Case 2:17-cv-00513-JRG Document 203 Filed 09/28/18 Page 1 of 8 PageID #: 11482
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE EASTERN DISTRICT OF TEXAS
`MARSHALL DIVISION
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`Plaintiff,
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`CIVIL ACTION NO. 2:17-CV-00517-JRG
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`AGIS SOFTWARE DEVELOPMENT, LLC,
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`v.
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`ZTE CORPORATION, ZTE (TX), INC.,
`ZTE (USA) INC.,
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`§
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`Defendants.
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`ORDER GRANTING MOTION TO TRANSFER FOR IMPROPER VENUE
`Before the Court is Defendants ZTE (TX) Inc.’s and ZTE (USA) Inc.’s Motion to Dismiss
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`Plaintiff’s Amended Complaint for Improper Venue or in the Alternative to Transfer (the
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`“Motion”) (Dkt. No. 38.) Having considered the Motion, the Court is of the opinion that the
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`Motion should be GRANTED and the case TRANSFERRED to the Northern District of
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`California in the interests of justice for the reasons set forth herein.
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`I.
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`BACKGROUND
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`AGIS Software Development, LLC, (“AGIS”) filed its Complaint on June 21, 2017,
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`accusing Defendants ZTE Corporation (“ZTE”), ZTE (TX) Inc. (“ZTX”), and ZTE (USA) Inc.
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`(“ZTA”) (collectively, the “ZTE Defendants”) of patent infringement under 35 U.S.C. § 271.
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`(Dkt. No. 1.) ZTX and ZTA filed the instant Motion on November 21, 2017. (Dkt. No. 38.) This
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`Court ordered the above-captioned case consolidated with Lead Case AGIS Software Development
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`LLC v. Huawei Device USA Inc. et al., No. 2:17-cv-513 for all pretrial purposes. (Dkt. No. 48.)
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` During the pendency of this Motion, a sister court in this District addressed the propriety
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`of venue in this District as to ZTA in a separate case. Specifically, in American GNC Corporation
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`Case 2:17-cv-00513-JRG Document 203 Filed 09/28/18 Page 2 of 8 PageID #: 11483
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`v. ZTE Corporation, that Court, applying § 1400(b) pursuant to the Supreme Court’s holding in
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`TC Heartland LLC v. Kraft Foods Grp. Brands LLC, 137 S. Ct. 1514, 1517 (2017), found that
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`ZTA had a regular and established place of business within the meaning of the statute and, thus,
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`that the statutory requirements for proper venue under the special patent venue statue were met.
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`As a result, it denied ZTA’s motion to dismiss, in that case. No. 417-cv-620-ALM-KPJ, 2017 WL
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`5163605, at *4 (E.D. Tex. Oct. 4, 2017). This finding, from the Magistrate Judge, was adopted by
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`the District Court, which conducted de novo review of the report and recommendation and
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`overruled ZTA’s objections regarding it. No. 4:17-cv-620, 2017 WL 5157700 (E.D. Tex. Nov. 7,
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`2017).
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`The basis for this holding was the Magistrate’s finding that ZTA has “a dedicated call
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`center in Plano, Texas, with 60 plus dedicated ZTE representatives,” which could be properly
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`considered to be a regular and established place of business within the meaning of the statute.
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`2017 WL 5163605, at *3. ZTA’s argument “that because the call center was established in
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`partnership with a third party (iQor), no products are sold from the call center, and the
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`representatives are employed by iQor—not ZTE, the call center does not qualify as a regular and
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`established place of business in the District” was not found to be persuasive. Id.
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`On mandamus petition, the Federal Circuit held that trial court erred in placing the burden
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`on the defendant to demonstrate that venue was improper, finding that, “upon motion by the
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`Defendant challenging venue in a patent case, the Plaintiff bears the burden of establishing proper
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`venue.” In re ZTE (USA) Inc., 890 F.3d 1008, 1013 (Fed. Cir. 2018). The Federal Circuit granted
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`the petition for mandamus on that basis alone and vacated the District Court’s denial of ZTA’s
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`motion to dismiss for improper venue on that basis. The case was remanded to the District Court
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`“to reconsider ZTE USA’s motion to dismiss consistent with this order, placing the burden of
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`2
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`Case 2:17-cv-00513-JRG Document 203 Filed 09/28/18 Page 3 of 8 PageID #: 11484
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`persuasion on the propriety of venue on American GNC.” 890 F.3d at 1016. The reconsideration
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`“consistent with” the Federal Circuit’s order required the District Court to “give reasoned
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`consideration to all relevant factors or attributes of the relationship in determining whether those
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`attributes warrant iQor’s call center being deemed a regular and established place of business of
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`ZTE USA,” which the Federal Circuit found “the district court did not do.” Id. at 1015.1
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`The Defendants in the above-captioned case filed a notice of supplemental authority in
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`support of the instant Motion directing this Court to the holding of the Federal Circuit in In re ZTE
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`(USA) Inc. (Dkt. No. 63.) AGIS responded to this notice of supplemental authority, (Dkt. No.
