Richards Layton & Finger

Magistrate Judge Fallon Recommends Court Transfer Action Because of Improper Venue

December 19, 2017

In Treehouse Avatar LLC v. Valve Corp., No. 15-427-JFB-SRF (D. Del. Nov. 20, 2017), Magistrate Judge Fallon recommended that the Court grant the defendant’s motion to dismiss or transfer the action to the Western District of Washington, where the defendant, Valve Corp., is incorporated and maintains its headquarters. Valve alleged that venue was improper in the District of Delaware under the patent venue statute.

Judge Fallon first concluded that Valve had not waived the improper-venue defense (because TC Heartland was an intervening change in controlling law), nor had it forfeited the defense, since trial was not scheduled until 2019, Valve had challenged venue at an earlier stage, and Valve filed its motion soon after the Supreme Court’s decision in TC Heartland issued.

As Valve did not “reside” in Delaware under the patent venue statute because of its incorporation elsewhere, Judge Fallon next considered whether Valve had a regular and established place of business in the district. The plaintiff, Treehouse Avatar, LLC, argued that Valve’s online video game platform, through its networks of players, satisfied this requirement. But Judge Fallon hesitated to conclude that any computer or mobile device could create a regular and established place of business, further stating that the independent activity of Valve’s customers was too remote and impermanent to satisfy the statute’s requirements. According to Judge Fallon, the online activity at issue was how Valve conducted its business activities, and the mere doing of business, without more, would not create a regular and established place of business in a district, however great the volume of that business may be.

Key Point: Although the plaintiff argued that the patent venue statute would bar the defendant’s counterclaims for declaratory judgment of non-infringement and invalidity in the transferee forum, Magistrate Judge Fallon stated that such counterclaims need not satisfy the requirements of the patent venue statute.