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Judge Oetken Sua Sponte Transfers Action to California Upon Holding that Pendent Venue Cannot Be Exercised Over a Patent Infringement Claim

On January 2, 2019, District Judge Paul Oetken (S.D.N.Y.) transferred to the U.S. District Court for the Central District of California ("CDCA") an action brought by Plaintiff NextEngine, Inc. against Defendants NextEngine, Inc. (not a typographical error) and Mark Knighton ("Knighton"). Plaintiff alleged infringement by Defendants of four patents pertaining to 3-D laser scanning and two registered trademarks—"NEXTENGINE" and a gear-shaped logo—in addition to unfair competition under the Lanham Act.

Plaintiff is a corporation under the laws of, and having its principal place of business in, the State of New York. The corporate Defendant is organized under the laws of Delaware and has a principal place of business in Santa Monica, California. Knighton, the founder and CEO of the corporate Defendant, is domiciled in Santa Monica, California.

Defendants moved to dismiss the Complaint on the ground that venue is improper in the Southern District of New York ("SDNY"). Plaintiff conceded that venue is improper for the patent claims in their own right, but argued that the Court should exercise pendant venue over the patent infringement claims given that venue is proper for the Lanham Act claims.

Judge Oetken reasoned that exercising pendent venue over a patent infringement claim would be tantamount to supplementing the exclusive patent venue provision in 28 U.S.C. § 1400(b), which would run afoul of the holding in TC Heartland LLC v. Kraft Foods Grp. Brands LLC, 137 S. Ct. 1514, 1517 (2017). In that decision, the Supreme Court of the United States reaffirmed that § 1400(b) is the sole and exclusive provision controlling venue in patent infringement actions, and is not to be supplemented by the general venue provisions. Therefore, Judge Oetken held that pendent jurisdiction cannot be exercised over a patent infringement claim. He acknowledged that in one case from 2000 on which Plaintiff relied, an SDNY court had gone against the weight of precedent in holding that pendent venue could be exercised over patent infringement claims. But, Judge Oetken distinguished that as a decision based on a broad interpretation of the patent venue statute that was since rejected in TC Heartland.

Judge Oetken then concluded that this action could have originally been brought in CDCA and that the balance of the traditional transfer factors favors a transfer to CDCA. Specifically, Judge Oetken explained: the defense witnesses, the company's documents, and the locus of facts pertaining to the alleged infringement and unfair competition are based in CDCA; the Defendants are already engaged in litigation in CDCA regarding ownership of the intellectual property at stake in this action, and against entities linked to Plaintiff's principal; and it would be convenient to the parties to litigate this related dispute in the same court. Thus, Judge Oetken transferred the action to CDCA.

Case: NextEngine, Inc. v. NextEngine, Inc. v. Mark S. Knighton, No. 17-cv-09785, Dkt. No. 25 (S.D.N.Y. Jan. 2, 2019).