Opinion
Case No. SA CV 17-1748-DOC (JDEx)
06-22-2018
INTERNATIONAL TECHNOLOGIES AND SYSTEMS CORPORATION v. SAMSUNG ELECTRONICS CO. LTD ET AL
CIVIL MINUTES - GENERAL PRESENT: Deborah Lewman
Courtroom Clerk Not Present
Court Reporter ATTORNEYS PRESENT FOR
PLAINTIFF:
None Present ATTORNEYS PRESENT FOR
DEFENDANTS:
None Present PROCEEDINGS (IN CHAMBERS): ORDER GRANTING DEFENDANTS' MOTION TO DISMISS [29] AND ORDERING SUPPLEMENTAL FILING BY 3:00 P.M. JUNE 22 , 2018
Before the Court is Defendants Samsung Electronics Co., Ltd. ("SEC"), Samsung Electronics America, Inc. ("SEA"), and Samsung Pay, Inc.'s ("SPI") (collectively, "Samsung" or "Defendants") Motion to Dismiss ("Motion") (Dkt. 29). The Court finds this matter appropriate for resolution without oral argument. See Fed. R. Civ. P. 78; L.R. 7-15. Having reviewed the papers and considered the parties' arguments, the Court GRANTS Defendants' Motion.
I. Background
A. Facts
The following facts are drawn from the First Amended Complaint ("FAC") (Dkt. 26) filed by Plaintiff International Technologies & Systems Corporation, d/b/a ID TECH ("Plaintiff" or "ID TECH").
Plaintiff ID TECH is a corporation organized under the laws of Delaware, with its principal place of business in Cypress, California. FAC ¶ 2. Defendant SEC is a company organized and existing under the laws of South Korea, with its principal place of business in Suwon-Shi, South Korea. Id . ¶ 4. Defendant SEA, a wholly owned subsidiary of SEC, is a corporation organized under the laws of New York, with its principal place of business in Ridgefield Park, New Jersey. Id . Defendant SPI is a corporation organized under the laws of Delaware, with its principal place of business in Burlington, Massachusetts. Id . ¶ 5.
While this was allegedly true when Plaintiff filed the FAC, on June 1, 2018, Plaintiff filed a Notice of Mootness of Samsung Pay Inc.'s Motion to Dismiss for Improper Venue ("Notice of Mootness") (Dkt. 51) that suggests that SPI's corporate identity has changed . Plaintiff alleges, and provides a Certificate of Ownership and Merger showing, that on June 1, 2018 a merger between Defendants SEA and SPI became effective, and resulted in a consolidation of SPI into SEA. Notice of Mootness at 1; see also Notice of Mootness Ex. A ("Certificate of Ownership and Merger").
Plaintiff designs, manufactures, and sells a wide range of automatic identification and payment systems products and components, including magstripe readers, smart and contactless card readers and writers, bar code readers, point-of-sale keyboards, and secure PIN entry products. FAC ¶ 11. On October 3, 2005, the United States Patent & Trademark Office ("USPTO") recorded an assignment of U.S. Patent Application No. 11/243,008 from its investors to VIVOtech, Inc. ("VIVOtech"), a software and pay systems company based in Santa Clara, California. Id . ¶ 13. On October 3, 2006, the patent-in-suit, U.S. Patent No. 7,114,652 (the '652 Patent), entitled "External Adaptor for Magnetic Stripe Card Reader," was filed with the USPTO. Id . ¶ 12; see Ex. A ("United States Patent External Adaptor for Magnetic Stripe Card Reader"). On August 3, 2012, VIVOtech assigned the '652 Patent to ID TECH and the assignment was recorded with the USPTO on February 13, 2013. Id . ¶¶ 17, 18.
LoopPay, Inc. ("LoopPay") was founded as a mobile payment startup company in 2012. Id . ¶ 21. LoopPay developed and sold aftermarket mobile device products incorporating Magnetic Secure Transmission ("MST") technology, which is designed to interact with conventional magnetic stripe credit carder readers to enable users to conduct commercial transactions using a mobile device. Id . In or around February 2015, Samsung Ltd., one of the named three Defendant companies, acquired LoopPay. Id . ¶ 22. Samsung Ltd. researches, manufactures, markets, distributes, imports, and sells Samsung products worldwide, including smartphones, tablets, smartwatches, and other mobile devices. Id . ¶ 19. In or around September 23, 2015, LoopPay's name was changed to Samsung Pay, Inc., another one of the named three Defendant companies. Id . ¶ 23. Samsung Pay, Inc. develops MST technology and products, and configures MST components for use in certain Samsung devices. Id . ¶ 24.
