Case 2:19-cv-00209-JRG Document 41 Filed 09/17/19 Page 1 of 18 PageID #: 2007
`
`IN THE UNITED STATES DISTRICT COURT
`FOR THE EASTERN DISTRICT OF TEXAS
`MARSHALL DIVISION
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`
`
`
`
`Civil Action No. 2:19-cv-00209
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`Plaintiff,
`
`v.
`
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`
`
`THE HILLMAN GROUP, INC.
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`
`
`
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`KEYME, LLC,
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`
`
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`Defendant.
`
`
`KEYME, LLC’S MOTION TO DISMISS FOR IMPROPER VENUE OR, IN THE
`ALTERNATIVE, TO TRANSFER TO THE SOUTHERN DISTRICT OF NEW YORK
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`
`
`
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`
`

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`Case 2:19-cv-00209-JRG Document 41 Filed 09/17/19 Page 2 of 18 PageID #: 2008
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`Table of Contents
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`Page
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`I.
`II.
`III.
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`IV.
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`V.
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`
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`
`
`INTRODUCTION ............................................................................................................. 1
`STATEMENT OF THE ISSUES....................................................................................... 1
`FACTUAL BACKGROUND ............................................................................................ 2
`A.
`The Parties ............................................................................................................. 2
`B.
`KeyMe’s Key Duplication Kiosks ......................................................................... 2
`ARGUMENT ..................................................................................................................... 5
`A.
`Legal Standard ....................................................................................................... 6
`B.
`KeyMe Has No “Physical Place” In This District ................................................. 6
`C.
`KeyMe Has No “Regular and Established Place Of Business” In This
`District.................................................................................................................... 8
`1.
`KeyMe’s Kiosks in this District are not “Regular and Established.” ........ 9
`2.
`KeyMe’s Kiosks are not “Places of Business.” ....................................... 10
`The Retail Stores Housing KeyMe’s Kiosks In This District Are Not
`“Places Of The Defendant” .................................................................................. 11
`Alternatively, This Case Should Be Transferred To The Southern District
`of New York Under 28 U.S.C. § 1406(a) ............................................................ 13
`CONCLUSION ................................................................................................................ 13
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`D.
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`E.
`
`-i-
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`

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`Case 2:19-cv-00209-JRG Document 41 Filed 09/17/19 Page 3 of 18 PageID #: 2009
`
`Table of Authorities
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`Page
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`Cases
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`Automated Packaging Sys., Inc. v. Free-Flow Packaging Int’l, Inc.,
`No. 5:14-cv-2022, 2018 WL 400326 (N.D. Ohio Jan. 12, 2018) .......................................... 7, 11
`
`Homebingo Network, Inc. v. Chayevsky,
`428 F. Supp.2d 1232 (S.D. Ala. 2006) ................................................................................ 11, 12
`
`In re Cordis,
`769 F.2d 733 (Fed. Cir. 1985) ................................................................................................. 8, 9
`
`In re Cray Inc.,
`871 F.3d 1355 (Fed. Cir. 2017) .......................................................................................... passim
`
`In re Volkswagen of Am., Inc.,
`545 F.3d 304 (5th Cir. 2008) ..................................................................................................... 13
`
`In re ZTE (USA) Inc.,
`890 F.3d 1008 (Fed. Cir. 2018) ................................................................................................... 6
`
`Lites Out, LLC v. OutdoorLink, Inc.,
`No. 4:17-cv-00192, 2017 WL 5068348 (E.D. Tex. Nov. 2, 2017) ......................................... 7, 8
`
`Magee v. Coca-Cola Refreshments USA, Inc.,
`833 F.3d 530 (5th Cir. 2016) ....................................................................................................... 9
`
`Peerless Network, Inc. v. Blitz Telecom Consulting, LLC,
`No. 17-cv-1725, 2018 WL 1478047 (S.D.N.Y. Mar. 26, 2018) ............................................... 10
`
`Personal Audio LLC, v. Google, Inc.,
`280 F. Supp. 3d 922 (E.D. Tex. 2017)....................................................................................... 10
`
`Seven Networks, LLC v. Google LLC,
`315 F. Supp. 3d 933 (E.D. Tex. 2018)............................................................................. 8, 11, 12
`
`TC Heartland LLC v. Kraft Foods Grp. Brands LLC,
`137 S. Ct. 1514 (2017)................................................................................................................. 6
`
`Statutes
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`28 U.S.C. § 1400(b) ........................................................................................................................ 6
`
`28 U.S.C. § 1406(a) .................................................................................................................. 6, 13
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`
`
`
`
`-i-
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`

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`Case 2:19-cv-00209-JRG Document 41 Filed 09/17/19 Page 4 of 18 PageID #: 2010
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`
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`I.
