Slyce Acquisition Inc. v. Syte - Visual Conception Ltd.

Decision Date22 October 2019
Docket NumberW-19-CV-00257-ADA
Citation422 F.Supp.3d 1191
Parties SLYCE ACQUISITION INC., Plaintiff v. SYTE - VISUAL CONCEPTION LTD., Kohl's Corporation, Defendants
CourtU.S. District Court — Western District of Texas

Matthew K. Gates, Michael Chibib, Bracewell LLP, Austin, TX, for Plaintiff.

David N. Deaconson, Pakis, Giotes, Page & Burleson, Waco, TX, Guy Yonay, Pro Hac Vice, Pearl Cohen Zedek Latzer Baratz LLP, New York, NY, for Defendants.

ORDER DENYING DEFENDANTS' MOTION TO DISMISS PURSUANT TO FED. R. CIV. P. 12(b)(2), (3), AND (6)

ALAN D ALBRIGHT, UNITED STATES DISTRICT JUDGE

Before the Court is Defendants Syte – Visual Conception Ltd. and Kohl's Corporation's motion to dismiss pursuant to Fed. R. Civ. P. 12(b)(2), (3), and (6), which was filed on July 2, 2019. ECF No. 6. Plaintiff Slyce Acquisition Inc. filed its response on July 26, 2019. ECF No. 13. Defendants filed their reply on August 9, 2019. ECF No. 14. Slyce filed its sur-reply on August 15, 2019. ECF No. 16. For the reasons described herein, the Court DENIES Defendants' Motion.

I. Factual Background

Slyce filed the instant action on April 11, 2019 alleging infringement of U.S. Patent No. 9,152,624. The '624 Patent is entitled "Systems and methods for visual presentation and navigation of content using data-based image analysis." The '624 Patent recites a method and system that allows a user to upload an image of what he/she would like to search for. Then, in accordance with the invention covered by the '624 Patent, "certain attributes and categories of that image are analyzed and stored (such as color, shape, size, etc. ); the uploaded image attributes and categories are compared to the attributes and categories of a number of stored images from the website; and once the comparison yields a positive match (or matches) based on certain criteria, the website images that match the uploaded image are displayed to the user. No text labels are necessary for the user, and the search results are based on the actual visual contents of the images." ECF No. 13 at 3. Slyce alleges that Defendants each infringe at least claim 1 of the '624 Patent. See, e.g. , ECF No. 1 at ¶¶ 28–29.

Defendant Kohl's is a Wisconsin corporation with its principal place of business in Menomonee Falls, Wisconsin. ECF No. 6 at 1. Kohl's is a nationwide retailer with multiple physical stores in this district. Id. ; ECF No. 13 at 15. Kohl's also sells products through its website and its mobile app. ECF No. 6 at 1. Syte is an Israeli corporation with principal place of business in Tel Aviv. Id. Neither party appears to contend that Syte has a regular and established place of business within this district. Id. ; ECF No. 13 at 16–17.

Slyce alleges that Kohl's, through the "Scan & Shop" tool in its mobile app, directly infringes at least claim 1. ECF No. 1 at ¶ 28. Slyce alleges that Syte knowingly induced Kohl's to directly infringe at least claim 1 "selling, offering for sale, providing, maintaining, and/or licensing its visual search navigation software with the intent that Kohl's utilize that software to implement the ‘Scan & Shop’ tool of the Kohl's mobile app in the United States." Id. at ¶ 29.

II. Legal Standards
A. Jurisdiction

Pursuant to Federal Rule of Civil Procedure 12(b)(2), the Court may dismiss an action when it lacks personal jurisdiction over the defendant. For patent cases, Federal Circuit law governs personal jurisdiction. Autogenomics, Inc. v. Oxford Gene Tech. Ltd. , 566 F.3d 1012, 1016 (Fed. Cir. 2009). When there has not been any jurisdictional discovery or an evidentiary hearing regarding jurisdiction, the "plaintiff usually bears only a prima facie burden." Celgard, LLC v. SK Innovation Co., Ltd. , 792 F.3d 1373, 1378 (Fed. Cir. 2015).

Personal jurisdiction is proper where the state long-arm statute permits service of process on the defendant and the requirements of due process are satisfied. Breckenridge Pharm., Inc. v. Metabolite Labs., Inc. , 444 F.3d 1356, 1361 (Fed. Cir. 2006). Because the Texas long-arm statute has been interpreted as extending to the limit of due process, these two inquiries are the same for district courts in Texas. Religious Tech. Ctr. v. Liebreich , 339 F.3d 369, 373 (5th Cir. 2003). The Supreme Court has articulated a two-pronged test to determine whether the requirements of due process are satisfied: 1) the nonresident must have "minimum contacts" with the forum state, and 2) subjecting the nonresident to jurisdiction must be consistent with "traditional notions of fair play and substantial justice." Int'l Shoe Co. v. Washington , 326 U.S. 310, 316, 66 S.Ct. 154, 90 L.Ed. 95 (1945) ; Breckenridge , 444 F.3d at 1361.