Samsung has developed and offers a mobile payment system called "Samsung Pay," which Samsung makes available to its customers for use with certain Samsung mobile devices ("the Samsung Pay System"). Id . ¶ 25. The Samsung Pay System allows users to transmit card information from their mobile devices using MST to communicate with the reader head of payment terminal card readers. Id . ¶ 26. Samsung currently manufactures and sells at least 12 products compatible with its Samsung Pay System. Id . ¶ 27. These 12 compatible products include: the Samsung (i) Galaxy S8; (ii) Galaxy S8+; (iii) Galaxy S7; (iv) Galaxy S7 edge; (v) Galaxy S6; (vi) Galaxy S6 edge; (vii) Galaxy S6 edge+; (viii) Galaxy S6 active; (ix) Galaxy Note5; (x) Galaxy Note 8; (xi) Gear S3; and (xii) Gear S2 (collectively, the "Accused Devices"). Id .
More specifically, the Samsung Pay System comprises a method for conducting transactions between a card reader and a mobile device by communicating a signal from the mobile device to the reader heads of a magnetic stripe reader device. Id . ¶ 33. Plaintiff alleges that the claims of the patent provide that the method is performed with magnetic stripe readers with multiple magnetic reader heads, with at least two heads having "a different sensitivity to magnetic fields." Id . Further, Plaintiff alleges that this is a characteristic standardized in the magnetic stripe readers with which the Samsung Pay System is designed to and does function, and with which Samsung intends its consumers to use the Accused Devices. Id .
Plaintiff alleges that Samsung has had knowledge of the '652 patent since at least the filing of the original Complaint on October 6, 2017. Id . ¶ 30. Plaintiff alleges that Samsung has infringed and continues to infringe, directly or indirectly, at least claims 1-5 of the '652 Patent by "practicing, making, using, selling, offering to sell, manufacturing, and/or using" 12 products compatible with Samsung Pay. Id . ¶ 32.
Further, Plaintiff alleges that Samsung has tested and has demonstrated the Samsung Pay feature of the Accused Devices in the United States. Id . ¶ 42. Plaintiff also alleges that Samsung actively induces others to infringe claims 1-5 of the '652 Patent by importing and selling the Accused Devices configured to use the Samsung Pay System and by instructing its consumers and retailers through its marketing, advertising, customer assistance, and direct instructions to use the Samsung Pay System. Id . ¶ 43. Plaintiff further alleges that Samsung has contributed to, and continues to contribute to, the infringement of at least claims 1-5 of the '652 Patent by importing and selling the Accused Devices configured to use the Samsung Pay System. Id . Claim 1 of the '652 Patent is a method claim that recites the following:
A method of communicating with a reader head of a magnetic stripe reader device, the method comprising: positioning a module comprising an inductor element proximate to a housing of a magnetic stripe reader device; applying a current to the inductor element to generate a magnetic field of sufficient strength to penetrate the housing and be sensed by a head of the reader device; and wherein the magnetic stripe reader device further comprises a second magnetic reader head exhibiting a different sensitivity to magnetic fields than the magnetic head, the method further comprising generating a second magnetic field of sufficient strength to penetrate the housing and be sensed by the second magnetic reader head.See FAC Ex. A (US Patent No. 7,114,652).
The first element of the patented method recited in claim 1 calls for "positioning a module comprising an inductor element proximate to a housing of a magnetic stripe reader device." Id . ¶ 34. The Accused Devices contain an inductor element. Id . When the Samsung Pay System uses the MST technology as designed, used, and instructed by Samsung, the inductor element in the Accused Devices is positioned proximate to the housing of the magnetic stripe reader. Id .
Next, the second element of the patented method calls for "applying a current to the inductor element to generate a magnetic field of sufficient strength to penetrate the housing and be sensed by a head of a reader device." Id . ¶ 35. Plaintiff alleges that when the Samsung Pay System uses the MST technology as designed, used, and instructed by Samsung, a current is applied to the inductor element in the Accused Devices, which generates a magnetic field of sufficient strength to penetrate the housing and be sensed by the reader head in the magnetic stripe reader. Id .