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`66), and this Court granted leave for both Plaintiff and Defendants ZTX and ZTA to file
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`supplemental briefing addressing the issue of venue in this case. (Dkt. No. 67.) The Parties filed
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`their respective briefing, (Dkt. Nos. 69, 72), and the Court has considered all of the briefing
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`permitted by rule and this Court’s orders.
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`II.
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`DISCUSSION
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`Venue lies only “in the judicial district where the defendant resides, or where the defendant
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`has committed acts of infringement and has a regular and established place of business.” 28 U.S.C.
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`§ 1400(b). “[A]s a matter of Federal Circuit law [], upon motion by the Defendant challenging
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`venue in a patent case, the Plaintiff bears the burden of establishing proper venue.” In re ZTE
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`(USA) Inc., 890 F.3d at 1013. “[Section] 1400(b) requires that ‘a defendant has’ a ‘place of
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`business’ that is ‘regular’ and ‘established.’ All of these requirements must be present.” In re Cray
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`Inc., 871 F.3d 1355, 1362 (Fed. Cir. 2017). “[T]he first requirement is that there must be a physical
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`place in the district”; “[t]he second requirement . . . is that the place must be a regular and
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`established place of business”; and “the third requirement . . . is that the regular and established
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`1 On remand from the Federal Circuit following the grant of mandamus, the case was stayed pending settlement
`negotiations. (4:17-cv-620, Dkt. No. 143).
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`3
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`place of business must be the place of the defendant.” Id. at 1362–63 (internal quotation marks
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`omitted).
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`In this case, the question of whether ZTA has a regular and established place of business
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`under the special patent venue statute centers around the activities of the iQor call center, located
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`within this District. AGIS’s opposition to ZTA’s Motion to Dismiss for Improper Venue was
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`largely predicated upon the findings of the District Court in American GNC Corporation which
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`were the subject of the Federal Circuit’s mandamus action in In re ZTE (USA) Inc. (See id. at 15–
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`19).
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`There is no dispute that the iQor call center is a physical place located in this District.
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`There is no dispute that the call center is a regular and established place of business. The dispute
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`is whether the call center is a place of business of ZTA. As to this issue, the Court finds that AGIS
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`has failed to properly support its allegation that the call center is such. AGIS’s argument amounts
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`to “ZTA engages in its business from iQor located in this District and, therefore, iQor is a regular
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`and established place of business of ZTA.” (Id. at 4). This is not sufficient to meet the statutory
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`requirements. Indeed, the instructions provided by the Federal Circuit specifically addressing the
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`facts of this particular defendant reveal how this is insufficient. Specifically, the control ZTA
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`exercises over the call center itself and the control ZTA exercised over the employees in the call
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`center, along with ZTA’s ratification, if any, of the place of the call center are factors which must
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`be considered. In re ZTE (USA) Inc., 890 F.3d at 1015.
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`AGIS argues that the following facts are sufficient to demonstrate that ZTA has a regular
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`and established place of business within this District pursuant to the Federal Circuit’s instruction:
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`• ZTA established the call center in the District for the purpose of providing customer
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`support services to ZTA customers;
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`4
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`Case 2:17-cv-00513-JRG Document 203 Filed 09/28/18 Page 5 of 8 PageID #: 11486
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`• ZTA provides the call center with materials that explain the operation of and changes
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`to ZTA which the call center uses to train customer service representatives;
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`• ZTA’s customer-facing website advertises a customer support telephone number and a
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`telephone number for online purchase and sales, both of which are automatically routed
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`to the call center;
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`•
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`Individuals call the call center seeking assistance with, and the call center
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`representatives provide advice about, ZTA’s products;
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`• ZTA employees perform work on behalf of ZTA at the call center; and
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`• ZTA directs its customer service representatives at the call center to affirmatively
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`contact customers in order to resolve issues and concerns and that the call center
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`customer service representatives research, draft, publish, and approve articles
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`pertaining to Defendants’ devices, policies, and procedures.
