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Treehouse Avatar LLC v. Valve Corp.

United States District Court, D. Delaware

November 20, 2017

TREEHOUSE AVATAR LLC, Plaintiff,
v.
VALVE CORPORATION, Defendant.

          REPORT AND RECOMMENDATION

          SHERRY R. FALLON JUDGE.

         I. INTRODUCTION

         Presently before the court in this patent infringement action is the motion to dismiss or transfer venue pursuant to Rule 12(b)(3) of the Federal Rules of Civil Procedure and 28 U.S.C. § 1406(a), as well as the motion for leave to amend the answer pursuant to Rules 15(a) and 16(b)(4), filed by defendant Valve Corporation ("Valve"). (D.I. 76) For the following reasons, I recommend that the court grant Valve's motion to transfer this action to the Western District of Washington, and deny without prejudice Valve's motion to amend its answer.

         II. BACKGROUND

         A. Parties

         On May 27, 2015, plaintiff Treehouse Avatar LLC ("Treehouse"), a Delaware corporation headquartered in Ottawa, Canada, filed the present patent infringement action against Valve, alleging infringement of U.S. Patent No. 8, 180, 858 ("the '858 patent"). (D.I. 1 at ¶ 7) Valve is a Washington corporation headquartered in Bellevue, Washington. (Id. at ¶ 2) Valve produces and markets video games including "Team Fortress 2, " "Dota 2, " and "Portal 2, " among others. (Id. at ¶ 13)

         B. Patent-In-Suit

         The '858 patent, entitled "Method And System For Presenting Data Over A Network Based On Network User Choices And Collecting Real-Time Data Related To Said Choices, " was issued on May 15, 2012 to Treehouse as the assignee of inventors Ian N. Robb, Michael B. Madlener, and Ken J. McGuire. (Id. at ¶ 7) The '858 patent is directed to methods of collecting data from an information network in response to user choices of a plurality of users navigating character-enabled ("CE") network sites on the network. (Id. at ¶ 9) For example, in networked video games used through a web browser or computer application accessing a server through the internet, users may select characters and character attributes from data presented to the users in one embodiment. (Id.)

         C. Procedural History

         In response to the filing of the complaint on May 27, 2015, Valve filed a motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure on August 7, 2015. (D.I. 11) On October 30, 2015, Valve filed a motion to transfer venue in accordance with 28 U.S.C. § 1404(a).[1] (D.I. 17) Judge Robinson issued a memorandum opinion on March 22, 2016, denying the motion to dismiss and the motion to transfer. (D.I. 24; D.I. 25) Valve filed its answer on April 5, 2016. (D.I. 26) The deadline to amend pleadings passed on December 9, 2016. (D.I. 31) Presently before the court is Valve's motion to dismiss or transfer venue pursuant to Rule 12(b)(3) and 28 U.S.C. § 1406(a), and motion for leave to amend its answer pursuant to Rules 15(a) and 16(b)(4), which was filed on May 26, 2017. (D.I. 76)

         III. LEGAL STANDARD

         A. Venue

         "The district court of a district in which is filed a case laying venue in the wrong division or district shall 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). In patent infringement actions, venue is proper "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); see TC Heartland LLC v. Kraft Foods Grp. Brands LLC, 137 S.Ct. 1514, 1516 (2017). In Fourco Glass Co. v. Transmirra Products Corp., the Supreme Court concluded that a domestic corporation "resides" only in its state of incorporation for purposes of the first prong of § 1400(b). 353 U.S. 222, 229 (1957). The Supreme Court recently reaffirmed the decision in Fourco, concluding that a corporation resides only in its state of incorporation. TC Heartland, 137 S.Ct. at 1520. In determining whether a defendant has a "regular and established place of business" in Delaware under the second prong of § 1400(b), the words of the statute provide clear guidance, and the Supreme Court has stated that the provisions of § 1400(b) are not to be liberally construed. See Boston Sci. Corp. v. Cook Grp. Inc., C.A. No. 15-980-LPS-CJB, ___ F.Supp.3d ___, 2017 WL 3996110, at *10 (D. Del. Sept. 11, 2017).

         Federal Rule of Civil Procedure 12(b)(3) permits a defendant to file a motion to dismiss for improper venue, although the defense may be waived under Rule 12(h)(1) if it is omitted from a motion filed under Rule 12(g)(2). Fed.R.Civ.P. 12(b)(3); 12(h)(1); 12(g)(2). Following the Supreme Court's recent decision in TC Heartland, many district courts faced circumstances similar to those presently before the court, in which a defendant filed a Rule 12(b) motion prior to the Supreme Court's ruling in TC Heartland, and subsequently moved to dismiss for improper venue under Rule 12(b)(3) by applying the standard set forth in TC Heartland. A split emerged among district courts as to whether the defendant in such circumstances had waived its right to challenge venue, or whether the intervening law exception should apply to permit the Rule 12(b)(3) motion. The Federal Circuit recently resolved the split of authority in In re Micron Technology, Inc., unequivocally stating that "[t]he Supreme Court changed the controlling law when it decided TC Heartland m May 2017." 2017 WL 5474215, at *6 (Fed. ...


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