Further, Plaintiff alleges that the third element of the patented method calls for "generating a second magnetic field of sufficient strength to penetrate the housing and be sensed by the second magnetic reader head." Id . ¶ 36. Plaintiff alleges that when the Samsung Pay System uses the MST technology as designed, used, and instructed by Samsung, the inductor element in the Accused Devices generates a second magnetic field of sufficient strength to penetrate the housing and be sensed by the second magnetic reader head in the magnetic stripe reader. Id . Moreover, as described in the Patent's method claim, "the second magnetic field is generated immediately after the [first] magnetic field in order to communicate a continuous data packet to the reader device." Id . ¶ 37.
B. Procedural History
Plaintiff filed its Complaint on October 6, 2017 (Dkt. 1). Plaintiff filed the operative complaint, the FAC, on January 17, 2018. In the FAC, Plaintiff brings one cause of action for infringement, alleging direct and indirect infringement, i . e . inducement and contributory infringement, of at least claims 1-5 of the '652 Patent in violation of 35 U.S.C. § 271(a)-(c). FAC ¶¶ 42-44.
On February 5, 2018, Defendants filed the instant Motion. On August 14, 2017, Plaintiff opposed ("Opposition") (Dkt. 20), and on August 28, 2017, Defendants replied ("Reply") (Dkt. 22).
On June 1, 2018, Plaintiff filed a Notice of Mootness of Samsung Pay, Inc's Motion to Dismiss for Improper Venue ("Notice of Mootness") (Dkt. 51). On June 7, 2018, Defendants filed a Response to Plaintiff's Notice of Mootness ("Reply to Not. Mootness") (Dkt. 52).
II. Legal Standard
A. Dismissal for Failure to State a Claim
Under Federal Rule of Civil Procedure 12(b)(6), a complaint must be dismissed when a plaintiff's allegations fail to set forth a set of facts which, if true, would entitle the complainant to relief. Bell Atl . Corp . v . Twombly , 550 U.S. 544, 555 (2007); Ashcroft v . Iqbal , 556 U.S. 662, 679 (2009) (holding that a claim must be facially plausible in order to survive a motion to dismiss). The pleadings must raise the right to relief beyond the speculative level; a plaintiff must provide "more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Twombly , 550 U.S. at 555 (citing Papasan v . Allain , 478 U.S. 265, 286 (1986)). On a motion to dismiss, a court accepts as true a plaintiff's well-pleaded factual allegations and construes all factual inferences in the light most favorable to the plaintiff. See Manzarek v . St . Paul Fire & Marine Ins . Co ., 519 F.3d 1025, 1031 (9th Cir. 2008). A court is not required to accept as true legal conclusions couched as factual allegations. Iqbal , 556 U.S. at 678.
In ruling on a motion to dismiss, the court need not accept as true allegations contradicted by judicially noticeable facts, see Schwarz v . United States , 234 F.3d 428, 435 (9th Cir. 2000), and it "may look beyond the plaintiff's complaint to matters of public record" without converting the motion into a motion for summary judgment. Shaw v . Hahn , 56 F.3d 1128, 1229 n.1 (9th Cir. 1995).
When a motion to dismiss is granted, the court must decide whether to grant leave to amend. The Ninth Circuit has a liberal policy favoring amendments and, thus, leave to amend should be freely granted. See , e . g ., DeSoto v . Yellow Freight System , Inc ., 957 F.2d 655, 658 (9th Cir. 1992). However, a court need not grant leave to amend when permitting a plaintiff to amend would be an exercise in futility. See , e . g ., Rutman Wine Co . v . E . & J . Gallo Winery , 829 F.2d 729, 738 (9th Cir. 1987) ("Denial of leave to amend is not an abuse of discretion where the pleadings before the court demonstrate that further amendment would be futile.")
B. Dismissal or Transfer for Improper Venue
Under Federal Rule of Civil Procedure 12(b)(3), a defendant may move to dismiss a case for improper venue. Fed. R. Civ. P. 12(b)(3). If venue is improper, the court may either dismiss the case without prejudice, or in the "interest of justice" may transfer the case "to any district or division in which it could have been brought." 28 U.S.C. § 1406(a); see In re Hall , Bayoutree Assoc ., Ltd ., 939 F.2d 802, 804 (9th Cir. 1991). Ordinarily, the interest of justice requires transferring the case to the proper venue rather than dismissing the case. See Baeta v . Sonchik , 273 F.3d 1261, 1264-65 (9th Cir. 2001).
In the context of a Rule 12(b)(3) motion, the Court need not accept as true all allegations in the complaint, but may consider facts outside the pleadings. See Murphy v . Schneider Nat'l , Inc ., 362 F.3d 1133, 1137 (9th Cir. 2004). However, the Court "is obligated to draw all reasonable inferences in favor of the non-moving party and resolve all factual conflicts in favor of the non-moving party." Id . at 1138.