`
`INTRODUCTION
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`Pursuant to Federal Rule of Civil Procedure 12(b)(3), Defendant KeyMe, LLC (“KeyMe”)
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`moves to dismiss The Hillman Group, Inc.’s (“Hillman”) First Amended Complaint, filed on
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`September 3, 2019, for improper venue and, in the alternative, moves to transfer this case under
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`28 U.S.C. § 1406(a) to the Southern District of New York.
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`Venue is not proper in this District. Under TC Heartland LLC v. Kraft Foods Group
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`Brands LLC, venue in a patent case is only proper where: (1) the defendant resides, or (2) in a
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`district in which the defendant has a regular and established place of business and has committed
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`acts of infringement. KeyMe, which is organized in Delaware and has its principal place of
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`business in New York, has never resided in this District and has no employees in this District.
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`KeyMe has approximately 30 kiosks, out of thousands of kiosks across the United States, located
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`within the Eastern District of Texas. KeyMe’s kiosks in this District are housed in supermarkets
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`and retail stores, owned and operated by third parties. These kiosks, smaller than a traditional soda
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`machine, are remotely operated by KeyMe employees from KeyMe’s office in New York and are
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`the only alleged tie to the Eastern District of Texas. KeyMe’s kiosks do not qualify as “regular
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`and established place[s] of business” under 28 U.S.C § 1400(b) and this case should be dismissed.1
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`II.
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`STATEMENT OF THE ISSUES
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`Pursuant to Local Rule CV-7(a)(1), KeyMe identifies the following issues to be decided
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`by this dispositive motion to dismiss under Rule 12(b)(3):
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`
`1 In the alternative to dismissing Hillman’s First Amended Complaint, the Court should transfer
`this case to the Southern District of New York. KeyMe’s principal place of business is in New
`York, therefore, it “resides” in New York under TC Heartland. Furthermore, New York is where
`KeyMe has a “regular and established place of business” pursuant to 28 U.S.C. § 1400(b). Because
`KeyMe does not reside in this District nor does it have a regular and established place of business
`here, the Court should transfer this case to the appropriate venue in the Southern District of New
`York.
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`
`1
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`

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`Case 2:19-cv-00209-JRG Document 41 Filed 09/17/19 Page 5 of 18 PageID #: 2011
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`
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`1.
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`Whether venue in this District is proper when KeyMe is not incorporated in this
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`District and does not have a regular and established place of business in this District.
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`2.
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`Whether the Court should dismiss this case or transfer it to the Southern District
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`of New York, where venue is proper.
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`III.
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`FACTUAL BACKGROUND
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`A.
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`The Parties
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`Although KeyMe provides key duplication kiosks across the United States, KeyMe does
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`not reside in nor have a place of business in the Eastern District of Texas. KeyMe is a company
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`organized and existing under the laws of Delaware. (Ex. A, Declaration of Greg Marsh (“Marsh
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`Decl.”) ¶ 4.) Its headquarters and principal place of business are located in the Southern District
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`of New York. (Id. ¶ 5.) As a Delaware company with its principal place of business in New York,
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`the majority of KeyMe’s employees work in New York. (Id.) KeyMe has a second office in New
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`Jersey and also has five individual employees who work remotely from Illinois, Nevada,
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`Wisconsin, Florida, and California. (Id. ¶¶ 7-8.) Moreover, KeyMe does not control any physical
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`places of business in this District, including locations where its key duplication kiosks are housed,
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`nor hold itself out as possessing or controlling these places. (Id. ¶¶ 12, 21.)
