Broadway Nat'l Bank v. Plano Encryption Techs., LLC

• Decision Date: 28 March 2016
• Docket Number: Case No. A-15-CA-1056-SS
• Parties: Broadway National Bank d/b/a Broadway Bank, Plaintiff, v. Plano Encryption Technologies, LLC, Defendant.
• Court: U.S. District Court — Western District of Texas

173 F.Supp.3d 469

Broadway National Bank d/b/a Broadway Bank, Plaintiff,

v.Plano Encryption Technologies, LLC, Defendant.

Case No. A-15-CA-1056-SS

United States District Court, W.D. Texas, Austin Division.

Signed March 28, 2016

R. Floyd Walker, Floyd Walker Law Firm, PLLC, Scott Sherwood Crocker, Steven Robert Sprinkle, Sprinkle IP Law Group, Austin, TX, for Plaintiff.

Papool Subhash Chaudhari, Chaudhari Law, PLLC, Wylie, TX, for Defendant.

ORDER

SAM SPARKS

, UNITED STATES DISTRICT JUDGE

BE IT REMEMBERED on the 28th day of March 2016, the Court held a hearing in the above-styled cause, and the parties appeared by and through counsel. Before the Court is Defendant Plano Encryption Technologies, LLC's Motion to Dismiss Plaintiff's Original Complaint [#10]; Plaintiff Broadway National Bank d/b/a Broadway Bank's Response [#13] thereto; Defendant's Reply [#14] in support; Plaintiff's Opposed Motion for Leave to File Sur-Reply [#16]; and Defendant's Response [#18] thereto¹ . Having reviewed the documents, the relevant law, and the file as a whole, the Court now enters the following opinion and orders.

Background

Defendant Plano Encryption Technologies, LLC (PET) is a patent licensing company which owns a portfolio of United States patents related to secure data transmission and storage technology. PET's sole business is to enforce its intellectual property; PET does not make or sell any products or services. See Mot. Dismiss [#10-1] Ex. A (Liddle Decl.) ¶ 5; Compl. [#1] ¶ 8.

On July 10, 2015, PET's CEO and Corporate Counsel, Bradley D. Liddle, sent a letter to the CEO and Vice Chairman of Plaintiff Broadway National Bank d/b/a Broadway Bank claiming it had a “good faith basis” to believe Broadway Bank's mobile banking applications and online banking features were infringing claims on three of its patents. See Compl. [#1-5] Ex. D (the Liddle Letter) at 1. Specifically, Liddle accused Broadway Bank's “Apple mobile apps” of infringing on U.S. Patent No. 5,991,399 (the '399 patent)

and U.S. Patent No. 5,974,550 (the '550 patent), and Broadway Bank's “online banking features” of infringing on U.S. Patent No. 6,587,858 (the '858 patent) (collectively, the Patents-in-Issue). Id. To “allow Broadway to continue its use of these technologies,” Liddle proposed “a non-exclusive license to its Patent Portfolio for an amount that would be a fraction of a reasonable royalty calculation it would otherwise be entitled to as damages for patent infringement.” Id. at 2. While Liddle stated PET's intention was to “open a meaningful dialogue toward a mutually beneficial business resolution,” he also alluded to the threat of litigation, citing PET's active enforcement of its patent rights in a recently filed lawsuit against Citizens National Bank. Id. at 1 (citing Plano Encryption Techs., LLC v. Citizens Nat'l Bank , Civ. No. 2:15–cv–1168 (E.D.Tex filed June 29, 2015)).

This is apparently not the only action PET has taken against banks related to the enforcement of the Patents-in-Issue. Since sending the Liddle Letter, PET filed three additional complaints in the Eastern District of Texas for infringement of '399 patent

and the '550 patent. See

Plano Encryption Techs., LLC v. Am. Bank of Tex. , No. 2:15–cv–1273–JRG (E.D.Tex., filed July 15, 2015); Plano Encryption Techs., LLC v. Citizens Nat'l Bank , No. 2:15–cv–1168–JRG (E.D.Tex., filed June 29, 2015); Plano Encryption Techs., LLC v. Independent Bank , No. 2:15–cv–1382–JRG (E.D.Tex., filed July 31, 2015); Plano Encryption Techs., LLC v. Guar. Bank & Trust, N.A. , No. 2:15–cv–1480–JRG (E.D.Tex., filed Sept. 3, 2015). These lawsuits were consolidated with the Citizens Nat'l Bank action for pretrial purposes on October 28, 2015. See Consolidation Order [#17], Plano Encryption Techs., LLC v. Am. Bank of Tex. et al. , No. 2:15–cv–1273–JRG (E.D.Tex., Oct. 29, 2015).

Additionally, multiple banks have filed declaratory judgment actions against PET in response to PET's cease-and-desist letters. See Nat'l Bank d/b/a The Nat'l Bank of Central Tex. v. Plano Encryption Techs., LLC , 6:15–cv–249–WSS (W.D.Tex., filed August 28, 2015); Jack Henry & Assocs., Inc. et al. v. Plano Encryption Techs., LLC , 3:15–cv–3645–N (N.D.Tex., filed Nov. 19, 2015); Fidelity Nat'l Info. Servs., Inc. v. Plano Encryption Techs., LLC etal. , No. 1:14–cv–777–LPS–CJB (D.Del., filed Sept. 3, 2015).