Venue in patent cases is governed by 28 U.S.C. §1400(b). TC Heartland LLC v . Kraft Foods Grp . Brands LLC , 137 S. Ct. 1514, 1514 (2017). Under that provision, "[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). A domestic corporation "resides" only in its state of incorporation. TC Heartland , 137 S. Ct. at 1514. Further, having a "regular and established place of business" requires that: (1) there is a physical place in the district; (2) that is a regular and established place of business; and (3) is the place of the defendant. In re Cray Inc ., 871 F.3d 1355, 1360 (Fed. Cir. 2017).
III. Discussion
In their Motion, Defendants argue that Plaintiff's single cause of action for infringement should be dismissed for failure to state a claim because Plaintiff does not sufficiently allege how Samsung Pay infringes the asserted claims, and merely recites the elements for inducement and contributory infringement. Mot. at 1. In addition, Defendants claim that Defendant SPI should be dismissed from the action for improper venue under 28 U.S.C. § 1400(b), or in the alternative, that the entire case should be transferred to the Northern District of California pursuant to 28 U.S.C. § 1406(a). Id . at 1-2. The Court will address each issue in turn.
A. Failure to State a Claim
Plaintiff's single cause of action encompasses claims for both direct infringement and for indirect infringement in the form of inducement and contributory infringement. FAC ¶¶ 42-44. The Court will first address the sufficiency of Plaintiff's allegations of direct infringement, before turning to Plaintiff's allegations regarding inducement and contributory infringement.
1. Direct Patent Infringement
First, Plaintiff alleges that Defendants infringe at least claims 1-5 of the '652 Patent by "practicing, making, using, selling, or offering for sale in this judicial district and elsewhere the inventions claimed in the '652 Patent through the use of the Samsung Pay System in the Accused Devices." FAC ¶¶ 29, 32. Defendants argue that Plaintiff's allegations are insufficient to state a claim for direct infringement because Plaintiff does not adequately describe how Samsung Pay infringes the asserted claims, or how Defendants practice each of the limitations of the asserted patent claims. Mot. at 1, 8. In response, Plaintiff argues that it adequately alleges direct infringement because the FAC identifies specific claims that Defendants infringe, identifies the Accused Devices that are manufactured and sold by Defendants, and includes a description of how the Accused Devices meet each claim limitation, with citations to evidence from Defendants describing the MST functionality in the Accused Devices. Opp'n at 1.
Under the Patent Act, "whoever without authority makes, uses, offers to sell, or sells any patented invention, within the United States or imports into the United States any patented invention during the term of the patent therefore, infringes the patent." 35 U.S.C. § 271(a). To be liable for direct infringement, a product must practice all elements of a patent claim. TeleSign Corp . v . Twilio , Inc ., No. CV 16-2106 PSG (SSX), 2016 WL 4703873, at *3 (C.D. Cal. Aug. 3, 2016) (citing Wi-Lan , Inc . v . Apple , Inc ., 811 F.3d 455, 463 (Fed. Cir. 2016); Southwall Techs ., Inc . v . Cardinal IG Co ., 54 F.3d 1570, 1575 (Fed. Cir. 1995)). Thus, a plaintiff must plausibly allege sufficient facts to "permit [the] court to infer that the accused product infringes each element of at least one claim." Id . (citation omitted).
In their Motion, Defendants argue that Plaintiff fails to state a claim for direct infringement because Plaintiff's allegations do not plausibly show that the Samsung Pay system practices each limitation of each asserted claim. Mot. at 8. Instead, Defendants point out, the FAC "repeats the language of each limitation of each asserted claim and asserts that each limitation is met '[w]hen the Samsung Pay System uses the MST technology as designed, used, and instructed by Samsung.'" Id . As an example, Defendants argue that the FAC provides no factual detail showing that any of the accused products have an inductor element, let alone one capable of generating the two magnetic fields required by the claim limitations. Id . at 9. In response, Plaintiff argues that it has identified the Accused Devices, and alleged that those Accused Devices practice each limitation of claim 1 of the '652 Patent. Opp'n at 11. Specifically, Plaintiff argues that it has plausibly alleged in the FAC that each limitation is met when the Samsung Pay System uses the MST technology, because the FAC cites to a Samsung document that explains how an MST transaction is completed using Samsung Pay. Id . Plaintiff claims that the Samsung document shows how the Accused Product applies "a current to the inductor element to generate a magnetic field of sufficient strength to penetrate the housing and be sensed by a head of the reader device." See Opp'n at 10; see also FAC ¶ 35. Plaintiff explains that the Samsung document further states that "MST sends a magnetic signal from your device to the payment terminal's card reader." Opp'n at 10; see FAC ¶ 41.