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`Hillman is incorporated in Delaware with its principal place of business in Cincinnati,
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`Ohio. (Am. Compl. ¶ 1.) While Hillman has sued another key duplication company for patent
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`infringement in the Southern District of Ohio, Hillman has not filed any other patent infringement
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`suits in the Eastern District of Texas. (See Hillman Grp., Inc. v. Minute Key Inc., Case No. 1:13-
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`cv-00707-SJD (S.D. Ohio Oct. 1, 2013).)
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`B.
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`KeyMe’s Key Duplication Kiosks
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`KeyMe owns approximately 2,500 kiosks in retail stores across the United States such as
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`supermarkets and convenience stores like 7-Eleven, Rite Aid, Bed Bath & Beyond, Albertsons,
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`2
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`

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`Case 2:19-cv-00209-JRG Document 41 Filed 09/17/19 Page 6 of 18 PageID #: 2012
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`
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`Kmart, Safeway, Sears, Giant Eagle, Ralphs, Vons, and Kroger. (Id. ¶ 10.) These stores are owned
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`by third parties and their products and services do not relate to key duplication. (Id. ¶ 12-14.)
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`KeyMe’s kiosks are vending-like machines, smaller in size than a traditional soda machine, and
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`are located inside of these stores where store patrons can insert their home or car key and obtain a
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`copy.
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`(See Ex. B, Declaration of Elizabeth Shrieves ¶ 1; Ex. C, How a start-up’s winning pitch landed a
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`deal with a mammoth retail chain, Greg Marsh (June 29, 2017); see also Marsh Decl. ¶ 16.) For
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`example, the below KeyMe kiosk is located inside of a Kroger in Plano, Texas2:
`
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`2 The below picture, taken in March of 2019, shows a KeyMe kiosk located within a Kroger
`supermarket, surrounded by grocery shoppers, grocery carts, coolers, a gift card rack, and the
`Kroger customer service desk.
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`3
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`

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`Case 2:19-cv-00209-JRG Document 41 Filed 09/17/19 Page 7 of 18 PageID #: 2013
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`
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`(see Marsh Decl. ¶ 17.) The kiosks themselves are made in Minnesota by a third party
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`manufacturer, Benchmark Electronics, and shipped directly to retail stores by third parties. (Id. ¶
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`9.)
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`No KeyMe employees work in the supermarkets and retail stores where these kiosks are
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`located. (Id. ¶ 18.) Furthermore, no KeyMe employees live or work in the Eastern District of
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`Texas. (Id.) While KeyMe has approximately 30 kiosks in stores located in this District (id. ¶ 12),
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`the kiosks in the Eastern District of Texas represent only 1.3% of KeyMe’s entire fleet of kiosks
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`and are responsible for only 0.8% of KeyMe’s total sales. (Id. ¶ 15.)
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`Furthermore, the kiosks located in the Eastern District of Texas are not permanent and can
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`4
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`Case 2:19-cv-00209-JRG Document 41 Filed 09/17/19 Page 8 of 18 PageID #: 2014
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`be removed at any time. KeyMe’s kiosks in this District are located in Albertsons3 and Kroger4
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`supermarkets and Bed Bath & Beyond5 retail stores. (Marsh Decl. ¶ 13.) KeyMe’s contracts with
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`retailers in this District state that the kiosks are placed in stores owned by the retailer and the
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`contract can be terminated at any time. (See, e.g., Ex. D (Kroger Contract) ¶ 1; Ex. E (Albertson’s
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`Contract) ¶ 1; Ex. F (Bed Bath & Beyond Contract) at 1; see also Marsh Decl. ¶ 14.) KeyMe and
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`the respective third party store mutually decide which stores in which areas will receive a kiosk
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`and KeyMe’s third party manufacturer ships the kiosk to the mutually selected supermarket or
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`retail store. (See, e.g., Ex. D ¶ 2; Ex. E ¶ 2; Ex. F ¶ 2; see also Marsh Decl. ¶ 9.)
