Regenlab U.S. LLC v. Estar Techs. Ltd.
| Decision Date | 17 August 2017 |
| Docket Number | 16-cv-08771 (ALC) |
| Parties | REGENLAB USA LLC, Plaintiff, v. ESTAR TECHNOLOGIES LTD., ECLIPSE AESTHETICS LLC, and HEALEON MEDICAL, INC., Defendants. |
| Court | U.S. District Court — Southern District of New York |
Pending before the Court are partially-briefed motions by Defendant Estar Technologies Ltd. ("Estar") to dismiss for lack of personal jurisdiction and by Defendants Eclipse Aesthetics LLC ("Eclipse") and Healeon Medical, Inc. ("Healeon") to dismiss and/or transfer the case on the basis of improper venue. Plaintiff RegenLab USA LLC ("RegenLab") seeks discovery in connection with each of these motions. For the following reasons, the Court finds that some, limited discovery will aid in the pending motions.
The Court recites only those facts and procedural history necessary to resolve the motions for jurisdictional and venue discovery.
RegenLab, the United States affiliate of a Swiss manufacturer of medical and pharmaceutical products, brought suit against Estar, an Israeli company; Eclipse, a Texas entity and the sole distributor of Estar products in the United States; and Healeon, a California entity affiliated with Eclipse, alleging infringement of its '957 patent for "[c]ell preparations for extemporaneous use, useful for healing and rejuvenation in vivo," used in platelet rich plasma therapy products. ECF No. 1 ("Compl.").
Estar filed a pre-answer motion to dismiss the Complaint against it for lack of personal jurisdiction. ECF No. 42. With its motion, Estar included the affidavit of its Chief Executive Officer, Aron Esteron, who provided testimony regarding certain jurisdictional facts. ECF No. 44 (Affidavit of Aron Esteron ("Esteron Aff.")). He testified that Estar is not registered to do business in New York; has no offices, employees, bank accounts, telephone listings, or other property in the district; has no customers in New York; and maintains only a passive website. Esteron Aff. ¶¶ 8-14, 17-21. Esteron also testified that Estar does not "transact any business" in New York, "regularly conduct or solicit business" there, or derive "any substantial revenue from goods used or consumed or services rendered in New York." Id. ¶¶ 15-16. Esteron denied that Estar sells any products to Healeon. Id. ¶ 36. Esteron did, however, describe the distribution agreement between Estar and Eclipse (the "Distribution Agreement"), which the Court ordered Estar to produce pursuant to a protective order. Id. ¶¶ 23-35; ECF No. 57.
Eclipse and Healeon also moved to dismiss this action, but on the basis of improper venue under the patent venue statute, 28 U.S.C. § 1400(b), or, alternatively, to transfer this action to the Northern District of Texas for convenience under 28 U.S.C. § 1404(a). ECF Nos. 45 (Eclipse Motion), 47 (Healeon Motion). With respect to the propriety of venue in this district—the relevant argument for present purposes—each asserted that it does not have a "regular and established place of business" in this district. Like Estar, Eclipse and Healeon also submitted affidavits from their principals: Thomas O'Brien, the Chief Executive Officer of Eclipse, and John Panik, the Chief Operating Officer of Healeon. ECF Nos. 49-3 (Declaration of Thomas O'Brien ("O'Brien Decl.")), 50-3 (Declaration of John Panik ("Panik Decl.")). O'Brien testified that, while Eclipse is registered to do business in New York and maintains a registered agent here, it has no bank accounts, does not own or rent real property, have a telephone numberor directory listing, and has no messaging or secretarial service in New York. O'Brien Decl. ¶¶ 7-12. Eclipse has two employees in New York who solicit sales of Eclipse's products; however, these employees do not maintain any inventory, and bills and sales are processed through Eclipse's office in Texas. Id. ¶¶ 13-15. Panik's testimony shows that Healeon has less of a connection to New York than Eclipse. In addition to not having any bank accounts, rented or owned real property, telephone numbers or directory listings, or messaging and secretarial services in New York, Healeon also is not registered to do business in New York and has no employees here. Panik Decl. ¶¶ 6-14.
After numerous attempts to encourage the parties to meet and confer regarding the scope of potential venue and jurisdictional discovery, the Court ordered short letter briefing from the parties regarding RegenLab's discovery requests. See ECF Nos. 75 ("Pl's Jx Ltr."), 76 ("Def's Jx Ltr."), 85 ("Pl's Venue Ltr."), 86 ("Defs' Venue Ltr.").
