IN THE UNITED STATES DISTRICT COURT
`FOR THE WESTERN DISTRICT OF TEXAS
`WACO DIVISION
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`KOSS CORPORATION,
`Plaintiff,
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`v.
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`SKULLCANDY, INC.,
`Defendant.
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`6-20-CV-00664-ADA
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`ORDER GRANTING SKULLCANDY, INC.’S
`MOTION TO DISMISS FOR IMPROPER VENUE UNDER RULE 12(b)(3)
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`Came on for consideration this date the Motion of Defendant Skullcandy Inc. to Dismiss
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`for Improper Venue under Rule 12(b)(3). Def.’s Mot. to Dismiss, ECF No. 16. The Court has
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`considered the Motion, all relevant filings, oral argument, and the applicable law. For the reasons
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`set forth below, the Court finds that Defendant’s Motion should be GRANTED for the following
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`reasons.
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`I.
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`BACKGROUND
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`Plaintiff Koss Corporations filed its Complaint in this Court on July 22, 2020 against
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`Skullcandy Inc. alleging direct and indirect infringement of certain Patents owned by Koss. Pl.’s
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`Compl. ECF No. 1. Koss’s Complaint states that venue is proper in the Western District of Texas
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`because Skullcandy has transacted business in this District. Id. at ¶ 9–10.
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`Skullcandy filed a Motion to Dismiss for Improper Venue under Rule 12(b)(3) on
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`September 8, 2020 alleging that Skullcandy neither resides in the Western District of Texas nor
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`does it have a “regular and established place of business” in Texas. Def.’s Mot. at 1. Koss filed a
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`response opposing the motion on September 22, 2020 stating that Skullcandy does have a
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`“regular and established place of business” in this District. Pl.’s Resp., ECF No. 18. Skullcandy
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`filed a reply on September 28, 2020. Def.’s Reply. ECF No. 19. On January 27, 2021, the Court
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`1
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`Bose Exhibit 1098
`Bose v. Koss
`IPR2021-00297
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`held a hearing on the Motion and granted limited discovery. ECF No. 24. Koss filed a sur-reply
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`on February 8, 2021. Pl.’s Sur-Reply, ECF No. 25-2. Skullcandy filed a sur-sur-reply on
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`February 12, 2021. Def.’s Sur-Sur-Reply, ECF No. 27-1. On March 17, 2021, the Court held a
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`second hearing to hear oral argument on the motion and supplemental briefings. ECF No. 32.
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`II.
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`LEGAL STANDARD
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`Under Federal Rules of Civil Procedure 12(b)(3), a court may dismiss a case when venue
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`is “wrong” or “improper” in the forum where the case was filed. Fed. R. Civ. P. 12(b)(3). The
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`plaintiff bears the burden of establishing proper venue. Slyce Acquisitions Inc. v. Syte – Visual
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`Conceptions Ltd., 422 F. Supp. 3d 1191, 1198 (W.D. Tex. 2019). The plaintiff need only make a
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`prima facie showing to establish venue if the court does not hold an evidentiary hearing.
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`Johnston v. Multidata Sys. Int’l Corp., 523 F.3d 602, 609 (5th Cir. 2008). The Court must accept
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`all allegations in the plaintiff’s complaint as true and resolve all conflicts in favor of the plaintiff.
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`Braspetro Oil Servs. Co. v. Modec (USA), Inc., 240 F. App’x 612, 615 (5th Cir). The Court may
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`consider evidence in the record beyond the facts alleged in the complaint and its admissible
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`attachments. Ambraco, Inc. v. Bossclip B.V., 570 F.3d 233, 238 (5th Cir. 2009). If venue is
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`improper and timely challenged, the court has discretion to dismiss or transfer the case. Caldwell
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`v. Palmetto State Savs. Bank of S.C., 811 F.2d 916, 919 (5th Cir.).
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`Patent Venue Statute 12 U.S.C. § 1440(b) is the “sole and exclusive provisions
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`controlling venue in patent infringement actions.” TC Heartland LLC v. Kraft Food Grp. Brands
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`LLC, 137 S. Ct. 1514, 1519 (2017). Under the Patent Venue State, a plaintiff may establish
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`venue in the district “where the defendant resides, or where the defendant has committed acts of
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`infringement and has a regular and established place of business.” 28 U.S.C. § 1440(b). A
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`defendant has a “regular and established place of business” in any district where (1) a defendant
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`2
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`has a physical place, (2) the physical place is a regular and established place of business, and
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`(3) the physical place is the place of the defendant. In re Cray Inc., 871 F.3d 1355, 1360 (Fed.
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`Cir. 2017). Koss points out that Skullcandy does not dispute that it is subject to personal
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`jurisdiction in this Court. Pl.’s Resp. at 2. But the standard for regular and established place of
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`business requires more than the minimum contacts standard necessary under personal
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`jurisdiction. In re Cray Inc., 871 F.3d at 1360.