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`IV. ARGUMENT
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`Venue is not proper under Section 1400(b) because KeyMe is not incorporated in Texas
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`and does not have a “regular and established place of business” in this District. First, there is no
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`dispute, and Hillman acknowledges, that KeyMe is a Delaware company with its principal place
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`of business in New York, New York. (Am. Compl. ¶ 3.) In addition, KeyMe does not have a
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`regular and established place of business within this District under the second prong of Section
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`1400(b) because it has no offices, employees, or real property within the Eastern District of Texas.
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`Hillman alleges that the regular and established prong is satisfied because there are kiosks within
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`this District. (Am. Compl. ¶ 8.) However, those kiosks are vending-like machines temporarily
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`located in third party supermarkets and retail stores that do not relate to key duplication, are
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`monitored remotely from New York, constitute less than 2% of KeyMe’s total number of kiosks,
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`and are manufactured and shipped by an out-of-state third party unrelated to the lawsuit. Thus,
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`3 See Albertsons stores website:
`https://www.albertsons.com/home.html?r=https%3A%2F%2Fwww.google.com%2Furl.
`4 See Kroger stores website: https://www.kroger.com/.
`5 See Bed Bath & Beyond stores website: https://www.bedbathandbeyond.com/.
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`5
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`

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`Case 2:19-cv-00209-JRG Document 41 Filed 09/17/19 Page 9 of 18 PageID #: 2015
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`
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`the Court should dismiss Hillman’s First Amended Complaint for improper venue or, in the
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`alternative, transfer this action to the Southern District of New York where proper venue lies.
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`A.
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`Legal Standard
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`In a patent case, venue is proper only “in the judicial district where the defendant resides,
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`or where the defendant has committed acts of infringement and has a regular and established place
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`of business.” 28 U.S.C. § 1400(b). “Plaintiff bears the burden of establishing proper venue.” In
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`re ZTE (USA) Inc., 890 F.3d 1008, 1013 (Fed. Cir. 2018). In TC Heartland, the Supreme Court
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`held that the first part of Section 1400(b), “where the defendant resides,” is exclusively the
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`defendant’s state of incorporation. TC Heartland LLC v. Kraft Foods Grp. Brands LLC, 137 S.
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`Ct. 1514, 1520 (2017). The second part of Section 1400(b) requires: “(1) there must be a physical
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`place in the district; (2) it must be a regular and established place of business; and (3) it must be
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`the place of the defendant.” In re Cray Inc., 871 F.3d 1355, 1360 (Fed. Cir. 2017). All three
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`prongs must be met in order for venue to be proper in a specific district. Id. If venue is improper
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`under Section 1400(b), the Court “shall dismiss, or if it be in the interest of justice, transfer such
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`case to any district or division in which it could have been brought.” 28 U.S.C. § 1406(a). If the
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`Court chooses not to dismiss this action, it should transfer this case to the Southern District of New
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`York, where venue is proper and where this action could have been brought.
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`B.
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`KeyMe Has No “Physical Place” In This District
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`KeyMe does not have any offices, stores, warehouses, or facilities within this District and
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`all kiosks located within the Eastern District of Texas are virtually controlled and maintained from
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`KeyMe’s office in New York. KeyMe does not have a “physical place” within the Eastern District
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`of Texas; rather, KeyMe only owns vending-like machines housed inside of supermarkets and
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`retail stores which are unrelated to KeyMe’s business of key duplication. See In re Cray, 871 F.3d
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`at 1360; see also Automated Packaging Sys., Inc. v. Free-Flow Packaging Int’l, Inc., No. 5:14-cv-
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`6
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`

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`2022, 2018 WL 400326, *9 (N.D. Ohio Jan. 12, 2018) (holding that machines installed in
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`customers’ homes within the district did “not satisfy the test set forth in Cray for the simple reason
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`that the equipment in question is not a place”). In Automated Packaging, defendant’s employees
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`installed packaging machines used by shipping customers in the customers’ facilities. Id. at *1,
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`*9. Machinery, such as a movable kiosk or vending machine, can be installed in and removed
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`from property which “precludes any finding that this equipment could serve as a physical,
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`geographical location for purposes of demonstrating” proper venue. Id.; see also id. at *9 n.10
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`(analogizing the defendant’s packaging machines to a vending machine which cannot be a “regular
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`and established place of business” under Cray).