Venue in this patent case is governed by 28 U.S.C. § 1400(b), which provides that patent infringement actions "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." The Supreme Court's recent decision in TC Heartland LLC v. Kraft Foods Grp. Brands LLC, 137 S.Ct. 1514 (2017), reaffirmed that a corporate defendant's residence, for purposes of the first prong of § 1400(b), is where the entity is incorporated. In light of TC Heartland, the parties agree that venue is improper in the Southern District of New York underthe first prong of § 1400(b) because Eclipse and Healeon were incorporated in Texas and California, respectively. Therefore, the question presented today is whether discovery is necessary to determine that Eclipse or Healeon "has a regular and established place of business" here.2 For the reasons that follow, the Court finds that very limited discovery will be helpful to adjudicate the pending motions to dismiss for improper venue.
Substantial confusion exists regarding the circumstances in which an entity will be found to have a "regular and established place of business" in the district. In recent years, there has not been much occasion to evaluate the second prong of the patent venue statute because the Federal Circuit determined—wrongly, it turns out—that a defendant satisfied the residency requirement of the venue statute's first prong if it was subject to personal jurisdiction in the district. See VE Holding Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574 (Fed. Cir. 1990), abrogated by TC Heartland, 137 S. Ct. 1514 (2017). Accordingly, most parties and courts focused on whether defendants were subject to personal jurisdiction in the district, which has a more well-developed body of law.
To the extent courts addressed the second prong of § 1400(b), the jurisprudence is rather rudderless. See, e.g., Herbert v. Diagnostic Prod. Corp., No. 85-cv-0856 (TPG), 1986 WL 6781, at *2-3 (S.D.N.Y. June 10, 1986) (); Lace v. Lace, 1989 WL 103364, at *3 (N.D. Ill. Aug. 25, 1989) (). Some courts have found that "a regular and established place of business" requires a"permanent physical location which defendant maintains, controls and pays for, and from which substantial business is conduct." Herbert, 1986 WL 6781, at *2 (collecting cases). In particular, this seems to have been the practice of district courts in the Southern District of New York. See, e.g., id.; Hsin Ten Enter. USA, Inc. v. Clark Enterprises, 138 F. Supp. 2d 449, 461 (S.D.N.Y. 2000); Mastantuono v. Jacobsen Mfg. Co., 184 F. Supp. 178 (S.D.N.Y. 1960). Other courts, however, have held that a physical office or store in the district is not required to prove a regular and established place of business there. See, e.g., Hemstreet v. Caere Corp., 1990 WL 77920, at *2 (N.D. Ill. June 6, 1990); Brunswick Corp. v. Suzuki Motor Co., 575 F. Supp. 1412, 1424 (E.D. Wis. 1983).
The Federal Circuit's decision in In re Cordis, 769 F.2d 733 (Fed Cir. 1985) did little to resolve the confusion. This may be, in part, because of the procedural posture in which the Federal Circuit decided the case. In Cordis, the Federal Circuit denied a petition for a writ of mandamus ordering the district court to dismiss the action for improper venue. As the court noted, "mandamus is 'strong medicine' to be reserved for the most serious and critical ills." 769 F.2d at 737. The question on a petition for a writ of mandamus is not whether the district court committed reversible error, only whether there is a "rational and substantial legal argument [to] be made in support of the rule in question." Id.
The facts presented in Cordis were as follows: The defendant did not own or rent an office or other property in the district, have a bank account, or register to do business there. It did, however, engage a secretarial service in the district. The defendant also employed two sales representatives who worked out of home offices. These sales representatives maintained approximately $90,000 worth of inventory between them and were allowed to provide this inventory directly to customers. They also served as technical consultants for users of theproduct. See id. at 735. On the basis of this record, the court found that there was "a rational and substantial legal argument" in support of the district court's ruling. Id. at 737. In so holding, the court also noted that, "in determining whether a corporate defendant has a regular and established place of business in a district, the appropriate inquiry is whether the corporate defendant does its business in that district through a permanent and continuous presence there and not . . . whether it has a fixed physical presence in the sense of a formal office or store." Id.
The parties here disagree on the import of the Federal Circuit's decision in Cordis. RegenLab argues that it holds that a physical presence is never required, see Pl's Venue Ltr. at 2-3, while Eclipse and Healeon argue that the procedural posture of Cordis makes it non-binding, and ask the Court to look at jurisprudence from other district and circuit courts, see Defs' Venue Ltr. at 2-3. However, it is not...
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