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`A “place” requires a “building or part of a building set apart for any purpose” or “quarters
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`of any kind” where business is conducted. Id. at 1362. “Regular” indicates a steady, uniform,
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`orderly, and methodical manner of business operations. Id. “Established” denotes that the place
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`of business is settled certainly or fixed permanently. Id. Courts should consider whether the
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`defendant lists the place of business on its website or other directory, or whether the defendant’s
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`name appears on the building’s sign. Id. at 1363–64. The fact that the defendant advertised the
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`place as its place of business or has an office in that place is not sufficient to establish venue. Id.
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`at 1364. “The defendant must actually engage in business from that location.” Id.
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`A defendant need not own real property in the district to fulfill the venue requirement. In
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`re Google LLC, 949 F.3d 1338, 1343 (Fed. Cir. 2020). Rather, the defendant can meet the
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`statutory requirement by possessing or controlling any physical place in the district. Id.
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`III. ANALYSIS
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`Skullcandy asserts that Koss cannot establish proper venue in the Western District of
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`Texas because Skullcandy does not reside in or have a “regular and established place of business
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`in this District.” Def.’s Mot. at 1. Koss believes Skullcandy leases and has control over shelf-
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`space in certain retail stores in the Western District of Texas and, thus, has a regular and
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`3
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`established place of business in this District. Pl.’s Resp. at 3–5. Skullcandy contends that it does
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`not have control over any shelf-space in Texas. Def.’s Reply at 4–5.
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`Koss failed to establish that venue is proper in this District because it cannot show that
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`Skullcandy resides in Texas or that Skullcandy has a regular and established place of business in
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`Texas.
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`A.
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`Skullcandy Does Not Reside in the Western District of Texas.
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`There is no question, and Koss does not contend, that Skullcandy does not reside in
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`Texas. Def.’s Mot. at 2; Pl.’s Resp. at 2. Rather, Skullcandy is a Delaware corporation. Def.’s
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`Mot. at 2; Pl.’s Resp. at 2. All parties agree that venue is not proper under the first prong of the
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`Patent Venue Statute. TC Heartland, 137 S. Ct. at 1517; Def.’s Mot. at 2; Pl.’s Resp. at 2.
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`B.
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`Skullcandy Does Not Have a Regular and Established Place of Business in the
`Western District of Texas.
`The Court finds that Koss failed to prove that Skullcandy has a regular and established
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`place of business in this District because Skullcandy (1) does not lease or own any real property
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`in Texas; (2) does not possess or control any shelf-space in Texas; and (3) does not employ any
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`persons in Texas.
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`i.
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`Skullcandy Does Not Lease or Own Any Real Property in Texas.
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`Skullcandy stopped using its last physical store in Texas in 2014 and filed a Certificate of
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`Withdrawal of Registration with the Texas Secretary of State in 2017. Def.’s Mot. at 3. Koss also
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`does not contend that Skullcandy owns any real property in Texas. See generally Def.’s Mot.
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`Therefore, the Court finds that Skullcandy does not lease or own any real property in Texas.
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`ii.
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`Skullcandy Does Not Possess or Control Any Shelf-Space in Texas.
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`Leased shelf or rack-space can serve as a “regular and established place of business”
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`under the Patent Venue Statute if the defendant also has an employee or agent conducting
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`business in that district. In re Google LLC, 949 F.3d at 1343–44 (holding that shelf-space did not
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`constitute a regular and established place of business for the defendant within the district because
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`the defendant had no employee or agent regularly conducting its business at the alleged place);
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`Tinnus Enterprises, LLC v. Telebrands Corp., No. 6:17-CV-00170-RWS, 2018 WL 4524119, at
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`*1 (E.D. Tex. May 2, 2018) (holding that shelf-space constituted a regular and established place
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`of business for the defendant because the defendant employed third-parties to facilitate
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`movement of its products, manage the merchandisers, help procure the best available space, and
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`monitory the sales within the retail stores).
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`Koss contends that Skullcandy has a “regular and established place of business” in this
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`District because Skullcandy leases and controls shelf-space in various retail stores in this
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`District. Pl.’s Resp. at 3–5. Specifically, Koss alleges that Skullcandy pays Best Buy for
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`advertisement and product placements in Best Buy’s stores. Id. at 3–4. Koss also alleges that
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`Skullcandy provides its products to Office Depot in Waco or Austin on consignment. Id. at 4.
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`Thus, Koss contends that since Skullcandy retains ownership over its products while they are on
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`display in Office Depot’s shelf-space, Skullcandy has possession and control over such shelf-
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`space. Id. Furthermore, since Office Depot sells Skullcandy’s products on consignment, Koss
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`alleges that Office Depot is effectively Skullcandy’s agent. Id. at 4–5 (citing United States v.