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`Like the packaging machines involved in Automated Packaging, KeyMe’s kiosks are just
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`that—movable machines the size of a soda machine. KeyMe does not have any offices, real
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`property, or employees in this District. (Marsh Decl. ¶ 21.) The 30 kiosks within the Eastern
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`District of Texas are located in Kroger and Albertsons supermarkets and Bed Bath & Beyond retail
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`stores and can be removed at any time. (Id. ¶¶ 12-13; see also Exs. D, E, and F.) Furthermore, as
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`discussed in more detail below, the only “physical places” relating to these kiosks within this
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`District are the actual retail stores and supermarkets owned by third parties in which the kiosks are
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`housed. KeyMe’s kiosks are not “physical places” under the Federal Circuit’s In re Cray test.
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`Moreover, a “physical place” requires actual, physical presence. Lites Out, LLC v.
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`OutdoorLink, Inc., No. 4:17-cv-00192, 2017 WL 5068348, *4 (E.D. Tex. Nov. 2, 2017). For
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`example, in Lites Out, this Court held that billboard monitors located in this District, but remotely
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`controlled and operated by the defendant outside of this District, were insufficient to establish
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`proper venue here. Id. (“A regular and established place of business must include a physical
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`location where a company maintains a regular business presence.”) (internal citation omitted). The
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`7
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`Court emphasized that the defendant did not have a “retail store, warehouse, or other physical
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`facility in the District.” Id. at *2. If the defendant’s actual “business” is carried on remotely in a
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`virtual space, the existence of machinery within the district is insufficient to meet the In re Cray
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`definition of a “physical place.” Id. at *4; In re Cray, 871 F.3d at 1360, 1362. Apart from its
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`kiosks, KeyMe does not have a physical presence in this District.
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`KeyMe operates its kiosks remotely from New York. (Marsh Decl. ¶ 18.) KeyMe runs its
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`business in a virtual space from New York, not Texas. Furthermore, the kiosks are akin to vending
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`machines and are not the type of physical place of business required under Section 1400(b). Cf.
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`Seven Networks, LLC v. Google LLC, 315 F. Supp. 3d 933, 957-59 (E.D. Tex. 2018) (likening
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`local “data warehouses” to shoe warehouses that are “properly considered places of business”).
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`The existence of the kiosks alone in this District, therefore, is insufficient to make venue proper
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`here.
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`C.
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`KeyMe Has No “Regular and Established Place Of Business” In This District
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`KeyMe’s kiosks within this District are simply machines where customers can obtain
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`copies of their keys, not “regular and established places of business.” Unlike the “local data
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`warehouses” at issue in Seven Networks, KeyMe’s kiosks resemble vending machines that are
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`placed in Albertsons and Kroger supermarkets and Bed Bath & Beyond stores, a large chain selling
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`domestic retail and home furnishings. (See generally Exs. D, E, and F.) These kiosks are made
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`and shipped by third parties and monitored from outside this District. (Marsh Decl. ¶¶ 9, 18); cf.
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`In re Cordis, 769 F.2d 733, 737 (Fed. Cir. 1985) (“the appropriate inquiry is whether the corporate
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`defendant does its business in that district through a permanent and continuous presence there”).
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`No KeyMe employees work or live in this District. (Marsh Decl. ¶ 18.) The kiosks within this
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`District, therefore, are not “regular and established places of business,” so venue is improper in
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`the Eastern District of Texas.
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`8
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`
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`1.
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`KeyMe’s Kiosks in this District are not “Regular and Established.”