However, while the description of the MST technology in the Samsung documents cited by Plaintiff supports a plausible inference that the Accused Devices may practice some aspects or elements of claim 1 of the '652 Patent—for example, it is clear that the Accused Devices must be held proximate to a magnetic strip reader device and that they emit a magnetic signal strong enough to communicate with the reader device—the FAC as currently plead does not link statements made in the Samsung documents to the specific limitations of any asserted claim. See generally FAC. In addition, the FAC merely recites the claim language for each limitation, alleging without factual support that the Samsung Pay System works by following that limitation. See FAC ¶¶ 34-40. However, "for a complaint to survive a motion to dismiss, the non-conclusory 'factual content,' and reasonable inferences from that content, must be plausibly suggestive of a claim entitling the plaintiff to relief." Moss v . United States Secret Service , 572 F.3d 962, 969 (9th Cir. 2009); see also Ashcroft v . Iqbal , 556 U.S. 662, 678 (2009) ("[T]he tenet that a court must accept a complaint's allegations as true is inapplicable to threadbare recitals of a cause of action's elements, supported by mere conclusory statements."); Apollo Fin ., LLC v . Cisco Sys ., Inc ., 190 F. Supp. 3d 939, 942 (C.D. Cal. 2016) ("In patent cases, with regard to a direct infringement claim, a court need not accept as true conclusory legal allegations cast in the form of factual allegations." (quotation marks and brackets omitted)). Moreover, "the failure to meet a single limitation is sufficient to negate infringement of [a] claim." Laitram Corp . v . Rexnord , Inc ., 939 F.2d 1533, 1535 (Fed. Cir. 1991); Atlas IP , LLC v . Exelon Corp ., No. 15-cv-10746, 2016 WL 2866134, at *5 (N.D. Ill. May 17, 2016) ("Because the failure to practice even a single element is all that separates innovation from infringement, . . . there is always an obvious alternative explanation where a plaintiff does not allege facts about each element.").
Thus, Plaintiff's failure to plead sufficient factual support to plausibly allege that the Accused Devices practice each limitation of the asserted claims means that Plaintiff fails to state a claim for direct infringement. See Atlas IP , 2016 WL 2866134, at *5 ("[F]actual allegations that do not permit a court to infer that the accused product infringes each element of at least one claim are not suggestive of infringement—they are merely compatible with infringement."); e . Digital Corp . v . iBaby Labs , Inc ., No. 15-CV-05790-JST, 2016 WL 4427209, at *5 (N.D. Cal. Aug. 22, 2016) (dismissing patent infringement claim where plaintiff did not "attempt to map" each claim limitation to factual allegations in the complaint).
Accordingly, the Court DISMISSES WITHOUT PREJUDICE Plaintiff's claim for direct patent infringement.
2. Induced Infringement and Contributory Infringement
Plaintiff further alleges that it has satisfied the additional requirements for pleading induced and contributory infringement. Mot. at 12. However, "[i]ndirect infringement, whether inducement to infringe or contributory infringement, can only arise in the presence of direct infringement." Dynacore Holdings Corp . v . U . S . Philips Corp ., 363 F.3d 1263, 1272 (Fed. Cir. 2004). Accordingly, because Plaintiff fails to state a claim for direct infringement, Plaintiff's claims for indirect infringement must fail as well.
Therefore, the Court DISMISSES WITHOUT PREJUDICE Plaintiff's induced and contributory infringement claims.
B. Improper Venue and 28 U.S.C. § 1400(b)
Next, Defendants argue that Defendant SPI should be dismissed from the case, or that the entire case should be transferred to the Northern District of California, because venue is not proper in the Central District of California as to Defendant SPI. See Mot. at 12-16. Defendants do not dispute that venue is proper in the Central District of California for Defendants SEC and SEA. Mot. at 5; see also Opp'n at 15. However, Defendants argue that venue is improper here for Defendant SPI because SPI does not "reside in" or have a "regular and established place of business" in this judicial district. Mot. at 5; see also Opp'n at 15. Plaintiff responds that venue is proper in this district because, according to Plaintiff, SPI has committed acts of infringement here and has "regular and established place of business" in the Los Angeles area in the form of several "Samsung Experience Shops." Opp'n at 15-22.