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`(Dkt. No. 66 at 2–3). These facts are not sufficient. The record to which AGIS points does not
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`show how ZTE controls the work conducted at the call center, does not show how ZTE controls
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`the call center generally, does not show how ZTE ratifies the call center,2 and does not demonstrate
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`how the relationship between ZTE and iQor is more intimate and controlling than a traditional
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`arms-length contractual relationship.3
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`2 To the extent that AGIS argues that routing a phone call to the call center constitutes ratification, that act alone,
`without more, is insufficient to constitute ratification to the public. If the routing included a statement that, for
`example, “your call is being transferred to ZTA customer service in Texas,” a finding of ratification would likely be
`proper. Seamless routing with no indication of where the call was being directed to, as here, however, is insufficient.
`3 AGIS requested venue discovery in the event that this Court found venue was improper. While it is certainly the
`case that venue discovery should be liberally granted, especially given the placement of the burden in proving venue
`upon the Plaintiff by the holding of In re ZTE (USA) Inc., this request amounts to seeking a “do over.” AGIS’s request
`lacks specificity in what it will seek (stating it will generally “further elucidate the relationship between ZTA and its
`local call service center and/or ‘ZTA employee home offices.’”), how this information was not available to AGIS, and
`why AGIS is unable to address these issues at the time it filed its opposition. This Court will entertain motions for
`venue discovery where the plaintiff demonstrates that discovery could or will be useful in addressing the issue of
`venue and shows the Court that such discovery is narrowly drawn and properly tailored to open question unable to be
`addressed by publically available information. See, e.g., SEVEN Networks, LLC v. Google LLC, No. 2:17-cv-442-
`5
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`For the reasons provided above, the Court holds that AGIS has failed to meet its burden
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`and, accordingly, finds that venue is improper as to ZTA. 4, 5 Having found venue improper as to
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`ZTA, the Court need not consider the propriety of venue as to ZTX as, in order for a district to be
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`“one in which [an] action [may be] brought, . . . both venue and jurisdiction must be proper there,”
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`as to all defendants. Magnacoustics Inc. v. Resonance Tech. Co., No. 97-1247, 1997 U.S. App.
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`LEXIS 26498, at *4 (Fed. Cir. Sep. 25, 1997) (“Furthermore, as firmly established by judicial
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`decisions, in an action involving multiple defendants venue and jurisdiction requirements must be
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`met as to each defendant.”) (citation omitted).
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`The only question, then, is whether dismissal or transfer best serves the “interests of
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`justice.”6 The “interests of justice” warrant transfer, in lieu of dismissal, when “time-consuming
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`and justice defeating technicalities would penalize the plaintiff or prevent the case from being
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`JRG, Dkt. No. 77 (Contingent Motion for Leave to Conduct Expedited Venue Discovery) (“SEVEN’s proposed
`discovery seeks to provide additional details about how Google uses the equipment—for instance, how much data is
`stored in the Edge servers and how much data is distributed from them to residents of the District. Further, SEVEN
`seeks to determine what other physical property Google owns and controls in the District, where it is located, how
`long it has been there, how it is used, and who uses it;” “SEVEN’s proposed discovery seeks information about
`Google’s employees in the District: who they are, what work they do for Google, where and how they perform that
`work, and how long they have worked for Google;” “SEVEN seeks additional information about the agreements and
`how Google meets it obligations under them, as well as information about agreements Google may have with other
`businesses in the District;” “SEVEN seeks information related to Google’s marketing and advertisements, to
`determine whether Google represents that it has a place of business in the District;” and “SEVEN has prepared a
`limited number of requests for production and deposition topics, attached here as Exhibits F and G, aimed at obtaining
`information related to each of these issues.”). AGIS’s request does not meet these requirements, and the Court denies
`the request.
`4 The Parties also dispute whether ZTA has committed acts of infringement within this District, as required by
`§ 1400(b). Because the Court finds that AGIS has failed to meet its burden in establishing that ZTA has a regular and
`established place of business within this District, the Court need not address this issue.