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`KeyMe’s kiosks within this District are not fixed, permanent, or continuous; rather, they
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`can be removed at any time. See In re Cray, 871 F.3d at 1363; see also In re Cordis, 769 F.3d at
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`737 (holding that a “regular and established” place has a fixed, permanent, and continuous
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`presence in a set location within the district). Like vending machines, kiosks are typically found
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`within established facilities, such as supermarkets and retail stores. See Magee v. Coca-Cola
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`Refreshments USA, Inc., 833 F.3d 530, 534 (5th Cir. 2016) (noting that “Merriam-Webster’s
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`Collegiate Dictionary defines ‘establishment’ as ‘a place of business or residence with its
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`furnishings and staff”). Although the Court in Magee was analyzing whether vending machines
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`were “sales establishments,” not “regular and established places of business,” the Court’s analysis
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`is instructive. Id. at 534. The Magee Court reasoned that soda machines were found inside retail
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`stores, the “actual, physical places.” Id. (internal citations omitted). KeyMe’s kiosks are similarly
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`located in supermarkets and retail stores.
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`KeyMe’s kiosks in this District are not “settled certainly, or fixed permanently.” In re
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`Cray, 871 F.3d at 1361 (internal brackets and quotation marks omitted). Instead, KeyMe or the
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`third party retailer can remove the kiosks at any time for any reason. (Ex. D, ¶ 1 (“either party
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`may terminate this Pilot Agreement, with or without cause, in one store or all stores at any time
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`by giving the other party 30 days’ prior written notice”); F, ¶ 1 (same); E, ¶ 1 (“Retailer shall have
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`the right to terminate this Agreement with respect to any Store upon thirty (30) days’ prior written
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`notice”).) While the kiosks can be found inside fixed, permanent stores, those stores are owned
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`by third parties and are completely unrelated to the kiosks. (Marsh Decl. ¶¶ 10, 12.) These stores
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`are Albertsons and Kroger supermarkets and Bed Bath & Beyond retail stores, none of which sell
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`products related to key duplication. (Id. ¶ 13.) Although the stores which house KeyMe’s kiosks
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`may be considered “regular and established,” KeyMe’s kiosks are temporary and unrelated. Thus,
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`9
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`
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`the kiosks located within this District are not “regular and established” within the meaning of
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`Section 1400(b) and In re Cray.
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`2.
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`KeyMe’s Kiosks are not “Places of Business.”
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`KeyMe employees virtually operate the kiosks located within this District from KeyMe’s
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`New York office. (Marsh Decl. ¶ 18); see also Peerless Network, Inc. v. Blitz Telecom Consulting,
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`LLC, No. 17-cv-1725, 2018 WL 1478047, *4 (S.D.N.Y. Mar. 26, 2018) (holding that no
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`“employee or agent of the defendant” was “conducting business at the location” of defendant’s
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`telecommunications equipment within the district). As such, KeyMe carries out its business from
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`New York, not from this District. See id. (concluding that defendant did not “engage in business
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`from” the respective district); see also Personal Audio LLC, v. Google, Inc., 280 F. Supp. 3d 922,
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`934 (E.D. Tex. 2017) (“To conclude that [Defendant’s] business was being carried out by [the
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`equipment] would have far-reaching consequences that distort the scope of the statute[.]”). As
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`noted above, KeyMe employees do not work or live within the Eastern District of Texas. (Marsh
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`Decl. ¶ 18.) KeyMe’s “place of business,” therefore, is in New York.
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`On the other hand, even if KeyMe’s kiosks were determined to be “places of business,”
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`when compared to the entirety of KeyMe’s kiosks across the United States, the kiosks within this
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`District are insufficient to confer proper venue. “A further consideration for this requirement
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`might be the nature and activity of the alleged place of business of the defendant in the district in
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`comparison with that of other places of business of the defendant in other venues. Such a
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`comparison might reveal that the alleged place of business is not really a place of business at all.”