In addition, after the instant Motion had been fully briefed, Plaintiff filed a Notice of Mootness arguing that venue in the Central District is now proper for SPI because a merger between Defendants SEA and SPI became effective on June 1, 2018, and resulted in a consolidation of SPI into SEA. Notice of Mootness at 1; see also Notice of Mootness. Ex. A ("Certificate of Ownership and Merger"). Thus, because Defendants concede that venue is proper here for SEA, Plaintiff argues that the improper venue issue as to SPI is now moot. See id . In response, Defendants argue that venue for the purposes of 28 U.S.C. § 1400(b) is determined at the time of filing. Reply to Not. Mootness at 1. Therefore, Defendants maintain that since venue was improper at the time of filing, Defendants' pending motion to dismiss SPI for improper venue, or to alternatively transfer the case to the Northern District of California, is not moot. Id . Plaintiff did not respond to this argument. The language of the § 1400(b) venue provision states that a patent infringement action "may be brought in the judicial district where [venue is proper]." 28 U.S.C. § 1400(b). Thus, at least one other court has pointed out that the word "brought" refers to the act of filing the complaint, and thus venue is determined at the time of filing. Pers . Audio , LLC v . Google , Inc ., 280 F. Supp. 3d 922 (E.D. Tex. 2017); see also 28 U.S.C. § 1400(b). Thus, in applying a strict statutory construction, venue under § 1400(b) should be analyzed based on the facts and circumstances that exist at the time an action is filed. See Cray , 871 F.3d at 1355 (stressing that "the [venue] analysis must be closely tied to the language of the statue") This rule also seems prudent to avoid the theoretical scenario in which a defendant is sued in a judicial district in which venue is proper at the time of filing, but then the circumstances change and defendant claims venue has become improper. As a result, the Court will analyze the facts and circumstances that existed at the time the Complaint was filed—when Defendant SPI was still a separate corporate entity.
In patent infringement cases, venue is proper as to any particular defendant only "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). A domestic corporation "resides" only in its state of incorporation. TC Heartland , 137 S. Ct. at 1514. Here, Plaintiff does not claim that SPI "resides" in the Central District of California. FAC ¶ 5. More importantly, because SPI is incorporated in Delaware with its principal place of business in Burlington, Massachusetts, there is no dispute that the residency requirement cannot be met here. Id .
However, Plaintiff argues that venue is proper as to SPI under the latter prong of § 1400(b) because SPI "has committed acts of infringement" and has a "regular and established place of business" in this district. Opp'n at 15; 28 U.S.C. § 1400(b). The Federal Circuit has explained that there are three requirements for a "regular and established place of business" under § 1400(b): "(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). Moreover, "upon motion by the Defendant challenging venue in a patent case, the Plaintiff bears the burden of establishing proper venue." In re ZTE (USA) Inc ., 890 F.3d 1008, 1013 (Fed. Cir. 2018).
Regarding the first requirement, a "physical place," Plaintiff claims that Samsung Experience Shops located inside of Best Buy stores, one of which is located at 2909 Los Feliz Boulevard in Los Angeles, California, constitute the "physical, geographical location" of SPI. See Cray , 871 F.3d at 1362; Opp'n at 17. Plaintiff explains that these Samsung Experience Shops provide "support to customers on a wide range of Samsung services, including the accused technology, Samsung Pay." Opp'n at 17. As to the second element, which requires that the physical location be "a regular and established place of business," Plaintiff claims that the Samsung Experience Shops are staffed with Samsung Experience Consultants and "provide customers with regular access to resources and employees related to Samsung's products and services." Id . at 19. Plaintiff argues that these "systematic business activities" are sufficient to meet the second element. Id . Finally, Plaintiff argues that the Samsung Experience Shops belong to SPI because they "employ agents and representatives of SPI," and because SPI is a wholly-owned subsidiary of SEA and thus lacks formal corporate separateness from the other Defendants. Id . at 20. Thus, overall, Plaintiff argues that "[t]he relationship between SPI and the Samsung Experience Shops—as evidenced through Samsung Skills Workshops, Defendants' own representations, and their customer service arrangements—is sufficient to demonstrate that SPI has places of business in this district." Id .