General jurisdiction is present only when a plaintiff can show the defendant's connection to a forum is "so constant and pervasive ‘as to render [it] essentially at home in the forum State.’ " Daimler AG v. Bauman , 571 U.S. 117, 121, 134 S.Ct. 746, 187 L.Ed.2d 624 (2014) (quoting Goodyear Dunlop Tires Operations, S.A. v. Brown , 564 U.S. 915, 919, 131 S.Ct. 2846, 180 L.Ed.2d 796 (2011) ).

"The Federal Circuit applies a three prong test to determine if specific jurisdiction exists: (1) whether the defendant purposefully directed activities at residents of the forum; (2) whether the claim arises out of or relates to those activities; and (3) whether assertion of personal jurisdiction is reasonable and fair." Nuance Commc'ns, Inc. v. Abbyy Software House , 626 F.3d 1222, 1231 (Fed. Cir. 2010). The plaintiff has the burden to show minimum contacts exist under the first two prongs, but the defendant has the burden of proving the exercise of jurisdiction would be unreasonable under the third. Elecs. For Imaging Inc. v. Coyle , 340 F.3d 1344, 1350 (Fed. Cir. 2003). The Federal Circuit has counseled, however, that the exercise of jurisdiction is unreasonable only in "the rare situation in which the plaintiff's interest and the state's interest in adjudicating the dispute in the forum are so attenuated that they are clearly outweighed by the burden of subjecting the defendant to litigation within the forum." Beverly Hills Fan Co. v. Royal Sovereign Corp. , 21 F.3d 1558, 1568 (Fed. Cir. 1994) (citing Burger King Corp. v. Rudzewicz , 471 U.S. 462, 477, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985) ).

The test of reasonableness and fairness is "a multi-factored balancing test that weighs any burdens on the defendant against various countervailing considerations, including the plaintiff's interest in a convenient forum and the forum state's interest in resolving controversies flowing from in-state events." Viam Corp. v. Iowa Export-Import Trading Co. , 84 F.3d 424, 429 (Fed. Cir. 1996) (citing Burger King , 471 U.S. at 477, 105 S.Ct. 2174 ). This test requires balancing the following factors: "(1) the burden on the defendant; (2) the interests of the forum state; (3) the plaintiff's interest in obtaining relief; (4) the interstate judicial system's interest in obtaining the most efficient resolution of controversies; and (5) the interest of the states in furthering their social policies." Viam Corp. , 84 F.3d at 429.

The Federal Circuit has also applied the "stream of commerce" theory born in World-Wide Volkswagen Corp. v. Woodson , 444 U.S. 286, 100 S.Ct. 580, 62 L.Ed.2d 490 (1980) and reaffirmed in Asahi Metal Indus. Co. v. Superior Court , 480 U.S. 102, 107 S.Ct. 1026, 94 L.Ed.2d 92 (1987). See Beverly Hills Fan , 21 F.3d at 1566. In Asahi , two four-justice pluralities offered slightly different versions of this theory as a means of establishing the existence of minimum contacts. Id. Justice Brennan, supported by three other justices, argued jurisdiction could be validly exercised over a defendant who placed goods into the stream of commerce so long as the defendant could foresee the goods might end up in the forum state. See Beverly Hills Fan , 21 F.3d at 1566 (citing Asahi , 480 U.S. at 117, 107 S.Ct. 1026 ). Justice O'Connor, also supported by three other justices, argued there must be "more than the mere act of placing a product in the stream of commerce" and endorsed the additional requirement of "an action of the defendant purposefully directed toward the forum State." Id. (quoting Asahi , 480 U.S. at 112, 107 S.Ct. 1026 (emphasis removed)).

The Federal Circuit has repeatedly refused to endorse either articulation of the stream of commerce theory. See, e.g. , Beverly Hills Fan , 21 F.3d at 1566 ("We need not join this debate here, since we find that, under either version of the stream of commerce theory, plaintiff made the required jurisdictional showing."); see also AFTG-TG, LLC v. Nuvoton Tech. Corp. , 689 F.3d 1358, 1364 (Fed. Cir. 2012) ("Thus, Beverly Hills Fan counsels that we refrain from taking a position on the proper articulation of the stream-of-commerce theory where the facts of a particular case mandate exercising or declining to exercise personal jurisdiction under any articulation of that theory."). Instead, the Federal Circuit's approach is to determine whether the plaintiff can establish minimum contacts—or has failed to establish minimum contacts—under both theories, making the choice between theories unnecessary. AFTG-TG , 689 F.3d at 1364.

B. Venue

"Any civil action for patent infringement may be brought in any 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). When a foreign corporation is sued for patent infringement, 28 U.S.C. § 1391 applies and not 28 U.S.C. § 1400. In re HTC , 889 F.3d 1349, 1357 (Fed. Cir. 2018).

A party may move to dismiss a claim for improper venue pursuant to Federal Rule of Civil Procedure 12(b)(3). Once a defendant challenges venue, "the plaintiffs have the burden to prove that the chosen venue is proper." Zurich Am. Ins. Co. v. Tejas Concrete & Materials Inc. , 982 F. Supp. 2d 714, 719 (W.D. Tex. 2013) (citation omitted). On a Rule 12(b)(3) motion to dismiss for...

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