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`In re Cray, 871 F.3d at 1364 (emphasis in original). The 30 kiosks within the Eastern District of
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`Texas represent only 1.3% of KeyMe’s entire fleet. (Marsh Decl. ¶ 15.) Moreover, the sales from
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`the Eastern District of Texas kiosks amount to only 0.8% of all of KeyMe’s sales. (Id.) Comparing
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`the small amount of kiosks and sales from the kiosks within this District is not a “value judgment
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`10
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`Case 2:19-cv-00209-JRG Document 41 Filed 09/17/19 Page 14 of 18 PageID #: 2020
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`on the different types of business activity” as the business activities (key duplication) conducted
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`from all KeyMe’s kiosks are the same. Seven Networks, 315 F. Supp. 3d at 957 (citing In re Cray,
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`871 F.3d at 1364 n.1). As a whole, the miniscule amount of kiosks within the Eastern District of
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`Texas “in comparison with” the remainder of KeyMe’s fleet across the United States demonstrate
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`that these kiosks are not “places of business” after all.
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`D.
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`The Retail Stores Housing KeyMe’s Kiosks In This District Are Not “Places
`Of The Defendant”
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`KeyMe’s kiosks are located within physical places of business—supermarkets and kitchen
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`and bath stores—however, those stores are owned by third parties, not KeyMe. (See generally
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`Exs. D, E, and F; see also Marsh Decl. ¶¶ 9-10.) Moreover, the actual business inside these stores
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`has no relation to key duplication. Cf. Seven Networks, 315 F. Supp. 3d at 965-66 (the location in
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`which defendant’s servers are housed have the sole purpose of providing a space for these digital
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`data warehouses).
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`Even if the Defendant owns a piece of equipment, the place in which that equipment sits is
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`not a “place of the defendant” if it is not also “owned, leased, or controlled by” the defendant.
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`Homebingo Network, Inc. v. Chayevsky, 428 F. Supp.2d 1232, 1250-51 (S.D. Ala. 2006); see also
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`Automated Packaging, 2018 WL 400326 at *9 (finding no “place of the defendant” for the
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`purposes of the venue statute where the defendant owned equipment installed on third-party
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`property within the district). In Homebingo Network, for example, the court held that even though
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`the defendants owned slot machines located within the district, they did not “own the casino, work
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`at the casino, have offices at the casino, or [] ever even set foot in the casino,” thus, they did not
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`own the relevant “place” for venue purposes. 428 F. Supp. 2d at 1250. Even though the court
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`determined that venue was not proper over individual owners of the slot machines, rather than a
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`defendant company, the court’s rationale can be applied to any defendant that does not own the
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`Case 2:19-cv-00209-JRG Document 41 Filed 09/17/19 Page 15 of 18 PageID #: 2021
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`real property in which a piece of equipment or machinery sits. The Homebingo Network court
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`continued:
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`That a[] [defendant] may be a part owner of a piece of equipment (in this case, a
`slot machine) located in a judicial district does not render the situs of that equipment
`[its] regular and established place of business for venue purposes. To declare
`otherwise would be to contort and expand the term ‘regular and established place
`of business’ far beyond that which Congress could reasonably have intended in
`drafting the venue statute, and would contravene the precedents cautioning against
`liberal construction of § 1400(b).
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`Id. at 1250-51. Like the defendant in Homebingo Network, KeyMe does not own or work at the
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`retail stores in which its kiosks sit in this District, KeyMe does not have offices in this District,
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`nor do any KeyMe employees work or live in this District. (Marsh Decl. ¶ 18.) Even though
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`KeyMe owns the kiosks, KeyMe does not own the physical places of business in which the kiosks
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`are housed.