In their Reply, Defendants primarily dispute Plaintiff's assertion that the Samsung Experience Shops located inside Best Buy Stores "belong" to SPI, explaining that "SPI does not own those facilities and does not have any employees that work in them." Reply at 13 (citing Brann Decl., Ex. E; Ingerowski Decl. ¶ 7). Relatedly, Defendants assert that third party Best Buy's provision and sale of Samsung products from these locations do not establish that SPI had a "regular and established place of business" in this district. Id . Thus, the Court will focus on the issue of whether the Samsung Experience Shops "belong to" SPI such that they can be considered SPI's "regular and established place of business." See Cray , 871 F.3d at 1360.
First, although Plaintiff points out that "Defendants purposefully advertise and market to customers in this judicial district and instruct customers to visit Samsung Experience Shops with any questions regarding Samsung Pay," the Federal Circuit has explained that marketing and advertising may be relevant to determining whether a place of business belongs to the defendant "only to the extent [it] indicate[s] that the defendant itself holds out a place for its business." Cray , 871 F.3d at 1363; Opp'n at 18. Here, although Plaintiff establishes that some information about the Experience Shops is advertised on the Samsung website, the posted information makes clear that the Experience Shops are "installed in" Best Buy stores to showcase Samsung products to Best Buy customers. See Opp'n at 5-6 (citing, e . g ., http://www.samsung.com/us/news/20487). This advertising is not sufficient to establish that Samsung holds the Experience Shops out as its own places of business, nor does it show that Samsung "owns or leases the place, or exercises other attributes of possession or control over the place." Cray , 871 F.3d at 1363; see also id . at 1364 ("[T]he mere fact that a defendant has advertised that it has a place of business or has even set up an office is not sufficient; the defendant must actually engage in business from that location. In the final analysis, the court must identify a physical place, of business, of the defendant."). In addition, that Samsung Experience Shops are staffed with Samsung Experience Consultants is not dispositive. See In re ZTE (USA) Inc ., 890 F.3d 1008, 1015 (Fed. Cir. 2018) (noting that even where defendant employed "at least two full-time employees (supervisors) on site" at a third party's call center, and that third party call center also had more than sixty customer service representatives dedicated to the defendant, "the determining factor" about whether the call center could be considered the defendant's regular and established place of business, "is whether those employees render the call center 'a place of the defendant , not solely a place of the defendant's employee[s]'" (quoting Cray , 871 F.3d at 1363)).
Moreover, even if Plaintiff could establish that the Samsung Experience Shops were regular and established places of business belonging to "Samsung," Plaintiff has not shown that they belong to Defendant SPI specifically. Defendants explain, "SPI has no direct connections to the Samsung Experience Shops." Reply at 8. As evidence, Defendants provide a declaration in which SPI's Senior Manager of Human Resources testifies that "SPI does not own or lease any offices or facilities or have any employees that work within the Central District of California." Declaration of Scott Ingerowski ("Ingerowski Decl.") (Dkt. 29-3) ¶ 5. Furthermore, Ingerowski specifically addresses the Samsung Experience Shops, stating, "I understand that ID Tech also claims that 'Samsung' maintains regular and established places of business through Samsung Experience Shops at Best Buy stores. SPI does not maintain those shops and does not employ personnel who work at those shops." Id . ¶ 7. Nor does SPI "control, or otherwise have any agreements or involvement in the operations of the Samsung Experience Shops." Supplemental Declaration of Scott Ingerowski ("Suppl. Ingerowski Decl.") (Dkt. 37-3) ¶ 3. "In addition, SPI does not have any employees, agents, consultants, or representatives that work in the Samsung Experience Shops or that put on workshops or other trainings within those shops." Id . ¶ 4.
Nevertheless, Plaintiff suggests that the Samsung Experience Shops should still be considered as belonging to SPI because SPI is a wholly owned subsidiary of SEA, which is a wholly owned subsidiary of SEC. See Opp'n at 7. Plaintiff further explains that "the ties described among the Defendants are also reflected in SPI's corporate officers' own descriptions of their job titles: Will Graylin, the Global Co-General Manager at Samsung Pay, works at SEA. And Sang Ahn, the Vice President and General Manager of SPI 'report[s] to the Global EVP of Software and Services at Samsung Electronics.'" Opp'n at 19 (citing declaration of Daniel Huynh (Dkt. 34-1) ¶¶ 23-24). In other words, Plaintiff seeks to impute to SPI, based solely on a "lack of formal corporate separateness," the Defendants SEA and SEC's potential connections to the Samsung Experience Shops. See Opp'n at 20. However, Plaintiff cites no authority showing that such imputation would be appropriate. See generally Opp'n. Furthermore, Defendants provide testimony that "SPI and Samsung Electronics America, Inc. ('SEA') are distinct corporate entities with, at least, separate officers, records, finances, and assets." Suppl. Ingerowski Decl. ¶ 5. Thus, Plaintiff has not established that Defendants lack formal separateness, and thus the Court must treat Defendants as separate entities for the purposes of determining proper venue. See Symbology Innovations LLC v . Lego Sys ., Inc ., 282 F. Supp. 3d 916, 932 (E.D. Va. 2017) ("The Supreme Court held that even where the parent corporation controls a subsidiary's operations and the companies share a unitary business purpose, the subsidiary's presence in the forum cannot be imputed to the parent company so long as they maintain formal corporate separateness." (citing Cannon Manufacturing Co . v . Cudahy Packing Co ., 267 U.S. 333, 335 (1925))).
