claim 24 covers “[a]n apparatus” for doing the same. (Id.) Thus, according to Plaintiff, although some portion of the accused system is located in the Northern District of California, the data channels connecting the various network elements are found throughout the country. (Id. at 9.) Plaintiff therefore urges that California is not clearly the situs of infringement. (Id.)

         Contrary to Plaintiff's argument, not all of the alleged infringing activity needs to have occurred within California so long as some act of infringement took place there. The Amended Complaint alleges that Defendants infringe the ‘335 patent, “by importing, making, using, selling and/or offering to sell certain web content systems and services as part of its content delivery network (‘CDN').” (Am. Compl., No. 17-283, ¶ 13; Am. Compl., No. 17-284, ¶ 13.) It further avers that both Cloudflare's and Fastly's “CDN performs a method, and also includes an apparatus, ‘for providing an internet third party data channel, said party data channel being established within an existing data channel between an internet server and an internet client, said third party data channel connecting a data source distinct from said internet server to said internet client.'” (Id. ¶ 14.)

         According to both Defendants, the “making” of the alleged infringing technology occurred in California. Cloudflare's Chief Revenue Officer, Chris Merritt, has averred that the precise services accused of being infringing were “designed and developed in San Francisco, ” Cloudflare employees who are responsible for “implementing the accused functionality work in San Francisco, ” and “Cloudflare uses the accused functionality from its regular and established place of business in San Francisco.” (Id. ¶¶ 6-7.) Likewise, Charles Neerdaels, Fastly's Senior Vice President of Engineering, has attested to the fact that most of the members of the technical team responsible for the development of Fastly's accused technology reside in San Francisco, and two of the three data centers which Plaintiff alleges to be part of the Content Delivery Network are located in California. (Neerdaels Decl. ¶ 5.) The declarations of Merritt and Neerdaels are uncontested. As such, Defendants make or use the accused functionality in California, thereby constituting “acts of infringement” in satisfaction of § 1400(b). Because Defendants maintain a regular place of business in California and have allegedly committed acts of infringement in California, I find that this case could have been brought in the United States District Court for the Northern District of California.

         B. The ...


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