Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—E.D. Wis.: Manufacturer’s connection to manure equipment dealer not deep enough for venue, (Mar 29, 2022)

By Peter Reap, J.D., LL.M.

The messy patent infringement suit from a competing manure pumping equipment maker was transferred in part.

Venue in the Eastern District of Wisconsin was not proper under the federal patent venue statute with respect to Bazooka Farmstar, LLC, a manufacturer of pumping equipment used to agitate manure lagoons, that was sued for infringing a competing manufacturer’s patent, the federal district court located there has determined. Bazooka resided in Iowa, and its relationship with its Wisconsin dealer, co-defendant Tasch’s Custom, LLC, which allegedly sold infringing equipment in Wisconsin, could not ratify the dealer’s location as a place from which the manufacturer itself did business. To permit ratification under the patent venue statute based on an authorized dealer’s location and the intermingling of corporate logos would undermine the statutory text and intent. The claims against the two defendants were severed, with the suit against the manufacturer transferred to Iowa, and the case against the Wisconsin dealer stayed (Nuhn Industries Ltd. v. Bazooka Farmstar LLC, March 17, 2022, Ludwig, B.).

Plaintiff Nuhn Industries LTD owns United States Patent No. 10,974,557 (the Nuhn Patent) for “the Lagoon Crawler,” an amphibious pumping vehicle used to agitate manure lagoons. According to Nuhn’s suit, filed in the Eastern District of Wisconsin, Bazooka infringed the Nuhn Patent when it began marketing its own amphibious pumping vehicle, the Wolverine Series Agitation Boat, in early 2021. Nuhn also alleged that Tasch, a Bazooka dealer, infringed the Nuhn Patent by selling Bazooka’s Wolverine Series Agitation Boat.

Venue for Bazooka. Bazooka is organized under the laws of Iowa and has its principal place of business in Iowa. Bazooka dealer Tasch is a Wisconsin corporation with a principal place of business in Wisconsin. Bazooka’s website features a “FIND US” dropdown menu, which potential consumers can use to identify the nearest authorized Bazooka dealer. The “Dealer Locator” tool displays a map of the upper Midwest where superimposed Bazooka logos indicate a dealer’s precise location. One such logo can be found in eastern Wisconsin, where Tasch operates. Bazooka’s website also allows prospective buyers to schedule a test drive with local dealers, including Tasch.

The patent venue statute Section 1400(b) provides that “[a]ny civil action for patent infringement may be brought in the judicial district where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business.” 28 U.S.C. §1400(b). A domestic corporation’s “residence” refers only to the state of incorporation. Because it was undisputed that Bazooka resides in Iowa and Nuhn alleged a bona fide patent infringement claim against Bazooka based on sales made in this District, the issue of whether Nuhn established proper venue with respect to Bazooka came down to whether Bazooka has a regular and established place of business in this District.

For Bazooka to have a regular and established place of business in the Eastern District of Wisconsin: “(1) there must be a physical place in the district; (2) it must be a regular and established place of business; and (3) it must be the place of the defendant.” In re Cray, Inc., 871 F.3d 1355, 1360 (Fed. Cir. 2017). This case depended on the third factor. Under Cray, a business is the “place of the defendant” if the defendant establishes or ratifies it as such. Id. at 1363. Cray enumerated a slew of individually non-dispositive considerations relevant to this inquiry. Based on these factors, Nuhn argued that Tasch is a “place of Bazooka” (or Bazooka has at least ratified Tasch as its place of business) because Tasch sells Bazooka products, offers test drives, displays the Bazooka logo on its website, and is featured on the “FIND US” map on Bazooka’s website.

Nuhn’s argument relied heavily on analogy to Blitzsafe Texas, LLC v. Bayerische Motoren Werke AG, No. 2:17-CV-00418-JRG, 2018 WL 4849345 (E.D. Tex. Sep. 6, 2018) (vacated by joint motion). In that case, the court held that BMW had ratified independent dealerships as “places of” BMW, in large part because the dealerships prominently displayed BMW logos and BMW’s website directed consumers to those dealerships. Id. at *8. But there is a difference between ratifying a dealer as a location at which customers may purchase the manufacturer’s products and ratifying a dealer as a location from which the manufacturer itself conducts business. Only the latter establishes venue pursuant to Section 1400(b). The plain statutory text confirmed this, the court reasoned.

If Congress had intended to define venue as broadly as Nuhn and Blitzsafe suggested, it would not have required that the regular and established place of business be of the defendant. But it did include that requirement. As a result, venue does not obtain merely through sales of allegedly infringing products from any given regular and established place of business (like a dealership); rather, proper venue exists only where those sales are made from the defendant’s regular and established place of business, the court held. To permit ratification based on an authorized dealer’s location and the intermingling of corporate logos would undermine the statutory text and intent. Absent any suggestion that the defendant owns, leases, or rents the dealerships, or that the dealerships are the defendant’s subsidiaries or alter egos, numerous decisions from other federal courts stand for the proposition that independent distributors, including authorized retailers are not sufficient to establish venue under § 1400(b). There was no suggestion here that Bazooka owned or rented Tasch’s dealership or that Tasch was Bazooka’s alter ego. Thus, venue in this District was improper as to Bazooka.

Proper remedy. Here, Nuhn’s case against Bazooka cannot be maintained in the Eastern District of Wisconsin, but Nuhn’s case against Tasch cannot proceed anywhere but the Eastern District of Wisconsin. In patent cases, severance and transfer is appropriate if the remaining claims are peripheral to the severed claims; adjudication of the severed claims would potentially dispose of the remaining claims; and transfer of the severed claims was warranted. All three factors were present here—Tasch is a peripheral defendant that would only be liable if Nuhn prevails against Bazooka, and judicial economy disfavored conducting separate proceedings against both defendants. Thus, the case against Tasch was stayed pending resolution of the case against Nuhn which was transferred to the Southern District of Iowa.

The Case is No. 2:21-cv-01322-BHL.

Attorneys: Matthew L. Cutler (Harness Dickey & Pierce PLC) for Nuhn Industries Ltd. Stephen R. Howe (Husch Blackwell LLP) for Tasch's Custom LLC.

Companies: Nuhn Industries Ltd; Tasch's Custom LLC

Cases: FranchisingDistribution WisconsinNews