For the foregoing reasons, Plaintiff has not carried its burden to establish that the Samsung Experience Shops are a regular and established place of business belonging to Defendant SPI. See In re ZTE , 890 F.3d at 1013; Cray , 871 F.3d at 1363; see also In re ZTE , 890 F.3d at 1014 ("Section 1400(b), like its predecessor statutes, is intended to be restrictive of venue in patent cases compared with the broad general venue provision."); Grantham v . Challenge-Cook Bros ., Inc ., 420 F.2d 1182, 1184 (7th Cir. 1969) ("[T]he patent venue statute should not be liberally construed in favor of venue" (citing Schnell v . Peter Eckrich & Sons , Inc ., 365 U.S. 260, 264 (1961))). Thus, because Plaintiff cannot demonstrate that SPI "resides," or had a "regular and established place of business" in the Central District of California when the suit was filed, venue under § 1400(b) is improper as to SPI.
This conclusion is further supported by considering "the nature and activity of the alleged place of business of the defendant in the district [i.e. the Samsun Experience Shops] in comparison with that of other places of business of the defendant in other venues." Cray , 871 F.3d at 1364. SPI has an office in the Northern District of California where it employs 51 employees. See Ingerowski Decl. ¶ 8 ("Aside from its location in Burlington, Massachusetts, SPI's only other office is located in Mountain View, CA. SPI employs 51 employees there."). In comparison, SPI has very few, if any, ties to Samsung Experience Shops beyond the fact that Samsung devices containing Samsung Pay are sold at those Experience Shops, albeit through Best Buy. Thus, this comparison suggests that "the alleged place of business is not really a place of business at all." Cray , 871 F.3d at 1364. --------
"If venue is improper, the court must either dismiss, or in the interests of justice, transfer the case to a district having proper venue." Nissan Motor Co ., Ltd . v Nissan Computer Corp ., 89 F. Supp. 2d 1154, 1161 (C.D. Cal. 2000). Here, Defendants claim that venue is proper as to all Defendants in the Northern District of California, and thus the case could be transferred there. Plaintiff did not specify any preference between dismissing SPI from the action or transferring the case in its entirety. See generally Opp'n. At this point, given that SPI has merged into SEA, it is unclear whether dismissing SPI from the suit would have any effect on Plaintiff's ability to bring claims for SPI's alleged conduct, because it may be the case that SEA has now assumed liability for SPI's prior conduct. Because the parties have not briefed this issue, the Court ORDERS Plaintiff to file, no later than 3 p.m. today , June 22 , 2018 , a statement indicating whether it would prefer that the Court dismiss SPI from the case or transfer the case in its entirety to the Northern District of California.
For the foregoing reasons, the Court GRANTS Defendants' Motion as to improper venue in this district for Defendant SPI, but the Court takes its decision regarding dismissal or transfer under advisement until it receives Plaintiff's supplemental filing.
IV. Disposition
For the reasons set forth above, the Court GRANTS Defendants' Motion.
The Court DISMISSES WITHOUT PREJUDICE Plaintiff's claims for direct and indirect patent infringement.
In addition, the Court ORDERS Plaintiff to file, no later than 3 p.m. today , June 22 , 2018 , a statement indicating whether it would prefer that the Court dismiss SPI from the case or transfer the case in its entirety to the Northern District of California. Following this supplemental filing, the Court will either transfer the action to the Northern District of California or dismiss Defendant SPI, and will provide instructions to Plaintiff regarding an amended complaint.
The Clerk shall serve this minute order on the parties. MINUTES FORM 11
CIVIL-GEN
Initials of Deputy Clerk: djl