`5 The Court notes the fact-specific inquiry which comprises every venue analysis and that, with time, venue facts may
`change. While this Court has found venue to be improper as to ZTA in this case, should different facts be presented
`in a future case addressing the considerations identified by the Federal Circuit as being of interest to this Defendant,
`the ultimate conclusion may be revisited. Venue determinations are highly fact intensive. Similarly, where a court
`finds venue is proper in a district as to a defendant, where different facts are presented in a later case, venue may be
`revisited and may be found to be improper, if the record so requires.
`6 The Court concludes that severance of ZTE is inappropriate in this situation, as doing so would require the same
`case to be litigated twice in two different forums. In re Rolls Royce Corp., 775 F.3d 671, 680 (5th Cir. 2014) (A court
`“should not sever [a case] if the defendant over whom jurisdiction is retained is so involved in the controversy to be
`transferred that partial transfer would require the same issue to be litigated in two cases.”) (quoting Liaw Su Teng v.
`Skaarup Shipping Corp., 743 F.2d 1140, 1148 (5th Cir. 1984)).
`6
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`Case 2:17-cv-00513-JRG Document 203 Filed 09/28/18 Page 7 of 8 PageID #: 11488
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`heard on the merits in the proper venue. Dubin v. United States, 380 F.2d 813, 815 (5th Cir. 1967);
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`see also Valspar Corp. v. PPG Indus. Inc., 2017 U.S. Dist. LEXIS 123501, 2017 WL 3382063, at
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`*5 (D. Minn. Aug. 4, 2017) (emphasizing that dismissal “would serve only to delay the progress
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`of justice to require [plaintiff] to start again from square one”). A transfer, rather than dismissal,
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`is also appropriate where the plaintiff is certain to “almost immediately” refile the action in the
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`proper venue and, as here, “discovery has already begun” and the Parties have “already invested a
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`considerable amount of time and money” in the case. Giroir v. MBank Dallas, N.A., 676 F. Supp.
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`915, 923 (E.D. Ark. 1987).
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`The ZTE Defendants submit that “[t]his case could have been brought in the [Northern
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`District of California], where ZTX has its principal place of business and ZTA has an office,” and
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`that “if the Court declines to dismiss the Amended Complaint,” as it has here, “ZTX and ZTA
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`respectfully request transfer of this case to the [Northern District of California]” (Dkt. No. 38 at
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`22, 20.) AGIS does not appear to propose an alternative district to which this case should be
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`transferred if venue is improper, arguing only that “transfer to the Northern District of California
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`pursuant to Sections 1404(a) and 1406(b) is not warranted.” (Dkt. No. 46 at 20 (cleaned up).) The
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`Court finds that this action could have been brought in the Northern District of California and that
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`transfer to the Northern District of California serves the interests of justice contemplated under
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`28 U.S.C. § 1406.7
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`7 On September 17, 2018, ZTE moved to supplement the record in support of its motion to transfer venue to the
`Northern District of California. (Dkt. No. 81.) In its motion, ZTE provided evidence that AGIS issued a subpoena
`on Google in both of the consolidated cases, Agis Software Development, LLC v. Huawei Device USA Inc. et al., No.
`2:17-cv-513 and Agis Software Development, LLC v. HTC Corp. et al, No. 2:17-cv-514. The subpoena sought the
`production of Google’s confidential source code for several of the accused applications in the Northern District of
`California. ZTE argued that these subpoena notices rebut AGIS’s claims that its infringement claims rest solely on
`Google’s publicly available source code and that such source code is located in the Northern District of California.
`The Court granted ZTE’s motion to supplement the record. (Dkt. No. 84.) The Court acknowledges that the subpoenas
`served on Google suggest that Google possesses relevant documents in the Northern District of California.
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`III. CONCLUSION
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`Accordingly, the Court hereby GRANTS Defendants ZTE (TX) Inc.’s and ZTE (USA)
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`Inc.’s Motion to Dismiss Plaintiff’s Amended Complaint for Improper Venue or in the Alternative
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`to Transfer. (Dkt. No. 38.) As a result, this case is hereby ORDERED UNCONSOLIDATED
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`from the Lead Case, Case No. 2:17-cv-513-JRG, and ORDERED TRANSFERRED to the
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`Northern District of California.
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`8
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