Kewlm v. Bike Builders Bible, Inc.
| Decision Date | 15 December 2015 |
| Docket Number | 2:15-cv-01008 JWS |
| Parties | Kewlmetal Inc., et al., Plaintiffs, v. Bike Builders Bible, Inc., Defendant. |
| Court | U.S. District Court — District of Arizona |
[Re: Motion at Docket 17]
At docket 17 defendant Bike Builders Bible, Inc. ("BBB") moves for an order dismissing the complaint of plaintiffs Kewlmetal, Inc. and Joseph B. Gschweng (collectively, "Kewlmetal") pursuant to Rule 12(b)(3) of the Federal Rules of Civil Procedure or, alternatively, transferring venue to the United States District Court for the Central District of California pursuant to 28 U.S.C. § 1404(a) or § 1406(a). Kewlmetal opposes at docket 26 and submits evidence at docket 27. BBB replies at docket 28. Oral argument was heard on December 14, 2015.
Kewlmetal owns a patent titled "Motorcycle Rake and Trail Adjuster," which "relates to the modification of a motorcycle and covers bolt-on neck kits that incorporate a false neck."1 BBB is a California corporation with a principal place of business in California.2 Kewlmetal's complaint alleges claims against BBB for patent infringement and common law unfair competition based on BBB's "advertising, marketing, offering for sale, selling, and/or distributing . . . Big Wheel and other Bolt-On Neck Kits under the American Suspension label" that infringe upon Kewlmetal's patent ("the infringing products").3
Venue challenges may be brought under Rule 12(b)(3) and 28 U.S.C. § 1406.4 If the district court rules that venue is improper, it must either dismiss the case or, "if it be in the interest of justice, transfer [the] case to any district or division in which it could have been brought."5 The decision whether to dismiss or transfer the case "in the interests of justice" is committed to the court's discretion.6 The general preference, however, is for the case to be transferred instead of dismissed altogether.7
The plaintiff bears the burden of showing facts that establish that venue is proper.8 Although the court need not accept the pleadings as true and may considerfacts outside the pleadings,9 it "must draw all reasonable inferences in favor of the non-moving party and resolve all factual conflicts in favor of the non-moving party."10 If the parties raise genuine factual issues, the district court has discretion to hold the Rule 12(b)(3) motion in abeyance until it holds an evidentiary hearing on the disputed facts, or to "deny the Rule 12(b)(3) motion while granting leave to refile it if further development of the record eliminates any genuine factual issue."11
Even if venue is proper, a district court may transfer venue to another district pursuant to 28 U.S.C. § 1404(a). When deciding a motion for transfer of venue under § 1404(a), which displaces the common law doctrine of forum non conveniens as to transfers between federal district courts,12 13 Whether a motion for transfer of venue should be granted is committed to the discretion of the district court.14
28 U.S.C. § 1400(b) states in pertinent part that a "civil action for patent infringement may be brought in the judicial district where the defendant resides."15 BBB "resides" in Arizona if it is subject to personal jurisdiction here.16 This determination involves two inquires: whether Arizona's "long-arm statute permits service of process and whether assertion of personal jurisdiction violates due process."17 Because Arizona's long-arm statute confers jurisdiction to the maximum extent permissible under the due process clause,18 the statutory inquiry collapses into the constitutional analysis,19 which is governed by the law of the Court of Appeals for the Federal Circuit.20
Due process allows the exercise of both general and specific personal jurisdiction. The broader of the two, general personal 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 thosecontacts."21 "Specific jurisdiction, on the other hand, must be based on activities that arise out of or relate to the cause of action, and can exist even if the defendant's contacts are not continuous and systematic."22