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`Moreover, KeyMe’s contracts with third-party stores in this District—Kroger, Albertsons,
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`and Bed Bath & Beyond—require that the location of the kiosks be mutually agreeable. (Ex. D, ¶
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`2; Ex. E, ¶ 2; Ex. F, ¶ 2.) Thus, KeyMe did not have full control over choosing the specific retail
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`stores in which its kiosks would sit, including those within this District. See In re Cray, 871 F.3d
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`at 1365 (finding no evidence to indicate that Defendant was involved in selecting the location of
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`business in the Eastern District of Texas or that Defendant intended to keep business in that
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`district); cf. Seven Networks, LLC 315 F. Supp. 3d at 951-53 (finding that Defendant exacted “far
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`more control than may be suspected from a general lease arrangement” over the physical location
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`within which the relevant equipment was kept). Furthermore, KeyMe’s contracts with third-party
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`retailers state that the retailer “shall provide first line maintenance” and repair to the kiosks and
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`notify KeyMe of any problems. (See e.g., Ex. E, ¶ 14.) In contrast, in Seven Networks, the
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`defendant’s contract with the third-party host that owned the physical location required that the
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`host request permission from the defendant before accessing or using the equipment or “tightening
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`screws [or] cable ties” on the equipment. 315 F. Supp. 3d at 953 (emphasis in original).
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`Additionally, KeyMe’s kiosk contracts with third party retailers can be terminated at any time,
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`allowing KeyMe or the retailer to remove the kiosks from this District for any reason. (Ex. D, ¶
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`1; Ex. E, ¶ 1; Ex. F, ¶ 1.) Accordingly, the “places” in which KeyMe’s kiosks are housed within
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`this District are not “places of the defendant” and venue is improper under Section 1400(b).
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`Because Hillman cannot establish that KeyMe has a “physical place” in this District that is
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`a “regular and established place of business” and “owned by the defendant,” venue is not proper
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`in the Eastern District of Texas. Thus, under Federal Rule of Civil Procedure 12(b)(3) this Court
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`should dismiss Hillman’s First Amended Complaint for improper venue.
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`E.
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`Alternatively, This Case Should Be Transferred To The Southern District of
`New York Under 28 U.S.C. § 1406(a)
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`Since venue is improper in this District, the Court “shall dismiss, or if it be in the interest
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`of justice, transfer such case to any district or division in which it could have been brought.” 28
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`U.S.C. § 1406(a). If this Court decides not to dismiss Hillman’s First Amended Complaint, the
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`Court should transfer this case to the Southern District of New York, where venue is proper. This
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`action could have been brought in the Southern District of New York because that is where KeyMe
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`maintains its headquarters, conducts its business, and where it employs hundreds of employees.
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`See In re Volkswagen of Am., Inc., 545 F.3d 304, 315 (5th Cir. 2008) (en banc). Thus, transfer is
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`appropriate.
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`V.
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`CONCLUSION
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`For these reasons, KeyMe respectfully requests that this Court dismiss this action for
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`improper venue, or transfer it to the Southern District of New York.
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`Dated: September 17, 2019
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`Respectfully submitted,
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`/s/ Deron R. Dacus
`
`
`Deron R. Dacus (Bar No. 00790553)
`The Dacus Firm, PC
`821 ESE Loop 323
`Suite 430
`Tyler, TX 75701
`Tel. 903.705.1177
`Fax 903.581.2543
`Email: ddacus@dacusfirm.com
`
`Michael G. Rhodes
`Cooley LLP
`101 California Street, 5th Floor
`San Francisco, CA 94111
`Tel: 415.693.2000
`Fax: 415.693.2222
`Email: rhodesmg@cooley.com
`
`Stephen R. Smith
`Cooley LLP
`1299 Pennsylvania Ave., NW, Suite 700
`Washington, DC 20004
`Tel: 202.842.7800
`Fax: 202.842.7899
`Email: stephen.smith@cooley.com
`
`Attorneys for Defendant KeyMe, LLC
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`Case 2:19-cv-00209-JRG Document 41 Filed 09/17/19 Page 18 of 18 PageID #: 2024
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`CERTIFICATE OF SERVICE
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`I hereby certify that all counsel of record, who are deemed to have consented to
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`electronic service are being served on this 17 day of September, 2019, with a copy of this
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`document via the Court’s CM/ECF system per Local Rule CV-5(a)(3). Any other counsel of
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`record will be served by electronic mail, facsimile transmission and/or first class mail on this
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`same date.
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`/s/