Square One Choices Inc. v. Ditec Solutions LLC

Background

Square One Choices Inc. brought patent-infringement claims against Ditec Solutions LLC involving Square One’s Patent No. 11,123,901 B2. Square One alleged that Ditec directly and indirectly infringed the patent by selling a Design Mat Kit under the MYNT3D brand through Amazon and Ditec’s website.

Ditec is incorporated in Wyoming and has its principal place of business in Utah. Ditec’s principal stated that the company moved its business operations and employees from New York to Utah before its Brooklyn lease ended on August 21, 2020, and that it had maintained only a physical location in Salt Lake City since then. Square One relied on a Brooklyn address displayed on Ditec’s Amazon storefront, New York business-registration information, bills of lading, and the Brooklyn address listed for Ditec’s chief executive officer.

Ditec moved to dismiss the case for improper venue under Rule 12(b)(3) or, alternatively, to transfer it to the District of Utah. Square One requested discovery concerning venue. Ditec also sought attorneys’ fees and costs.

Venue Analysis

Patent venue is governed by 28 U.S.C. § 1400(b). A patent case may be filed where the defendant resides or where the defendant committed acts of infringement and has a regular and established place of business. The court held that venue must be assessed based on the facts existing when the complaint is filed. Here, that date was September 8, 2022.

The parties agreed that Ditec was incorporated in Wyoming and therefore resided in Wyoming for patent-venue purposes. Ditec did not dispute, for purposes of the venue analysis, that Square One had adequately alleged infringing acts in the Southern District of New York. The dispute therefore centered on whether Ditec had a regular and established place of business in that district when the complaint was filed.

The court concluded that Square One had not made the required initial showing. First, the Brooklyn address identified in the complaint was in the Eastern District of New York, not the Southern District of New York. Second, even assuming Brooklyn were in the Southern District, the evidence showed that Ditec had ended its Brooklyn operations in 2020 and had no place of business there when the complaint was filed. The Amazon address and New York registration did not establish that Ditec actually conducted business from that location. The chief executive officer’s alleged residence in Brooklyn also did not, by itself, make that residence Ditec’s place of business. The bills of lading did not show where Ditec conducted business in September 2022, and Ditec’s principal stated that the shipments were not delivered to the former Brooklyn address.

Because Square One had not shown that Ditec had a regular and established place of business in the Southern District of New York, the court ruled that venue was improper. The court did not decide Ditec’s separate argument concerning pre-issuance provisional patent rights because its venue ruling made that issue unnecessary.

Discovery and Transfer

The court denied Square One’s request for venue-related discovery. It found that Square One had not provided fact-specific allegations or evidence that could support a finding that venue was proper in the district.

Under 28 U.S.C. § 1406(a), a court may dismiss a case filed in the wrong district or transfer it to a district where it could have been brought. The court declined to dismiss the case because it had no view at that stage on the merits of Square One’s patent claims. Square One requested transfer to Utah, Ditec did not oppose that request, and the court determined that venue appeared proper there because Ditec had a regular and established place of business in Salt Lake City. The court therefore granted Ditec’s motion to transfer and ordered the case transferred to the District of Utah.

Attorneys’ Fees

The court denied Ditec’s request for attorneys’ fees and costs under both 35 U.S.C. § 285 and the court’s inherent authority. Ditec was not a prevailing party under Section 285 because it had prevailed only on a transfer motion and had not obtained a final decision changing the parties’ legal relationship. The court also found that the case was not exceptional under Section 285 or extraordinary enough to justify fees under the court’s inherent authority.

The court relied in part on uncertainty in the law concerning when patent venue should be assessed, including a split among decisions in the district and conflicting authority at the circuit level. It therefore did not find that Square One’s decision to file in New York was frivolous, objectively unreasonable, or brought for an improper purpose.

Disposition

The court granted Ditec’s motion to transfer, denied Square One’s motion for venue-related discovery, and denied Ditec’s motion for attorneys’ fees and costs. The Clerk was directed to close the case in the Southern District of New York and transfer the action to the District of Utah. The opinion did not resolve the patent-infringement claims on their merits.