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`Menier Hardware No. 1, Inc., 219 F. Supp. 448, 460 (W.D. Tex. 1963) (“consignment of goods
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`for sale is bailment and does not imply a sale, but imports an agency with title in the
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`consignor”)).
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`In its Reply, Skullcandy counters that it does not pay Best Buy for product advertising
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`and placement in its stores. Pl.’s Reply at 3. Skullcandy points out that Koss’s alleged evidence
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`of such arrangement is that Best Buy receives “funds from certain vendors” but Koss does not
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`5
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`prove specifically that Skullcandy is one of those vendors. Id.; Def.’s Resp. Ex. B at 53, ECF No.
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`18-3. Skullcandy alleges that the mere fact that its products are sold on “endcaps” in Best Buy
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`stores does not prove Skullcandy has possession or control over such shelf-space. Pl.’s Reply at
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`3–4. Although Skullcandy pays Best Buy “marketing development funds,” Skullcandy states that
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`Best Buy retains sole control and discretion over the manner in which Skullcandy’s products are
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`sold. Id. at 4. Skullcandy evidences its lack of control over the “endcaps” by stating that that if it
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`did have control, Skullcandy would not permit Best Buy “to leave so many empty pegs and
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`shelves without Skullcandy products.” Id. (citing Def.’s Resp. Ex. A, ECF No. 18-2, at 4-6, 8,
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`10, 12).
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`Skullcandy also contends that it does not sell its products to Office Depot on
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`consignment; rather, Office Depot purchases Skullcandy’s products directly from Skullcandy
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`and controls its own shelves. Id. at 4–5. Moreover, Skullcandy alleges that this is the agreement
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`it has with every one of the retail stores mentioned in Koss’s Complaint. Id. at 5. Skullcandy
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`points out that the agreement Koss cites to in alleging consignment is between Office Depot and
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`SupportSoft, Inc., a party unrelated to Skullcandy. Id. at 4; Ex. C (18-4). Skullcandy has filed a
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`supporting affidavit by Ms. Hindman, Skullcandy’s Chief Financial Officer, that states the
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`former. Hindman Supp. Decl. ECF No. 19-1.
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`Koss argues that the Court should disregard Ms. Hindman’s declarations, asserting that
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`such statements regarding Skullcandy’s arrangements with its Texas retailers are not within the
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`purview of her position and cannot be relied on. Pl.’s Sur-Reply at 2. The Court disagrees. Ms.
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`Hindman, as Chief Financial Officer, is in an appropriate position to testify about such issues. It
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`is clear from Ms. Hindman’s declaration that she is sufficiently familiar with Skullcandy’s
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`arrangements with its Texas retailers. Ms. Hindman stated that Skullcandy does not consign
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`products for sale by Office Depot and that Skullcandy does not have control over how Office
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`Depot stocks and places Skullcandy’s products in Office Depot stores. See Hindman Supp., Decl.
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`ECF No. 19-1 at ¶ 7. Ms. Hindman also made similar statements addressing Skullcandy’s
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`arrangements with Target, Kohl’s, Office Max, and Wal-Mart. See id. at ¶ 8. Koss failed to rebut
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`these statements with any evidence to the contrary. As such, this Court finds that Skullcandy
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`does not have possession or control over any shelf-space in Texas to give it a regular and
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`established place of business in this District.
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`iii.
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`Skullcandy Does Not Employ Any Persons in Texas.
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`A defendant has a “regular and established placed of business” in districts where their
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`employees work, even if those employees are working from home. In re Cordis Corp., 769 F.2d
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`733, 735, 737 (Fed. Cir. 1985); In re Cray, 871 F.3d at 1362. Therefore, the Court examines
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`whether any of Skullcandy’s employees worked in this District, even if working from home, on
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`July 22, 2020, the day Koss’s Complaint was filed.
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`Skullcandy states it has not had a Texas employee since November 2016. Def.’s Mot. at
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`3. Due to the pandemic, Skullcandy did have employees who worked from home for a period of
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`time. Pl.’s Resp. at 5–6. Koss contends that Skullcandy may have employees working from home
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`in Texas, or employees who worked from home on July 22, 2020. Id. at 6. Skullcandy rebutted
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`this statement, unequivocally asserting that none of its employees that work from home live in
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`the state of Texas. Pl.’s Resp. at 6; Hindman Supp. Decl. at ¶ 5. Thus, the Court finds that Koss
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`cannot establish that Skullcandy has a regular and established place of business in this District
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`through employees working from home in this District.
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`IV. CONCLUSION
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`For the reasons stated above, it is ORDERED that Skullcandy’s Motion to Dismiss for
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`Improper Venue is GRANTED.
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`SIGNED this 31st day of March, 2021.
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`ALAN D ALBRIGHT
`UNITED STATES DISTRICT JUDGE
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