In Perkins v. Benguet Consolidated Mining Co., the Supreme Court held that an Ohio court could subject a foreign corporation to general personal jurisdiction where that corporation, among other things, maintained an office in the state, conducted company business from that office, and distributed salary checks drawn from Ohio bank accounts.23 The court held that the exercise of general jurisdiction did not offend due process because the defendant had "been carrying on in Ohio a continuous and systematic, but limited, part of its general business."24 In contrast, the Supreme Court in Helicopteros Nacionales de Colombia, S.A. v. Hall,25 held that Texas lacked general personal jurisdiction over a helicopter company that did not have a place of business in Texas or a business license in that state. The Supreme Court concluded that the defendant's contacts with Texas were not "continuous and systematic" despite the fact that the defendant "sen[t] its chief executive officer to Houston for a contract-negotiation session; accept[ed] into its New York bank account checks drawn on a Houston bank; purchas[ed] helicopters, equipment, and training services from [a Texas helicopter company] for substantial sums; and sen[t] personnel to [Texas] for training."26
Neither the Supreme Court nor the Federal Circuit has 27 The "degree of contact with the forum state that is necessary to establish general jurisdiction is quite high," however.28 For instance, in Campbell Pet Co. v. Miale, the Federal Circuit held that general personal jurisdiction was lacking even though the defendants made twelve sales over eight years to customers in the forum state of Washington and maintained a sales website that was accessible to Washington consumers.29 The website did not show "continuous and systematic" contacts, the court held, because it was not specifically directed at customers in Washington and did not appear to have generated any sales in Washington.30 The court held that the average 1.5 sales per year to Washington customers was similarly insufficient because of the sales' "very small volume," the fact that the sales totaled "less than $14,000 in gross revenue (approximately two percent of the defendants' total sales), and in four of those years [the defendants] made no sales in Washington at all."31 The court held that this was "a classic case of sporadic and insubstantial contacts with the forum state, which are not sufficient to establish general jurisdiction over the defendants in the forum."32
Kewlmetal asserts that BBB "continually does business in Arizona" through both direct and indirect sales to Arizona customers.33 With regard to direct sales, Kewlmetal points to a list of BBB's transactions that shows that BBB had "at least 25" Arizona customers between June 2012 and June 2015.34 This list includes 36 separate invoices: six in year one, 14 in year two, and 16 in year three. Kewlmetal also asserts that its evidence shows that BBB has attended trade shows in Arizona and that it markets its products online specifically to Arizona customers, but these assertions are contradicted by evidence in the record.35
With regard to indirect sales, Kewlmetal cites the deposition transcript of Vincent Costa ("Costa"), a "Principal Shareholder" of BBB,36 and the affidavit of Kewlmetal's founder, Joseph B. Gschweng ("Gschweng"). When asked whether BBB sells its products through distributers, Costa testified as follows: 37 Costa stated that he knew of one company in particular that resold BBB's products, Zodiac, but he did not know where Zodiac advertises or resells BBB's products.38 He testified that there are "probably" other companies like Zodiac that resell BBB's products, but he could not name them at the time.39 When asked whether BBB's products are resold in Arizona,Costa's answers were evasive,40 but he eventually testified that he did not know of any such companies.41 When confronted with an advertisement for the infringing product that was apparently being sold in Arizona by a company named "Baggers, Inc.,"42 Costa testified that he was unaware if BBB has ever done any business with that company.43 For his part, Gschweng states that he has personally observed various third-parties reselling the infringing products to Arizona residents "[c]ontinually since August of 2014."44
Kewlmetal has not shown that BBB's activities in Arizona are sufficiently continuous and systematic to support jurisdiction over a cause of action unrelated to those activities. Like the defendant in Helicopteros, BBB has no physical presence or license to do business in the forum state. Kewlmetal's allegations and evidence merely show that BBB engages in sales transactions, directly and indirectly, with Arizona customers. Although Kewlmetal shows that BBB engages in direct transactions with Arizona consumers on a fairly regular basis, it cites no cases where a court has found this factor alone to be sufficient.45 Further, Kewlmetal's claims regarding BBB's indirectsales are unpersuasive...
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