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Xodus Medical, Inc. v. Allen Medical Systems, Inc.

United States District Court, W.D. Pennsylvania

May 22, 2018

XODUS MEDICAL, INC., et al., Plaintiffs,
v.
ALLEN MEDICAL SYSTEMS, INC., et al., Defendants.

          MEMORANDUM OPINION

          Mark R. Hornak, United States District Judge.

         This is a patent case. The Defendant has moved to dismiss the case on the basis that venue is not proper in this District pursuant to 28 U.S.C. § 1400(b). The Plaintiff has opposed that Motion. The matter has been briefed and orally argued, and is ripe for disposition. The Motion will be granted, but rather than dismissing the case, it will be transferred forthwith to the District of Massachusetts.

         There is no dispute that the Defendant is a corporation incorporated under Indiana law, with its headquarters in Massachusetts. ECF Nos. 42-7, 39-1. It is undisputed that the Defendant is a subsidiary of another corporation, Hill-Rom, Inc. which itself is a subsidiary of a holding company, Hill-Rom Holdings, Inc. ECF No. 42-3.[1] Both Hill-Rom entities are also incorporated under Indiana law. ECF No. 42-8. The Defendant corporation does not have any physical presence in and of itself in Pennsylvania. ECF No. 39-1. The Plaintiff argues that applying any number of theories, the Defendant corporation should be treated as one and the same/part and parcel of the Hill-Rom entity that has a physical building in Monroeville, Pennsylvania, which is in this District. ECF No. 42-4. Thus, says the Plaintiff, the Defendant "really" does have a physical presence in this District for purposes of § 1400(b), and venue in this Court is proper. The Court concludes that the Plaintiff has not met its obligation to demonstrate that the Defendant has such a presence in this District, that venue does not lie in this District, and that the case must proceed elsewhere.

         Federal Circuit and applicable Third Circuit law is settled at least as to the following points. Venue under § 1400(b) is to be treated in a restrictive fashion, and is to be tightly construed. See In re: ZTE (USA) Inc., No. 2018-113, 2018 WL 2187782, at *4 (Fed. Cir. May 14, 2018). The burden is on the Plaintiff to demonstrate that venue lies in the District in which the patent lawsuit is filed. Id. Venue must lie not only in the state where the lawsuit is brought, but specifically in the judicial district in which the case is filed. In re: BIGCOMMERCE, Inc., No. 2018-122, 2018 WL 2207265, at *6 (Fed. Cir. May 15, 2018). Where, as here, the Plaintiff asks the Court to look past/through the corporate form of the Defendant, the Plaintiff has the burden of proving that such is proper by a preponderance of the evidence. Plasticpak Packaging, Inc. v. DePasquale, 75 F. App'x. 86, 88 (3d Cir. 2003); see also Wordtech Sys., Inc. v. Integrated Networks Sols., Inc., 609 F.3d 1308, 1314 (Fed. Cir. 2010) (law of regional circuit applies).

         The Plaintiff argues that this Court should apply some theory[2] to conclude that the physical presence of an "upstream" Hill-Rom corporate entity in this District should be treated as the physical presence of this Defendant. Otherwise, it is plain that there is no venue here. In re: Cray, Inc., 871 F.3d 1355, 1360 (Fed. Cir. 2017).[3] That is a heavy burden, as ordinarily a court does not disregard or otherwise look past/through the corporate structure of a corporate entity, unless strong equitable considerations compel it to do so. Plastipak, 75 Fed.Appx. at 88 (applying Pennsylvania law).[4] There is no single factor that the Court is to consider in such an analysis, but it must look at a number of considerations, including adherence to corporate formalities, capitalization, financial records and operations, the mode/method of business operations, and the like. No. one factor is conclusive. See Unity Opto Tech. Co., Ltd. v. Lowe's Home Ctrs., LLC, No. 18-cv-27, 2018 WL 208725, at *2, 3 (W.D. Wis. May 4, 2018).

         Here, there is no doubt that the Defendant is a currently existing, registered Indiana corporation. It has officers, and does business in its own name. It sells its products. The record does not reflect that it owns, leases, or has any stores, offices, or buildings in its own name in this District. The record does not reflect that it has any employees here, nor any distribution centers in this District, and it has not registered to do business in Pennsylvania.

         The Plaintiff says that based on the following, the "physical place" of Hill-Rom, Inc., which is in Monroeville, PA (in this District), ECF No. 42 at 6, should be treated as a "physical place" of the Defendant for purposes of 28 U.S.C. § 1400(b). We'll take its contentions one at a time.

         First, a corporate representative of the Defendant testified in a deposition[5] that at least at the time of his deposition, the Defendant had no members on its Board of Directors. But, the Plaintiff has advanced no facts or law as to whether, and if so why, that actually impairs the Defendant's corporate existence under Indiana law.

         Second, at least some of the Defendant's legal expenses, including for this litigation, may ultimately be paid by a Hill-Rom entity. But, the Plaintiff has advanced no evidence as to why that is impermissible, or is a fact that is inconsistent with the Defendant having a distinct and valid corporate existence.[6]

         Third, the Plaintiff has placed in the record the Fiscal Year 2017 SEC form 10-K for Hill-Rom Holdings, Inc., Exhibit PX 1(H), which appears to show that that entity consolidates revenue in its financial presentations, including the revenue from the Defendant and other subsidiaries, but then offers no testimony or evidence that doing so is impermissible, irregular, is contrary to Generally Accepted Accounting Principles ("GAAP"), or would impair the distinct corporate existence of the Defendant (or any other subsidiary) under Indiana law.

         Fourth, the Plaintiff says that the Hill-Rom, Inc., Monroeville (PA) facility acts as a contracted service location as to one of the Defendant's large products, ECF No. 42 at 7, but then advances no evidentiary or legal basis to conclude that one business performing contracted service work for another business somehow impairs the independent corporate existence of that second business, here the Defendant. Further, there is no record evidence that the Defendant exercises possession or control over that facility. See Javelin, 2017 WL 5953296, at *5.

         Fifth, the Plaintiff says that there is a complete overlap of the listed and registered corporate officers of the Defendant and of Hill-Rom, Inc., but points to no legal principle that stands for the proposition that such in and of itself destroys or impairs corporate separateness. See Miller v. EME Homer City Generation, LP, No. 13-cv-352, 2013 WL 5972382, at * 10-12 (W.D. Pa. Nov. 8, 2013); Clemens v. Gerber Sci, Inc., No. 87-cv-5949, 1989 WL 3480, at *2 (E.D. Pa. Jan. 13, 1989).

         Sixth, apparently the Defendant needs to get approval from its Hill-Rom parent before it can lease or purchase interests in real estate, and before it can promote an employee to its "leadership team." Again, if even true, the Plaintiff advances no factual or legal basis to conclude that a corporate parent retaining that level of control of high-level structural decisions permits a court to disregard the corporate distinction between those corporations. Croyle v. Tex. E. Corp., 464 F.Supp. 377, 379 (W.D. Pa. 1979).

         Seventh, the employees of the Defendant use e-mail address ending in "hill-rom.com, " Hill-Rom provides "IT services" to Defendant, and Hill-Rom, Inc., advertises the Defendant's products for sale in its sales literature. ECF No. 42 at 9. This, says the Plaintiff, makes the Defendant a mere operating division of Hill-Rom, Inc. The Court disagrees. Whether considered on its own, or in conjunction with any or all of the other factors noted, these points of intersection may demonstrate a close ...


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