On November 20, 2015, Broadway Bank filed the current declaratory judgment action, seeking a declaration of non-infringement with respect to the '399 patent

, the '550 patent, and the '858 patent. See Compl. [#1]. On January 20, 2016, PET filed a motion to dismiss for lack of venue pursuant to Rule 12(b)(3) or, in the alternative, asking the Court to decline to exercise jurisdiction on equitable grounds. See Mot. Dismiss [#10]. Broadway Bank responded and also moved for jurisdictional discovery. The motions are now ripe for consideration.

Analysis

PET contends venue is improper in this Court because it does not have sufficient contacts with the Western District, and because a substantial part of the events giving rise to the claim occurred in Plano, not in Austin or San Antonio. Broadway Bank, naturally, disagrees. Broadway Bank contends PET has waived the right to challenge venue by failing also to challenge personal jurisdiction under Rule 12(b)(2). Alternatively, Broadway argues PET has sufficient contacts with the Western District and the sole event giving rise to this action—receipt of the Liddle Letter—occurred in San Antonio.

I. Legal Standard—Venue

Under Rule 12(b)(3) of the Federal Rules of Civil Procedure

, a party may move to dismiss an action on the basis of improper venue. FED. R. CIV. P. 12(b)(3). Once challenged, the burden of sustaining venue lies with the plaintiff. See

Langton v. Cbeyond Commc'n, L

.

L

.

C

. , 282 F.Supp.2d 504, 508 (E.D.Tex.2003).² If, as here, there is no evidentiary hearing, a plaintiff may carry its burden by presenting facts that, taken as true, would establish venue. Id. The court must accept as true all allegations in the complaint and resolve all conflicts in favor of the plaintiff. Id. ; see also

Braspetro Oil Servs., Co. v. Modec (USA), Inc. , 240 Fed.Appx. 612, 615 (5th Cir.2007). Further, in deciding whether venue is proper, “the court is permitted to look at evidence beyond simply those facts alleged in the complaint and its proper attachments.” Ambraco, Inc. v. Bossclip B.V. , 570 F.3d 233, 238 (5th Cir.2009).

As a general rule, a declaratory judgment alleging non-infringement is governed by the general venue statute, 28 U.S.C. § 1391

. See

VE Holding Corp. v. Johnson Gas Appliance Co. , 917 F.2d 1574, 1583 (Fed.Cir.1990) ; see also

Gro Master, Inc. v. Farmweld, Inc. , 920 F.Supp.2d 974, 988–99 (N.D.Iowa 2013) ; United Sonics, Inc. v. Shock , 661 F.Supp. 681, 682 (W.D.Tex.1986). Pursuant to § 1391(b), venue is proper in:

(1) a judicial district in which any defendant resides, if all defendant are residents of the State in which the district is located; (2) a judicial district in which a substantial part of the events or omissions giving rise to the claim occurred, or a substantial part of the property that is the subject of the action is situated; or (3) if there is no district in which an action may otherwise be brought as provided in this section, any judicial district in which any defendant is subject to the court's personal jurisdiction with respect to such an action.

28 U.S.C. § 1391(b)

. In a state with multiple districts, such as Texas, a corporate defendant who is subject to personal jurisdiction in the state at time the action is commenced is “deemed to reside in any district in that State within which its contacts would be sufficient to subject it to personal jurisdiction if that district were a separate state ...” Id. § 1391(d). Thus, “a plaintiff must demonstrate that the defendant has sufficient minimum contacts with the district where the suit was brought to show venue was proper.” Garnet Digital, LLC v. Apple, Inc. , 893 F.Supp.2d 814, 815 (E.D.Tex.2012).

II. Legal Standard—Personal Jurisdiction

Because venue turns on the establishment of personal jurisdiction over PET in this District, a brief explication of personal jurisdiction principles is helpful. Personal jurisdiction is a question of law, and because Broadway Bank brings the case pursuant to the patent laws, the Court applies Federal Circuit law in addressing the jurisdictional issue. Autogenomics, Inc. v. Oxford Gene Tech. Ltd. , 566 F.3d 1012, 1016 (Fed.Cir.2009)

.

“Determining whether jurisdiction exists over an out-of-[district] defendant involves two inquiries: whether a forum state's long-arm statute permits service of process and whether assertion of personal jurisdiction violates due process.” Genetic Implant Sys., Inc. v. Core – Vent Corp. , 123 F.3d 1455, 1458 (Fed.Cir.1997)

(citing Burger King Corp. v. Rudzewicz , 471 U.S. 462, 471–76, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985) ). Because the Texas long-arm statute has been interpreted as extending to the limit of due process, the two inquiries are the same for district courts in Texas. Religious Tech. Ctr. v. Liebreich , 339 F.3d 369, 373 (5th Cir.2003) ; see Tex. Civ. Prac. & Rem. Code §§ 17.001 -093. The constitutional touchstone for determining whether an exercise of personal jurisdiction comports with due process “remains whether the defendant purposefully established minimum contacts in the forum state.” Burger King Corp. , 471 U.S. at 474, 105 S.Ct. 2174 (quoting Int'l Shoe Co. v. Washington , 326 U.S. 310, 316, 66 S.Ct. 154, 90 L.Ed. 95 (1945) ).

“Minimum contacts” may give rise to either general or specific jurisdiction. General jurisdiction “requires that the defendant have ‘continuous and systematic’ contacts with the forum state and confers personal jurisdiction even when the cause of action has no relationship with those contacts.” Autogenomics , 566 F.3d at 1017

(internal quotation marks omitted). The Federal Circuit applies a three-prong test to determine if...