Federal Judiciary

Motion to Dismiss Indemnity Claim Against Third Party Defendant in Patent Case for Improper Venue Granted

By Michael Smith

Iovate v. BSN, 9:07-CV-46 (E.D. Tex. 1/31/08)
Judge: Ron Clark
Holding: Motion to Dismiss for Improper Venue GRANTED
This one's not reported yet, but was worth posting on.  This is a Lufkin patent case in which plaintiff Iovate accuses defendant BSN of infringing its patent dealing with dietary supplements.  Defendant third-partied in Creative Compound, LLC. (which I represent in this case, by the way - full disclosure) alleging that Creative was obligated to indemnify BSN for any liability to Iovate in connection with shipping, distributing, offering for sale and/or selling any product containing the accused product.
Creative moved to dismiss the third party claim against it, asserting: a) improper venue and b) failure to state a cause of action upon which relief can be granted. 
This afternoon, Judge Clark granted the motion to dismiss, finding that "Creative does not have a place of business or any employees in this district. It has never made any sales of the product accused in the Third Party Complaint to anyone in the Eastern District of Texas and currently has no pending orders from customers located in the Eastern District of Texas."  Absent the above, the Court determined that the plaintiff had not met its burden to prove a prima facie case that venue was proper.
Interestingly, one of the key issues in Judge Clark's holding was that the nature of the third party claims at issue, which were not patent claims, but breach of warranty claims.  "To the extent that Creative does have contacts with Texas," he wrote "those contacts do not give rise or relate to the alleged breach of warranty claim that BSN has asserted against Creative. BSN?s cause of action involves
indemnification of BSN?s liability and has nothing to do with the alleged infringing activities at the core of this suit."  The different claims at issue also affected the "fair play" prong of the jurisdictional analysis, where Judge Clark wrote that "[a]lthough this district has an interest in adjudicating the underlying patent infringement dispute, the citizens of this district have little interest in the interactions between two companies that conducted their transactions outside of Texas." 
So while the patent case stays where it is in Lufkin, the defendant's indemnity claim against its supplier will have to be heard elsewhere.

Full post as published by Eastern District of Texas Federal Court Practice on January 31, 2008 (boomark / email).